This founder raised $450K for a social enterprise that failed. Here’s what he learnedFebruary 11, 2016 Category: Featured, Long, People, Results
SuperMighty wanted to change the mobile gaming industry for the better, and a lot of folks kind of expected them to — especially their investors.
But it just didn’t happen for the Old City-based startup, a startup that tied in-game purchases to charitable donations. In the middle of a $3 million Series A investment round, with $450,000 already banked in early stage venture capital and over $250,000 of the three cofounders’ own cash invested, SuperMighty shriveled up and died.
Simply put, the weight of the $25 billion industry they were trying to disrupt ended up crushing them.
“We had traction, we had proof, we had a working product,” said cofounder Ty Burrowbridge. “But ultimately, the customers we hinged our sustainability upon, it was like we were trying to feed them a vitamin.”
Those customers were game publishers — of which Burrowbridge said he learned later down the road there are really only five major ones that own most game companies and studios you might be familiar with. The crazy thing about that $25 billion industry, Burrowbridge said, is that all of that moolah comes from just under two percent of players.
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“We naively stumbled on this idea that ‘Hey, doing the right thing should be easy right?’ Apple partners with Product RED, Tom’s Shoes, you see these projects all the time. For-profit companies that are really sustainable, but at the same time, they’re mission-driven,” Burrowbridge said. “Why can’t anyone do that?”
SuperMighty quickly gained the support of Philadelphia’s indie game community and the indie game community at-large; Burrowbridge credits them with SuperMighty’s existence in the first place. Yet, even the backing of the entire indie game industry wouldn’t have sustained SuperMighty. They needed to get their service into big moneymakers like Clash of Clans, a game that rakes in $5 million per day.
When Burrowbridge and his two cofounders Gavin Potts and Sean Legnini met with the publishers of those big games, Burrowbridge said they quickly realized they were talking to companies that have no real need for SuperMighty — they were making enough money as it was. Why go through the hassle of making your developers integrate third-party software for a donation function?
The response from them, Burrowbridge said, was something along the lines of “This is really cool,” and “You guys seem like good guys,” but — there was just no incentive.
The gloss was coming off quickly, and that was frightening — especially for a 32-year-old startup CEO with a family. When you first launch a business, Burrowbridge said, and you begin to gain some momentum and make some traction, the highs and lows are incredibly dramatic and equally as addicting.
Until reality settles in.
“When the clouds start to dissipate, you start to really see how hard the ground is going to be. It’s really tough,” Burrowbridge said. “A startup in general is extraordinarily tough and you have to be slightly insane to really go out and do it. I think there’s a misconception about how easy it is to do.”
It’s a misconception that can oftentimes be perpetuated by media headlines. This month in Philly alone, tech startup Curalate raised nearly $30 million and there was news that motorcycle ecommerce company RevZilla might soon be acquired for as much as $500 million. (The latter turned out to be false.)
“You get this ultra-inflated and distorted perception of where you’re going to be, how fast you’re going to get there and how easy it’s going to be,” Burrowbridge said. “I was drunk on it too, at one point. You’re fed all these false positives and if you’re not careful and you’re not grounded, then it’s very easy to lose sight of what is actually possible.”
But the toughest part, Burrowbridge said, was going back to SuperMighty’s investors — the ones that already put in $450,000 and the potential VCs they were lining up for their $3 million Series A.
“When you go back and tell your investors ‘Hey, I was wrong. We miscalculated. The market shifted. The money you invested, we will do everything we possibly can to recoup those funds, but we may not be able to.’ That’s extraordinarily hard,” he said. “Especially because our investors were [impact investors]. They wanted their $10 to turn into a million dollars of social good. That was the return we were going to provide them. We just weren’t going to be able to get there. It really can beat you up.”
Believe it or not, the curtains hadn’t closed on SuperMighty quite yet. Another opportunity was laid before Burrowbridge when the cofounders reached out to other competing startups playing in the same mobile gaming sandbox. Burrowbridge said SuperMighty was considering proposing an “acquihire” to some of those companies, and they got pretty far along in the process with a company out of Boston.
