The Exit

On starting an accidental business, raising vc, failing, rebuilding, and getting acquired.

Mar 11, 2021

Hi Friends,

I’m excited to finally be able to share the news with you.

This is the story of how we got started, the early days, raising venture capital, pivots, strategic mistakes, laying off nearly everyone, rebuilding, getting profitable, the exit, and what’s next.

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From Side-Project to Startup

In 2014, I opened the doors to a brick-and-mortar storefront. A blank canvas available to anyone with an idea, without the hassles of a traditional lease. It was the first of its kind. The concept of flexible space seems obvious today, but back then opening a storefront meant committing to a minimum 5-year lease. I made it as easy as booking a hotel room. Landlords started calling to bring the concept to vacant properties. Media loved it. Local and global brands alike filled the space.

The original storefront where it all began

While I didn’t set out to build a startup, the idea gained traction and we had a marketplace. I had hustle, grit, and learned fast—but I was a complete outsider. I immersed myself in YC startup school, listened to every podcast, studied marketplace metrics, and talked to anyone in the microcosm of Vancouver’s tech community who would meet me. A friend in tech finally convinced me that it was time to build.

I interviewed a few engineers and dev shops, but ultimately decided to hack a marketplace together on Squarespace. I hired a design intern and built thisopenspace (TOS) in late 2015.

A few months later we had our first 100 bookings. I took out a $50,000 loan and hired an engineer and product designer to build the web app. We launched in January 2016, I recruited two co-founders, and our team huddled around my kitchen table. Six months later we bootstrapped to over $2 million GMV run rate.

We raised $1MM from friends, users, and angels.

Early Days

We started by serving anyone who wanted to open a storefront. There was a clear demand for flexible retail. While the market size for short-term retail was initially small, our bet was that it would grow alongside the proliferation of microbrands enabled by platforms like Shopify.

In those early months, we discovered a new customer segment that rapidly accelerated growth. We began working with household brands and the experiential marketing agencies that represent them. Great logos, but highly demanding customers. The order values were massive and hard to overlook. However, serving this segment would prove to be a strategic mistake.

Around the same time, we began seeing traction with creators. They transacted with low friction bookings. The average order value was small and in the early days so was transaction volume. Knowing what I know today, this is the segment we should have focused on. We did not pay enough attention to the creators.

Our product was built for low-value low-friction transactions. Yet, our team was making high-touch sales to experiential marketing agencies with high order values. At one point, I recall my co-founder looking at our financial projections and telling me we could achieve them with direct sales to agencies, but that he had no idea how we'd hit our targets with low order value marketplace transactions. I had failed to align sales and product vision.

The pressure of hitting financial targets meant we made decisions to optimize for short-term revenue at the expense of long-term product-led growth. In hindsight, we should have slowed down, taken time to get clear on who we serve, and accepted slower deliberate growth. But, we were hitting numbers and revenue solves all problems--until fundamentals catch up.

Product-Market Fit

While we searched for product-market fit, we were also forming our narrative. We had product-market fit with low value but increasingly high volume creators, but the market size was not obvious. The best story wins and it was hard to tell a compelling story about creators then. The unscalable agency segment drove revenue, but the narrative and long-term sustainability were terrible and we knew it. We shifted focus to build for retail brands, a segment with strong market tailwinds. Even though this segment had relatively low adoption and unclear market size, our bet was that we would grow along with the proliferation of microbrands. We got this wrong.

To find product-market fit for retail we launched several projects and experimental products outside the core marketplace we had built. These included two experiential multi-brand retail stores, Sleepover in Toronto and Home in Tribeca.

While these projects were financial successes, the internal resources they took divided the team’s focus. How could we continue to keep the product team engaged and motivated while the rest of the team was opening brick-and-mortar stores that did not use much of the product we had built? These experimental projects are best saved for late-stage companies with internal resources and cash reserves. We were still a seed-stage startup with less than 10 employees. The fact that we were able to execute on these projects at all is a testament to the incredibly dedicated and hard-working team we had.

