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"As we approached the end of our runway, it became clear to us that DrawQuest didn’t represent a venture-backed opportunity, and even with more time that was un

"As we approached the end of our runway, it became clear to us that DrawQuest didn’t represent a venture-backed opportunity, and even with more time that was unlikely to change." I believe this is the heart of the message. It looks like there was no revenue generation model that could give back the money invested ($3.6 million) and provide a real return. The application is successful and there is a large user base. Let's assume DrawQuest is able to make a profit of $200,000 a year on revenue of $400,000 based on some simple changes to allow users to pay for premium features. For a very small company with 2-3 people, this may be enough to keep going. Now, I don't know what these numbers can really be but I would imagine for a bootstrapped company it would be viable. It's unfortunate that this business "failed" because the profit it can generate just isn't enough for the investors and the founders. It would be nice if instead of shutting it down, it's handed out to others that will be happy with its lower profit potential.

benjaminwootton 13y ago
Seems like you have to be really careful with VC as it can reframe a success into a huge failure.
- sliverstorm 13y ago
  But if you are making less than pennies on the dollar, was it ever a success anyway? Having users and traction is not success. Plenty of companies get both users and traction, all they have to do is tolerate negative profits...
  - ForHackernews 13y ago
    shrug It seems to work for Amazon. All you need is patient investors.
    - sliverstorm 13y ago
      Amazon is somewhat of a different story; Amazon is enduring small profits by choice in a bid for the future, and investors feel like they see that future, that tremendous potential. The way they are playing it, IMO Amazon is still neither a success nor a failure. Their story is still being written, as they position themselves for whatever move they have been preparing for the last decade.
      - dclara 13y ago
        Discussing Amazon's business model is always an interesting topic. The first time I heard about that Amazon made no profit was from the news telling that they had to increase the free shipping criteria to be $35 instead of $25. Basically, they cannot afford to keep the $25 promise, which may lose some customers foreseeably. Of course, Amazon does a lot of good and successful things, such as running such a huge ecommerce website to fulfill and meet so many customers needs, helping online business to sell, keeping their executives rich and making their employees job secure, including the stock holders happy, etc. And they are also investing into the technology side of the business and expanding into the cloud technology in early years. But how successful is it for AWS? All of these cannot avoid an issue that their business model was going a wrong direction for many years to reach today's stage and further. So the article below shows that they are going to change their direction and stopping the effort to replace or shorten the supply chain by offering all kinds of services which exhaust their resources and lose focusing: Amazon’s Future Is Not in Selling Stuff — And That’s a Good Thing http://www.wired.com/business/2013/01/amazons-future-not-selling-stuff/ http://www.wired.com/business/2013/01/amazons-future-not-sel...
    - declan 13y ago
      I'm not sure it's that useful to compare a <10 person startup to the world's largest online retailer, with revenue increasing by leaps and bounds every quarter, a quarter-billion active customers, and approaching $100 billion a year in net annual sales. Bezos is choosing to reinvest $$$ in business rather than report it as profits. So far it's been a very wise choice. Back on the topic at hand, I should add that it's sad to see this happen to DrawQuest, and it's very decent of Chris to post this for us to read.
      - edanm 13y ago
        I'm guessing the OP is talking about the PAST of Amazon, not the present. They ran for many years at a huge loss in order to capture the online retailing market, and didn't provide any returns for many, many years. Arguably, it worked.
callmeed 13y ago
Yeah, its a bummer because my 9 y/o daughter really loves DrawQuest. It would be nice if some other mobile/gaming company bought the assets and kept it alive.
moot 13y ago
This is mostly right. DrawQuest would make a fine lifestyle business for a few partners, but is unlikely to become a business that represents a venture-backed opportunity. However because we built it as a venture-backed business, that's the bar we're held to. Per my post, I'm exploring options for keeping the service alive for the next few months (and hopefully longer), and am cautiously optimistic we'll be able to figure something out.
- cgag 13y ago
  If it could be run as a lifestyle business by a few partners and be profitable, why not do that?
  - andyjdavis 13y ago
    I suspect the terms of their funding and human nature have something to do with it. If the business shuts down everyone (founders and investors) loses. If they now run it as a lifestyle business the founders win but the investors lose. If I was an investor in that second case I would be deeply suspicious and possibly angry.
    - cheapsteak 13y ago
      Could you elaborate on how the investors would lose if they run it as a lifestyle business? Would they make more money back by liquidating their assets?
      - cgag 13y ago
        I think they "lose" in that they'll be angry to see someone still making a living on the idea while they saw no returns. Or maybe they can't break free, and keeping it running would still mean just giving the profits to the investors for the next 100 years and it's easier to just close it all together?
      - dkersten 13y ago
        Even making a 2x or 3x return is a failure for a VC and not seen as worth their time.

