As the country crawls out of the Great Recession, America remains rife with entrepreneurial spirit. The Fiscal Times’ Launch Pad series features innovative small-business owners to see how they got started, how they dealt with their mistakes, and what advice they have for other aspiring entrepreneurs.
Mistakes were made along the way, no doubt. But Yipit co-founder Vinicius Vacanti says that was just part of the blueprint for success. After a rocky start, the online startup eventually got it right, capitalizing on the nascent online coupon craze: Today, it is a leading one-stop shop for locating daily deals across the Web.
Yipit’s Specs:
Year Founded: 2007
Business: Daily Deal Aggregator
Number of Employees: 7
First Round Funding: $1.3 million
Location: Manhattan
Website:www.yipit.com
Competition: Ink Coupons, Deal Map
Yipit’s success more or less starts with Groupon, the deal-a-day website recently valued in the range of $25 billion in advance of a possible initial public offering. In the wake of Groupon, some 400 clones, sites like LivingSocial, Gilt City and iDeal Day crowded inboxes everywhere with daily emails offering half-priced restaurant meals, discounted facials, gym memberships, and the like.
That’s where Yipit comes in. The company aggregates all those deals into one customized and manageable daily email based on user preferences, location and other data. The young enterprise now has more than 165,000 subscribers in 24 cities, and is growing fast. But it didn’t always seem like such a sure thing.
Sowing the Seeds
Yipit’s co-founders, Vacanti and Jim Moran, met at Harvard in the early 2000s, and reconnected while both were working at the Blackstone Group investment firm. In early 2007, they decided to go into business together, leaving their full-time positions and launching Yipit 1.0 in that summer.
At first, Yipit was a service for buying and selling used furniture. After toying with other concepts, the site re-launched at the height of the economic crisis as a database for the “recession specials” that were popping up around New York. “You would sign up, tell us where you lived and where you worked, and we would go out and get all the deals in New York,” says Vacanti.
Groupon, which started in Chicago, launched in New York in May 2009. Vacanti and Moran began occasionally featuring Groupon deals in their own emails. They noticed a couple of things. “A, the deals were really good.” And B: “Our users would click all over them, whereas our other deals, they weren’t as interested.”
This led to the company’s eureka moment. “I remember turning to Jim … and I told him, ‘What if instead of doing all of these happy hours and sample sales, [which] takes a ton of time, and it’s hard for us to expand to other cities … What if we just did these [daily email] deals?”
Words of Advice:
If you could do one thing differently, what would it be?
“I would have sought more advice before I started,” says Vacanti. “I just sort of dove right in and didn’t really ask anyone whether I should be doing this or should be doing that. I learned the hard way that I was doing everything incorrectly.” For example, he spent two months perfecting a business plan that became obsolete within two weeks of launching.
One tip for aspiring small business owners?
“A lot of people put a lot of pressure on themselves to have that great idea. The truth is, you want to solve a problem … You put it out and you see why it’s wrong … and you listen to customers, constantly fixing, until you hit something that works.”
Vacanti built the new website himself over three days in February 2010 (he’d taught himself how to program as Yipit evolved) and they re-launched immediately. It was an instant win. In the 30 days before they made the switch, the site got 4,000 visits. In the 30 days after, it was 25,000. And it’s been a steady climb from there. Today, the site gets 200,000 unique visitors per month.
As the company grew, Vacanti’s and Moran’s distinct roles became clearer. Vacanti now manages and develops the product, while Moran oversees operations, which includes content and monetization.
The two founders also discovered they have slightly different approaches to the business, but learned to use that to their advantage. “I’m more of a perfectionist that Jim,” says Vacanti. “So we often clash on how perfect to make something before launching. It’s good to have clashes like that, though, because it keeps us both in check.”
Financing
Before leaving the security of full-time work in finance, Vacanti made sure he had enough money saved to tide him over as he struck out on his own. “I knew that one day I was going to try to start a company and that my biggest expense was going to be my living expenses,” he says. When he made the move, friends and family were surprised. “In the summer of 2007, finance was riding high and startups were not very popular in New York,” he says.
Vacanti sustained himself on his savings until June 2010, when Yipit secured a $1.3 million round of financing from several tech investors. Since then, he and Moran have been taking a “founders” salary, which for now is significantly less than what the pair earned working in finance. They also now have five additional employees, and an office in General Assembly, a collective space for entrepreneurs in Manhattan’s Flatiron District.
Although the company is not yet profitable, Vacanti does not expect Yipit to require a second round of financing. “Our revenue is going up, so our costs are getting smaller and smaller,” he says.
The Business Plan
That revenue is currently coming from two sources. First, every time a Yipit subscriber clicks through to a deal site and makes a purchase, Yipit takes a cut. In the case of Groupon, that cut is 2 percent of gross revenue on each sale.
The second source of revenue emerged unexpectedly. With so many companies now vying for the coupon-buyer’s attention, Yipit found that, as an aggregator of deals across the market, it had amassed a database of competitive intelligence that businesses were willing to pay for. “If you are running a daily deal service, you want to know what [deals] your competitors just ran,” says Vacanti. “But it’s really painful for all these individual sites to go out and monitor all their competitors. But guess who’s monitoring everybody? Yipit.”
Challenges Along the Way
“I was probably unaware of how difficult it would be to start a company,” Vacanti says of his start in entrepreneurship. “I was probably overconfident, just not really realizing that hard work and intelligence is not what it takes, necessarily, to start a successful company.
“Product management, user interface, web design. I didn’t know how to get PR. I didn’t know the value of networking or building relationships with others. I didn’t know how you go about fundraising or presenting yourself as a potential fundable company.” In hindsight, he says he may have tried to work at another startup first, to gain some of that hard-won insight.
And of course, the technology business comes with a unique set of challenges. Vacanti acknowledges the constant need to keep ahead of his fast-moving industry. He stays on top of the new developments by voraciously reading tech blogs like TechCrunch and TechMeMe, as well as The New York Times (he no longer reads print publications). He also tries out every new product and innovation that seems relevant.
The constant pressure to get ahead can make social life a problem. But even though Vacanti says that he never really leaves work, it’s crucial to make room for friends and family. Sometimes, he says, getting away from the company even helps make it better. “Stepping away from a problem, giving yourself time to think creatively, actually brings you closer to solving that problem,” he says.
Why This Company? Why Now?
Vacanti is first to point out that Yipit owes its success in part to being in the right place at the right time. “We stumbled into it in many ways,” he says. “We just happened to be doing this deal thing when the greatest company [Groupon] … created content for us to aggregate and recommend.” As more and more players enter the field, customers will be even more receptive to a company that manages the user experience in one place, he says.
If there is one industry that met the needs created by the recession, this is it. An entire country full of newly cost-conscious consumers – and of newly struggling businesses – presented a unique opportunity for marketing discounts. “The recession actually helped create this industry,” says Vacanti.
What’s Next?
Yipit anticipates growth to continue at a brisk pace for the near term: Vacanti says it’s adding up to 1,000 new subscribers per day and a city a week. The market for deal-a-day sites may become saturated at some point, but for now Yipit is adding 15 new ones every week.
“We’re definitely building a company,” Vacanti says. “We have 165,000 users. There’s no reason why we can’t be at 20 million or 40 million users.”
Related Links:
Why a Bad Economy Is Good for Entrepreneurs (The Fiscal Times)
Small-Firm Owners Still Waiting for Recovery (The Street)
Groupon Clones Pop Up Like Mushrooms (TechCrunch)