As much as we celebrate social enterprises and mission-driven companies, the acquihire might have actually happened if SuperMighty wasn’t bound to its social mission. Burrowbridge said one of the investors in the Boston startup was a well-known conservative with public opinions that highly contrasted SuperMighty’s values.
“Ty and the team decided that the firm would not be using the assets — or them — in a way that was aligned with their mission and decided not to go forward,” said Shannon Mudd, a member of angel network Investors’ Circle Philadelphia, which had members lined up for that upcoming SuperMighty $3 million round.
“This is pretty impressive and demonstrates, in this case anyway, that impact investors are not only about return, that impact is key,” Mudd said. “If the ‘assets’ that were developed had just been used as a new marketing tool in order to sell more random consumer goods, the energy, effort and sacrifices that the team made to create something not only valuable, but important in expanding the ideas and goals of philanthropy to a new set of people, would have been wasted.”
Mission is the one caveat that makes this particular space most interesting. It’s also a caveat that makes this space prone to failure. By not going forward with the acquihire, Mudd said, the SuperMighty team left open the possibility that those assets might be “deployed in another setting and actually achieve the original goals of all those who put so much effort into it.”
“I try to take religion and politics out of all my relationships, but [the conservative investor]’s position, his point of view on the world was so out of alignment with anything we believed in our company,” Burrowbridge said. “It wasn’t worth it. It was against everything we stood for and why we stood for it when we started the company.”
So, Burrowbridge went ahead and left that “lump of cash” on the table. He said his team and his investors were behind the decision. In April 2015, 11 months after it was born, SuperMighty was dead. Though he didn’t want to admit it at the time, Burrowbridge found himself in a dark place. And though his first response was to “make the lemonade” and put a positive spin on the failure, he found that’s a mindset that’s easier to bluff than it is to actually embrace.
“The public perception should be that most startups fail, but here’s all the valuable lessons we learned, here’s where we’re going to go from here. You sort of arrive at that,” he said. “I think there’s a tendency to want to shape the story like other stories before yours so that it sort of fits with them, but it doesn’t feel OK for the startup CEO no matter what they say.”
Any entrepreneur, social or otherwise, needs a support network to fall back on, to help foster growth. Burrowbridge said his were his wife Jenny Streets and his mentors, local serial entrepreneurs Rick Nucci and Edward Sullivan. They helped him keep his head straight.
And while Burrowbridge said SuperMighty provided him with a deep well of experience to draw from in order to maintain a balanced perspective — how to ideate, self-fund, raise capital, grow a customer base and really, how to fail — he said one of the most valuable lessons he learned was how to set expectations by really, actually, personally putting customers first.
SuperMighty’s customers were supposed to be those major game publishers. If a meeting had taken place with one of them before launching SuperMighty, Burrowbridge said he would have never written that first line of code.
“The relationship with the customer is not based out of theory or spreadsheets or market research,” he said. “What governs a lot of decisions is the conversations with a stranger who is a potential customer — having more of those conversations to help dictate business decisions, rather than some magical feature or product that I feel the world would be better with.”
"Once you get involved with a company that is mission-driven at its core, that wants to be sustainable but isn’t solely driven by profit margins, that measures its success based on its impact on the world, I think that changes how you see companies forever."
But Burrowbridge caught the social enterprise bug. He took some time to think about what he wanted to do after SuperMighty failed, and realized he couldn’t be involved with a company without a social mission.
“Once you get involved with a company that is mission-driven at its core, that wants to be sustainable but isn’t solely driven by profit margins, that measures its success based on its impact on the world — I think that changes how you see companies forever.”
So, Burrowbridge joined up with TREATMiNT Box, founded by local social entrepreneur Kimberly Fink. The company sells monthly subscriptions for boxes filled with gifts for cancer patients, cancer survivors and caregivers.
Burrowbridge’s message for first-time entrepreneurs: Get comfortable with failure, and get comfortable with failing often. You can spend all day reading about how founders handle failure, but the reality is, you have to be failing in the moment to really get it.
“You move quickly, and by moving forward quickly you make a lot of mistakes. And when you’re small and make those mistakes, they are visible,” he said. “It’s how you respond to those moments that really defines the leader you can be for your company.”