Key Moments
What Shutting Down Your Startup Feels Like - Avni Patel Thompson of Poppy with Kat Manalac
Y CombinatorKey Moments
Founder Avni Patel Thompson discusses the emotional and practical challenges of shutting down her startup, Poppy.
Key Insights
Childcare is an inherently margin-challenged industry due to parent affordability and caregiver compensation.
Scaling a service business significantly changes its operational dynamics and value proposition.
Experiments like the 'bring back brunch' showed community engagement, but didn't solve core economic issues.
Transparency with investors through monthly updates smoothed the difficult process of shutting down.
Founders often grapple with identity tied to their startup, requiring a deliberate grieving and recovery process.
The decision to shut down was a deliberate choice to end cleanly rather than pursue a low-probability pivot or acquisition.
THE ECONOMIC REALITIES OF CHILDCARE
Avni Patel Thompson, founder of Poppy, a service connecting families with childcare providers, discusses the inherent economic challenges in the childcare sector. She explains that the willingness of parents to pay and the required compensation for skilled caregivers create a narrow margin for service providers. Even with a subscription and transaction revenue model, achieving profitability at scale was a significant hurdle. Poppy operated on the hypothesis that they could navigate these economic complexities.
THE EVOLVING CHALLENGES OF SCALING
The operational landscape of Poppy changed drastically as it scaled. What began as a small, neighborhood-based service where the founder knew every caregiver and parent personally, evolved into a much larger operation. At scale, managing hundreds of caregivers and thousands of families required a different approach, impacting the initial close-knit value proposition. This shift meant less personal connection and potentially turned the caregiver role into just another gig economy job, affecting the labor pool dynamics.
EXPERIMENTS AND PROVEN HYPOTHESES
Poppy's journey involved various experiments to test its hypotheses. One key success was proving that a pool of talented individuals, such as students or stay-at-home parents, existed within communities and could be vetted. Poppy unearthed supply not found on other platforms. They also ran community engagement initiatives like 'bring back brunch' to foster connections. While these experiments showed positive engagement, they did not fundamentally alter the core economic feasibility of the business at scale.
THE SLOW REALIZATION AND DECISION-MAKING
The decision to shut down Poppy wasn't sudden but a gradual realization over about a year. Consistent, steady growth of 5-10% monthly, while good for some marketplaces, wasn't indicative of explosive growth needed for venture-backed scale. The founder maintained monthly investor updates, fostering transparency and accountability. As the company's runway dwindled to six to eight months, the need for decisive action became urgent, prompting a serious evaluation of options.
EVALUATING PATHWAYS: PIVOT, ACQUISITION, OR SHUTDOWN
Faced with the reality of the situation, Avni considered three main options: pivoting, seeking acquisition, or shutting down. A pivot would have involved significant team cuts and a new direction, potentially losing the original mission. Acquisition proved difficult, with potential buyers expressing interest in partnerships but not outright purchases. After exploring these paths and realizing the low probability of successful acquisition or a meaningful pivot with the remaining runway, the decision leaned towards a clean shutdown.
TRANSPARENT COMMUNICATION AND INVESTOR RELATIONS
Maintaining consistent, transparent monthly investor updates throughout Poppy's life was crucial. This practice meant that the eventual discussions about shutting down were not a surprise to investors. Avni emphasized doing right by them and her team. She found gratitude in investors' understanding, highlighting that doing one's best with the raised capital, even without a massive return, is often appreciated. This transparency built trust, making the difficult conversations more manageable.
NAVIGATING THE EMOTIONAL TOLL
Shutting down a company, especially one deeply intertwined with personal identity, is an emotional process. Avni describes it as a grieving period, akin to losing a family member. She intentionally created space for herself, taking a break over the holidays to process the experience without external pressures. She emphasizes the importance of self-kindness during this transition, acknowledging that not every decision might have been perfect but were made with the best intentions for all stakeholders.
THE VALUE OF LEARNING AND SERIAL ENTREPRENEURSHIP
Avni views Poppy not as a failure, but as an invaluable learning experience. She believes founders shouldn't be discouraged by a single unsuccessful venture, as the knowledge gained is substantial. This perspective fuels her desire to continue exploring problems within the parent and working mother space. She is not done with the broader mission, even if the specific vehicle has changed, highlighting the iterative nature of entrepreneurship and the importance of pursuing the next hypothesis.
LOOKING FORWARD: PASSION AND CURIOSITY
While Avni doesn't have a defined next step, her passion for solving problems for parents remains strong. She is exploring her interests through learning new skills like coding and engaging in creative pursuits. This period of observation and exploration is vital for collecting inspiration for future ventures. She aims to eventually return to building innovative solutions, guided by curiosity and a desire to address significant challenges in the market.
Mentioned in This Episode
●Software & Apps
●Companies
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●People Referenced
Common Questions
Poppy's mission was to build the 'modern village' by finding and vetting childcare providers and connecting them to families needing supplemental childcare. It aimed to help millions of families across the country.
Topics
Mentioned in this video
Mentioned as an example of a successful serial entrepreneur who did not have immediate success with their first venture.
Mentioned for writing a post titled 'Pivot or Die', which Avni reflected on regarding her decision-making process.
Mentioned as an example of a successful serial entrepreneur who did not have immediate success with their first venture.
Mentioned as a place where some potential caregivers were working before joining Poppy.
Mentioned as an example of a company whose founders tried multiple ventures before achieving massive success.
Mentioned as an example of a company by Blake, in the context of serial entrepreneurship.
A startup accelerator that Avni Patel Thompson applied to and went through.
The startup founded by Avni Patel Thompson, with the mission to build the modern village by connecting families with vetted childcare providers.
Mentioned as an example of a company whose founders tried multiple ventures before achieving massive success.
Mentioned as an example of a service where users don't typically care about the specific driver, contrasting it with the childcare space.
Mentioned as an example of a company whose founders tried multiple ventures before achieving massive success.
Mentioned as an example of a company by Blake, in the context of serial entrepreneurship.
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