Most of the time when a startup pivots, it’s because they’re forced to — either the model isn’t as viable as they originally hoped or the execution is something that they can’t support or the customers just aren’t there.
Every once in a while, a fortunate startup has the vision to pivot off a piece of their overall offering, turning that piece into its own product or, even better, its own platform. When this happens, a pivot goes from a desperation move to opportunistic land grab.
This is exactly what’s happened to subscription management startup Spreedly over the last year, and it culminates today with the announcement of a small, serendipitous raise and a new platform rollout. I sat down with Spreedly CEO Justin Benson to talk about the pivot, the raise, and how Spreedly will be integrating their product and their platform into one viable, scalable business.
Durham-based Spreedly had been building a business in software-as-a-service subscription management since 2008, and with four full-time employees had been growing over 100% per year. But they were growing off of an initial customer base that had started small — there simply weren’t a whole lot of net new customers in the market.
And as more entrants came into the industry and competitors started raising their prices repeatedly, the team saw bigger opportunities building on the platform and realized they had two options:
1) Stay where they were and maintain a small but steady business with a loyal customer base.
2) Swing for, if not the fences, at least something a little bigger.
At the same time, Spreedly noticed an increase in interest in their Core product. Core is the platform on which subscription payments are processed, essentially working like a valut for Spreedly to store credit card information for their customers to be able to charge against periodically, thus the subscription-as-a-service magic. In four years of working with all different types of gateways in various parts of the world, Spreedly had built integration with more than 40 gateways, all of which plugged in seamlessly to their vault.
They realized that while customers liked the subscription service, they loved the vault.
In March 2012, Spreedly opened a beta for customers to use just the Core product, the vault, as an e-Commerce platform. That took off, and in the process Spreedly found itself evolving from a subscription management company to a startup hoping to disrupt eCommerce.
They plan to do this by offering Spreedly Core customers a “one-connect” option for their e-Commerce customers.
Example: One Spreedly Core customer is a social/visual network that acts like the “Etsy of restaurants,” allowing any restaurant to post to their networked visual and social medium. I can browse this network and choose from theoretically hundreds of restaurants.
Using Spreedly, the network can offer each of those restaurants an e-Commerce platform that allows me the option to save my credit card with the network, and use it again the next time I shop on that network without having to enter it again, regardless of which restaurant I choose.
Core solves a couple of problems. It allows companies to be able to change their payment provider or gateway and still retain the credit card information of their customers, something that can’t be done with today’s storage services (Authorize.net, PayPal, etc.). This is important, because one-click has become a crucial component of the purchase process.
As Justin put it, “If I have to go downstairs and get my wallet, I’ll probably just put the purchase off until later, then probably never get back around to it.”
The other problem it solves is allowing a company to work with multiple gateways, especially important for companies doing business in more than one country.
Think of it as credit card storage as a service, and the price tag to build something like that means complying to strict PCI (Credit card security standards) which will run you a minimum of $50K to $100K per year.
Over the coming weeks, Spreedly will be targeting developers, platform providers, and anyone working with payment gateways. The raise comes from an investor in one of Spreedly’s larger prospective customers and is a little over $200K. They’ll use the proceeds to make this marketing push as well as continuing to enhance the product.