If there is a problem, there is a model.

This is the second part of a series about the start-up Peecho. The chapters are:

  1. Starting up
  2. Business model
  3. Execution
  4. Community
  5. Investor game (part I)

Stealth does not work

The first weeks of our start-up adventure were rather chaotic. The most complicated thing was to decide what we were going to do. Basically, we needed to get our story straight. Our hectic brainstorm sessions lead to some outrageous business proposals that would never see the light of day - and never will, I hope.

Initially, we thought it was best to keep the results of those sessions a Big Secret. The master plan was very simple at that point. We would secretly invent a killer product and then rule the world. Luckily, we changed our minds about the secrecy. Stealth mode doesn’t work. It’s all in the execution - what will ultimately make the difference between success and failure isn’t the idea itself, but the ability to execute and dominate the market very fast. We stopped worrying about somebody stealing our ideas and decided to publish everything that we were doing.

It worked. Many smart people approached us, triggered by the stuff we wrote on the web. They helped us figuring out what to do. However, even with lots of help, it’s incredibly difficult to get a story straight. It takes forever and you never really get there. When you think you do, some show-off then comments on your business plan and you will have to rewrite it. Again. And again. But without all this help, our plans would never have converged to something useful.

Making money

While frantically rewriting our business plan, we realized that making money is actually quite hard. It didn’t used to be like that, though. The idea behind a successful start-up was once simple.

  1. Build a really cool service.
  2. Offer it for free.
  3. Get yourself a whole lot of registered users.
  4. After a year or so, start bombarding them with expensive advertising.
  5. Buy yourself a big yacht.

Yes, those were the days. Then, a couple of bubbles burst and along came a crisis. Advertisers cut back their spending. All there is left now are paid subscriptions and selling stuff. Our time at Albumprinter showed us that selling stuff is good, but selling personalized stuff is even better. So, that’s what we were going to do.

Applications need a platform

We started off by thinking that we would offer a couple of mobile applications to sell personalized photo products. However, after careful examination, the execution promised to be complicated. It is not easy to start selling personalized, physical goods. It requires a large up-front investment. It begins really simple, though. First, you need to choose a relevant product, like a glossy magazine, greeting card or a t-shirt. Next up is creating a user interface. Then, the real trouble begins.

You need to find yourself a print facility, discuss pricing, think over your infrastructure, buy the relevant software licenses, worry about product definition formats, figure out how to offer themed templates, choose between translation to either PDF or PPML and transport the resulting files into the facility workflow. After that, you cross your fingers, hope that all goes well in production and wait for status updates about shipping and such - if those come at all. The worst part: to get a reasonable price from your print facility, you will be faced with an up-front demand for a minimum required number of sold products.

At that point, you are not even done. Let’s assume all goes well and it’s time to extend your product portfolio. You call your print facility and ask them if they can print your new product of choice. Unfortunately, the answer is no. So, you get yourself a new factory somewhere. Tough luck - the new print facility doesn’t comply with your existing infrastructure that you put so much effort in. Now, the whole ordeal starts over. Ouch - I loved Ghostbusters, but Groundhog Day was a nightmare.

In short: our ideas required lots of infrastructure and at least a couple of print facilities. That’s a lot of work for just a few mobile apps. Maybe somebody else could do the work for us. Apparently, there are software providers that can help - but their licenses come at a huge price. That investment was unacceptable.

As an alternative, we tried to find somebody who could offer this kind of infrastructure as a service, preferably pay-as-you-go. We failed miserably. There was nothing to be found.

Drunk

Boy, were we lucky. That night, Martijn and I celebrated our failure. We got pretty drunk. Sometimes, it’s awesome just to fail. In this case, it meant we had found ourselves a business model. After all, to make money, you will have to search for the things that are hard to do – that’s where the revenue is.

So, instead of focusing on our initial concepts, we quickly decided to start scratching our new itch. We were not just going to build applications and sell stuff. We were going to help other businesses to make money instead. We were going to offer print as a service, without a minimum required volume, pay-as-you-go, no investments needed.

Our story was straight - for the time being.