Premature scaling killed us

$1,000,000 in the bank. Shorty what you drank.

We were funded, had a working product, clients, and revenue. On the surface, it seemed like we were growing fast and moving toward the right trajectory.

Within 2 years, we had grown tremendously, but that growth ultimately killed us.

Keep it scrappy

I’m currently reading #GIRLBOSS by Sophia Amoruso. In it, Sophia has a great story about how her team bought really expensive chairs without her knowledge. Though she was making millions of dollars, she still made the office assistant sell all of the chairs on eBay to make the money back and stay as scrappy as possible.

How we failed to stay scrappy at RewardMe

Our demise happened because we tried to scale prematurely at RewardMe. We attended expensive conferences and trade shows, booked flights to meet with clients, added several people to the growth team, bought tons of hardware before we sold it to clients (so we had to hold inventory), and delegated customer support before finding product market fit.

Though on paper we had tremendous progress, we brute forced our growth and never established a stable product or a scalable customer acquisition channel.

What I would do differently (hindsight is always 20/20)

If I could do it all over again, I would do the following differently:

1. Be a 1-man growth team

At RewardMe, we were a total of 15 full-timers, 3 of which were involved with growth. That’s 1/5 of the team focused on customer acquisition. In contrast, at Bunny Inc., we have 65 full-timers, 3 of which involved with growth.

We scaled prematurely with the growth team because we focused our team on customer acquisition even though we still had no idea who our customers were and how much they were willing to pay. Until you have a predictable, scalable customer acquisition channel, there is no need to grow your growth team.

2. Get customers online as oppose to through a long sales cycle

Selling to enterprise clients is time consuming and expensive. We made the strategic decision to go after these large companies, which I still feel was the correct choice, but we could have gone about it in a more scrappy way. We spent tens of thousands of dollars on conferences and trade shows to acquire customers. We hustled hard and actually acquired our best customer via this method, but I feel we could have been equally successful had we gone after these enterprise clients via LinkedIn or email.

The key: when you’re an unproven startup, you’re looking to find the clients that have a first-mover mentality. These are the types of clients that are forward thinking and will respond to your InMails or emails.

3. Don’t hold inventory

We were serious about our growth and invested a lot of our funding into it. We even bought iPads in bulk to minimize our costs per iPad. The problem was that we were holding several hundred iPads at a time, money that could have been spent on improving the product.

Lesson: don’t buy it until you sell it.

4. Focus on product and support

RewardMe was one of my most important learning experiences, and I feel that though we were young, Yu-kai, Stephen, and I did very well. We worked hard and got Fraiche, a local, well-known yogurt shop in Palo Alto, to use our product and give us a fantastic testimonial.

But I feel this is where we strayed away from our scrappiness. Instead of focusing on how to get the product right for Fraiche, we felt that this was instant validation that our product worked and that we could scale it up to anyone.

What we should have done: we should have buckled down and made the best possible product for Fraiche. We should have used Fraiche as a testing ground to determine how to effectively capture users and how to seamlessly integrate with a POS system so that there is never any product downtime. Once our product functioned well (it doesn’t have to be perfect), we could have targeted other similar quick service restaurants using Fraiche as a testimonial. In addition, we could have built a customer support model for Fraiche which would allow us to scale to other clients.

Don’t scale until you’re ready for it. Cash is king, and you need to extend your runway as long as possible until you’ve found product market fit.

Published by

Jun Loayza

Jun Loayza is the Chief Growth Officer at Bunny Inc. In his startup experience, he has sold 2 technology companies and raised $1M in angel funding. Jun lives in San Francisco, CA with his wife Kim.

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