With a marquee list of local investors, an even larger-than-life executive team, and a lead position in an emerging hot space, EVOAPP was poised to reach great heights. But, that was all of 6 months ago and over the past few weeks, they have notified their key investors, shuttered their product website, leased their space to ReverbNation, and today released all of their employees.
The timeline of EVOAPP reads like a recipe for success:
• Founded in June of 2009 by 20-somethings (Joe Davy & Alexey Melnichenko), from the NC School of Science & Math and UNC-Chapel Hill.
• Raised $500k of angel funding in October of 2010 from Ryan Allis (iContact founder), Tom McMurray (former Sequoia partner) and Christy Shaffer (former CEO of Inspire Pharmaceuticals) to name a few.
• Hired Marco Fregenal as COO and sales champion in late 2010 as their first experienced hire.
• Turned around 3 months later and raised another $1.5M from most of the same investors with key additions including Lee Buck, Steve Nelson, Tom Darden, Henry Kaestner and Kimberly Jenkins.
• Added longtime venture capitalist and executive-for-hire, Kip Frey to join as CEO & President in September of 2011.
• Named NCTA’s “Small Technology Company of the Year” in November of 2011
• Took venture debt from Silicon Valley Bank in November of 2011
• Added additional investment from TAP (Triangle Angel Partners) in January 2012
• Moved into the former Ogilvy & Mather space in downtown Durham and immediately created EVOLABS to sublease to promising startups in January of this year
• Named CED’s “Company to Watch” in June 2011.
But the combination of tier-A investors, a serious chunk of investment dollars to establish a strong product foothold, and experienced executives like Kip, Marco and Lee were not enough. Over the past 24 months Joe could be seen at many events extolling the progress of the company. That is/was his job – to share his enthusiasm and passion for his company. Did he have the same passion for the product? We’ll see.
Is there a lesson for startups, entrepreneurs and the greater community? Sure is, and maybe we can uncover specific insights in a few more months, but there are a few obvious high-order thoughts we should consider:
1. There is no perfect recipe for success. Sometimes the ingredients just don’t come together the right way at the right time. It’s still very much a crapshoot out there. And, don’t discount luck, serendipity and timing.
2. Be careful of your context. At times, EVOAPP looked like the big fish in our smaller pond (Whiz Kid?) Being the darling of RTP buys you very little. And, it’s a big world out there and likely to have 3-5 companies thinking the same thing you are. The competitive landscape is brutal. Is $2.5M over 3-4 rounds and 2 years enough to play big in a big emerging space?
3. Are you ready for the struggle? This sh*t is hard. Don’t confuse activity with achievement. Did EVOAPP achieve, or did they just raise money, hire people and get super-cool space that they could share with other equally cool people.
4. Lastly, make big swings and sometimes you miss the ball. Even the best fail often. Failure is an integral part of the long-term equation. Safe bets are not enough to drive the community forward (though this looked pretty good from the cheap seats!). So, relax and learn from this experience.
Having gone through a similar startup failure here in RTP (Visitar), I am confident that the answer to question 2 (is 2.5M over 3-4 rounds enough) is no. If you are in an area that is really about creating a new market segment (or a big niche in an existing segment), then you need more time and funding to make it happen. If you are solving a known problem in a better way, then maybe you can get by with less.
Regardless of how much funding you get, you still have to be smart about how you spend the money, but when the key leaders have to spend as much of their time (or more) selling the idea and company vision to investors as they do selling to customers, you have a problem.
I think this is a lesson for both entrepreneurs and investors. If its a big idea, you need to “big funding” to match, particularly to compete with firms in the valley.
There are lots of opportunities for bootstrapped and “seed” capital style businesses that solve known problems in niche segments. The funding approach that is commonly used here in RTP works well for those. But the big idea businesses will struggle under that model and the likelihood of a having a runaway success here decreases every day.
Great coverage Chris. This is big news for the region, a serious team of big players, most of the local angel investors, and a red hot space in the market. It goes to prove that there is no consistent recipe for success.
Failure is a huge part of a startup ecosystem. For NC to have a thriving startup ecosystem these types of failures should be happening EVERY WEEK, that’s the volume we’ll eventually need to get to. Because, just by the math, we need lots of failures to get to a consistent number of successful exits. This is the startup game.
But in every failure is great opportunity… I hope that other NC startups are as eager as I am to snatch up the talent that EvoApp just freed up. There’s nothing better than a team of brilliant engineers who have learned by the trial of fire.
I’m hiring developers at BoostSuite. Follow and DM us on twitter @BoostSuite if you’re interested.
One other thought. When a company is going out with the idea of category creation, its often the case that the first product and positioning is not right. But you usually learn in that effort where your real value and differentiation comes from. Larger funding rounds allow for that one “good mistake” to happen and the a quick course correction and aggressively pursue a refined strategy.
I don’t have any first hand knowledge, but Bermuda feels like that type of thing for EvoApp. Unfortunately, the common funding profile here means there is rarely the runway to make that one mistake and learn from it to create a better company.
This comment is not specific to EvoApp but directed at point number 3. It reminds us that it is always about conversion; conversion into customers or dollars. It’s great to get accolades, awards and trophies. But if you’re not converting, well, all you have is a trophy case.
I believe the technology developed in the Triangle can be very competitive. To compete, though, we have to develop a high powered PR machine that touts the technology and products coming out of this area. I think there is a lot of noise in the environment and the inability to create awareness hurts any company.