The profitable stores gained us plenty of attention from investors. We raised another $3 million from an incredible group of investors including Lerer Hippeau, CRV, 3KVC, and SV Angel to pursue a vision for retail.

The momentum kept our team motivated. We were exceeding projections. We moved the company from Vancouver to Toronto, opened a New York office, and began hiring aggressively.

Pivot to Retail

The early decision to not focus on a single segment in the marketplace meant that we had two very distinct users that needed to be served by different products. We invested in building a new brand and product focused on retail. The new brand and product, which later launched as Uppercase, allowed us to finally separate these distinct groups. The high-touch retail segment would be served by Uppercase. Creators would continue to self-serve on thisopenspace.

Over the next few months, we would shift the entire team’s focus to Uppercase. Our vision was to create a one-stop-shop for brands to launch retail stores. The product would be a complete turnkey offering for real estate, design, fabrication, and buildout. The promise was that brands could open stores faster and more efficiently than ever before. The early months of Uppercase were by most measures successful—but we still had a lot to figure out.

We considered shutting down thisopenspace, but it was low maintenance. Instead, we assigned a small internal crew to oversee thisopenspace. Our engineers had built an incredibly low-maintenance product. With only two customer support agents and a few hours of attention from myself and my technical co-founder, we maintained the product. While I can’t share the numbers as we no longer own the asset, thisopenspace continued to grow organically over the next few months.

Co-Founder, Layoffs, & Rebuilding

When things are going well it is easy to ignore underlying challenges in the business model and co-founder relationships. In the months leading up to launching Uppercase, my relationship with one co-founder became toxic and seeped into our culture. When it became clear that continuing to work together would be to a detriment to the rest of the team, we separated. This caused an irreparable strain on the team. I believe remaining together would have been further damaging and I took what I believe was the less damaging of two paths, for better or for worse.

In January 2019 it was clear we were not hitting our projections. We had to lay off over half the team. The month before the layoffs our financials looked like this:

Revenue: $312,901
Gross Profit: $46,918
Operating Expenses: $279,593
Net Profit: -$190,984

I had failed.

The day of the layoffs and the weeks that followed were the hardest of my career. Overall, I am proud of how the team handled it. Some employees commented on how well it was handled. Others were understandably pissed off.

I should have cut deeper. It would have meant firing even more friends and disbanding a leadership team I had worked hard to build, but it would have been less painful in the long run.

As one investor put it poetically, “if you’re going to eat shit, eat it fast and in large gulps.” In a series of double-or-nothing moves, we deprioritized anything that did not drive immediate revenue. Yet we didn't hit the numbers we needed. More people left.

By April we had very few options. I considered shutting down and sent an email to investors letting them know we were considering closing the doors. Our biggest investors told me this was the best path forward—move on and spend your time building what's next. Some investors were understandably frustrated.

A few days later, I saw a shot for profitability and decided to take it. We had a community of hundreds of thousands that depended on the marketplace. Top hosts on thisopenspace were earning well over $100,000 annually at that point. I still had a team that believed in me and our mission. Finally, I still believed in the vision for Uppercase (and still do today) and had talked to enough customers to know we were solving a real pain point. I couldn't just give up knowing I had not taken the last chance I saw. We quickly signed two large clients for Uppercase to drive revenue. We temporarily contracted out our engineers to another startup to cover expenses. These two decisions gave us a thin lifeline to profitability.

In October 2019, just ten months after the layoffs, our numbers looked like this:

Revenue: $664,156 (+112.26%)
Gross Profit: $116,124 (+147.50%)
Operating Expenses: $81,378 (-70.89%)
Net Profit: $42,563

I am incredibly proud of the turnaround and getting the company to profitability. I’m also eternally grateful to every team member who stayed around to get us to that point.

I didn’t know it then, but looking back on late 2018 and 2019 I was completely burnt-out. I began losing confidence in myself and acting on the opinions of advisors, investors, and others who did not know the business as well as I do. After the layoffs and following near-death of the business, the forced objective of survival made it very easy to be radically candid with myself.