benjaminwootton 13y ago

Seems like you have to be really careful with VC as it can reframe a success into a huge failure.

sliverstorm 13y ago
But if you are making less than pennies on the dollar, was it ever a success anyway? Having users and traction is not success. Plenty of companies get both users and traction, all they have to do is tolerate negative profits...
- ForHackernews 13y ago
  shrug It seems to work for Amazon. All you need is patient investors.
  - sliverstorm 13y ago
    Amazon is somewhat of a different story; Amazon is enduring small profits by choice in a bid for the future, and investors feel like they see that future, that tremendous potential. The way they are playing it, IMO Amazon is still neither a success nor a failure. Their story is still being written, as they position themselves for whatever move they have been preparing for the last decade.
    - dclara 13y ago
      Discussing Amazon's business model is always an interesting topic. The first time I heard about that Amazon made no profit was from the news telling that they had to increase the free shipping criteria to be $35 instead of $25. Basically, they cannot afford to keep the $25 promise, which may lose some customers foreseeably. Of course, Amazon does a lot of good and successful things, such as running such a huge ecommerce website to fulfill and meet so many customers needs, helping online business to sell, keeping their executives rich and making their employees job secure, including the stock holders happy, etc. And they are also investing into the technology side of the business and expanding into the cloud technology in early years. But how successful is it for AWS? All of these cannot avoid an issue that their business model was going a wrong direction for many years to reach today's stage and further. So the article below shows that they are going to change their direction and stopping the effort to replace or shorten the supply chain by offering all kinds of services which exhaust their resources and lose focusing: Amazon’s Future Is Not in Selling Stuff — And That’s a Good Thing http://www.wired.com/business/2013/01/amazons-future-not-selling-stuff/ http://www.wired.com/business/2013/01/amazons-future-not-sel...
  - declan 13y ago
    I'm not sure it's that useful to compare a <10 person startup to the world's largest online retailer, with revenue increasing by leaps and bounds every quarter, a quarter-billion active customers, and approaching $100 billion a year in net annual sales. Bezos is choosing to reinvest $$$ in business rather than report it as profits. So far it's been a very wise choice. Back on the topic at hand, I should add that it's sad to see this happen to DrawQuest, and it's very decent of Chris to post this for us to read.
    - edanm 13y ago
      I'm guessing the OP is talking about the PAST of Amazon, not the present. They ran for many years at a huge loss in order to capture the online retailing market, and didn't provide any returns for many, many years. Arguably, it worked.

callmeed 13y ago

Yeah, its a bummer because my 9 y/o daughter really loves DrawQuest. It would be nice if some other mobile/gaming company bought the assets and kept it alive.

moot 13y ago

This is mostly right. DrawQuest would make a fine lifestyle business for a few partners, but is unlikely to become a business that represents a venture-backed opportunity. However because we built it as a venture-backed business, that's the bar we're held to. Per my post, I'm exploring options for keeping the service alive for the next few months (and hopefully longer), and am cautiously optimistic we'll be able to figure something out.

cgag 13y ago
If it could be run as a lifestyle business by a few partners and be profitable, why not do that?
- andyjdavis 13y ago
  I suspect the terms of their funding and human nature have something to do with it. If the business shuts down everyone (founders and investors) loses. If they now run it as a lifestyle business the founders win but the investors lose. If I was an investor in that second case I would be deeply suspicious and possibly angry.
  - cheapsteak 13y ago
    Could you elaborate on how the investors would lose if they run it as a lifestyle business? Would they make more money back by liquidating their assets?
    - cgag 13y ago
      I think they "lose" in that they'll be angry to see someone still making a living on the idea while they saw no returns. Or maybe they can't break free, and keeping it running would still mean just giving the profits to the investors for the next 100 years and it's easier to just close it all together?
    - dkersten 13y ago
      Even making a 2x or 3x return is a failure for a VC and not seen as worth their time.