With a skeleton crew, we focused on growing a profitable business. The plan was to invest in growing both products and slowly buy out investors.

Selling TOS

January 2020 was the best month in company history. But, I was completely burnt out. A few buyers began reaching out and I considered selling. I needed time to think.

With the support of my team, I made the decision to go away and completely disconnect. It was an experiment to see if the business could run without me. If it worked, the plan was to step away once I got back. I built a playbook for the team and took off to India, leaving the cell phone and laptop behind.

Then COVID hit. The team had an emergency number to reach me at, but they never called. They managed everything as if it were their own business. I am incredibly indebted and proud of them.

The pandemic devastated everything we had rebuilt. With limited resources, all we could do is go into survival mode again. The cash reserves we had built up to put us in a position for me to step away went towards keeping the lights on when revenue went into the negatives. Opportunistic buyers began reaching out but it was the worst time to sell. We had a wonderful high-margin, low overhead, and profitable business.

Selling was tempting. Longevity is the name of the game and with pivots, layoffs, and now a pandemic I had run out of energy for this.

This was hard to admit. I love thisopenpsace. I love that we provide people with meaningful income. Hosts have built real businesses on the marketplace. They take pride in the spaces they’ve created, and I take pride in them too. I’m still amazed at what creators produce. I love working on thisopenspace, but it needed fresh energy.

I waited until we recovered in the fall and started looking for buyers. Besides returning some money to investors, my biggest priority was finding a buyer that would continue to grow the community we had built. An introduction from our investor Andrew Wilkinson (@awilkinson) led me to join Mike Williams’ Everything Marketplaces and that’s where I met the Giggster team.

That brings us to today.

What's Next

I’m proud that TOS has a new home, renewed resources, and a team committed to growing the community. I believe Giggster is best positioned to grow what we started.

While I failed at building a venture-scale business, I'm proud of what we built. We generated millions of dollars in income for a community of hosts on TOS. We gave hundreds of thousands of creators access to incredible spaces to do what they do best. Our alumni have gone on to places like Facebook, Instacart, TrueAccord, Studs, and Brookfield. One co-founder and an early employee launched a company together. Another co-founder married my first hire. I’m sure there were budding office romances I knew nothing about.

Uppercase is now a tech-enabled retail firm focused on retail development and operations for leading brands. It’s a profitable business even as a global pandemic devastated retail. The day-to-day operations are led by partners Bhavik Vyas and partner Phil Turley. We’ve launched stores for some of the most exciting commerce brands in the world including Brooklinen, Mejuri, NoBull, Knix, and Food52--many of which started on TOS. I am optimistic about its future.

As for me, I’m coaching, advising, and investing in founders. I’m also writing. I’ve been thinking a lot about what problems I want to solve next and giving myself time to explore my genuine curiosities.

I’m a builder and will continue to build. For now, you can find me @yasharnejati.

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Thisopenspace is the product of many people’s hard work, including: Yvonne Ren, Morgan Fraser, Jeff Ling, Andrew Cham, Holly Goldsmith-Jones, Ellen Janstch, Rachel Eckersley, Adam Bent, Charmaine Mendoza, Joanna Alvar, Carolynn Lacasse, Elaine Goussiatiner, David King, Michael Braiden, Alana Paton, Josh Conley, Janice Wong, Hailie Campbell, Steven Chen, Nate Dunn, Jessica DiDonato, Carla Pruner, Dale Inverarity, Grant Brandshaw, Tyler Jones, Evan Haveman, Alex Chabo, Andrew Dunn, Shannon Fox, Dustin Foxman, Asghar Khan, Edyta Lorek, Shannon Wood, Camille Heron, Stephanie Balmer, Vanessa Pulla, Frank Franze, Orly Freiberg, Nicolette Finder, Eunice Lam, Jacky Ho, Hélène Tran, Jeff Beaulieu, Cristina Sasso, Erica Raphael, Taavi Weinberger, and Bhavik Vyas. Thank you.

Thanks to Sahil (@shl) for inspiring this post.

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