Key Takeaways

  • In a downturn, nailing your startup’s product market fit takes on a new urgency.
  • At a VC-backed company, traction is not enough; you also need a clear path to scale.
  • Confidence in your ideas and your team are essential to getting through hard times.

How Jennifer Dulski led Fatdoor/The Dealmap through the Great Recession

When Jennifer Dulski joined Fatdoor as cofounder and CEO at the end of 2007, things seemed to be going according to plan. The company had raised a modest sum of money and assembled a small but talented team. Like many early-stage startups, Fatdoor was iterating on various concepts – all tied to the idea of a local, neighborhood-based service — as it sought to find a still-elusive product market fit.

But shortly after, events upended Fatdoor’s well-laid plans. As the subprime mortgage crisis deepened, the stock market went into freefall. By September 2008, Lehman Brothers collapsed. A month later, a dire warning rattled the entire Silicon Valley startup economy. In its immediately-famous “RIP Good Times” presentation, marquee venture firm Sequoia Capital admonished founders to “adapt quickly,” “spend every dollar as if it were your last,” and “get real or go home.”

“What we read is what we had already been thinking,” Dulski says. “But it made us realize that we had better get on it and act fast.”

In the ensuing months, Fatdoor followed many of the Sequoia prescriptions, moving quickly to cut costs, exploring emergency financing alternatives in a changed environment, and most importantly, focusing with renewed urgency on the task at hand: zeroing in on a model that could deliver users, revenue and profits.

The company iterated at dizzying speed, running through a series of product ideas and business plans. It even changed its name, not once (from Fatdoor to Center’d), but twice (from Center’d to The Dealmap). In that final iteration, an app that would show Groupon-style deals and other offers on a map, it found its path to growth. In 2011, Google acquired the company, which had grown to 15 employees and two million users.

In the face of a new economic crisis unleashed by a global pandemic, the story of how Dulski led her startup to success in the face of long odds — leveraging her grit, perseverance and conviction in her startup’s potential and talent — is a lesson and inspiration for entrepreneurs in uncertain times.

Painful cuts become a lifeline

Shortly after the Sequoia presentation, a gallows humor quip began to circulate among the members of Dulski’s team. “Must be present to win,” they would jokingly remind each other, in reference to the rules common in many raffles. In short, survival was job number one, two and three.

The plan to extend the startup’s life began, not surprisingly, with cost-cutting. The company eliminated a couple of positions, leaving it with just a handful of employees. Dulski and co-founder and CTO Chandu Thota took pay cuts. And Dulski began negotiating with vendors hoping to get a break wherever she could.

First was their landlord. The company was able to get out of a long-term lease and move into a smaller space. Dulski also renegotiated a number of contracts, including a licensing deal the company had for local content. “A lot of people were pushing to renegotiate agreements, and in some cases we got better deals,” she says. “We really went down to bare bones from a cost perspective.”

Ideate. Prototype. Test. Repeat.

The bigger, more urgent changes, however, were around Fatdoor’s search for a product that would resonate with users. The company scrapped the initial concept it had for a neighborhood-based social network in favor of a new idea, a service for organizing local events. After Dulski and her team realized the service wasn’t spreading virally, they changed course again.

The company, by then called Center’d, would use artificial intelligence and natural language processing capabilities to analyze local listings and online reviews, and to single out characteristics that stood out. It could identify restaurants that were “romantic,” or “family friendly,” for example, or bike shops that catered to “serious athletes,” or day spas that were “full service” or “high end.” “We analyzed the text in tens of millions of online reviews,” Dulski says.

In the nascent mobile era, the new approach Center’d pioneered proved valuable – sometimes more so than review sites like Yelp, which consumers struggled to use on smartphone screens. But the company lacked funds to spend on marketing, so rather than a consumer product, it decided to license its data to other online companies focused on local businesses, like CitySearch.

Revenue started to grow, but Dulski soon realized the market wasn’t large enough for a company whose investors were intent on outsize returns. The universe of potential customers for Center’d was relatively small. “The licensing business was growing, but I realized it wouldn’t grow at venture scale,” Dulski says. “We needed to iterate again.”

 

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The questions you have to ask yourself are, “do you believe in the team,” and “do you believe you can build something great.”

From survival to success

At the company’s final board meeting of 2009, Dulski pitched her new idea of aggregating local deals into an app. She then spent the holidays persuading board members one-on-one that it was the right move. Some were reluctant to change course, saying the company had shifted direction too many times, and it was finally getting some traction. But through perseverance and persuasion, she was finally able to win them over and get the green light. After struggling with two names that had done little for the startup, Dulski insisted on being descriptive, even literal. The Dealmap was born early in 2010, and things turned around quickly after that.

The Dealmap allowed users to find local deals near them. It not only displayed Groupon-style offerings, which had grown in popularity over the previous year, but also those from big national brands. If Gap or Subway had a special offer, The Dealmap would show it. “It took off immediately,” Dulski says. “It really showed me the difference between having product market fit and not having it.”

Revenue started to trickle in, and Dulski began getting cold calls from businesses, including major national brands, that wanted to work with The Dealmap. Sometimes Dulski had to pinch herself to believe the company’s newfound fortunes. “One day, I picked up the phone and it was someone from MasterCard,” Dulski recalls. “My first reaction was to think it was fake.”

Despite the cost-cutting early in the crisis, the company still found itself in need of additional funds as it iterated through business ideas. With the path to new investors effectively closed, Dulski pitched her existing investors. An inside round made sense, because those investors had a stake in preserving the money they had already sunk into the company. Even so, it wasn’t easy, until Dulski persuaded one investor to lead a $1.5 million round. “No one wanted to lead it,” Dulski says. “Finding allies in the moment is really important. You need someone who is willing to step in and make a statement.” 

Uniting the team

Dulski says she could not have succeeded had she not earned the support of her team. And that wasn’t easy. “To bring a team along on something like that can be really challenging,” she says. “When you let people go at a very small company, it’s impactful. Others start to worry about job safety. We had to sell them on the idea of staying.”

Being small, however, was a saving grace. As everyone worked harder, the bonds between the team solidified. “We were working incredibly hard, so we were together all the time,” Dulski says.

To relieve some of the pressure, The Dealmap introduced some fun traditions. They agreed to work especially late on Wednesdays: Everyone would leave the office around 4 pm to relax at home or go for a workout. They would return in the early evening for a group dinner. Dulski’s husband and young daughters would then bring homemade cookies for everyone. “We loved what we struggled for,” she says. “It can really bring the team together — as long as you see light at the end of the tunnel.”

Dulski is now founder and CEO Rising Team, a startup that builds tools for leadership development and team building. She’s facing a new economic crisis — one that could derail many entrepreneurial dreams. In choosing to pursue hers, she draws on a lesson from her days at The Dealmap. “The questions you have to ask yourself are, ‘do you believe in the team,’ and ‘do you believe you can build something great,’” she says. “The answer for me was yes to both, so it was worth taking a hit in the near term to keep going.”

The views expressed in this column are solely those of the author and do not reflect the views of SVB Financial Group, or Silicon Valley Bank, or any of its affiliates. This material, including without limitation the statistical information herein, is provided for informational purposes only. The material is based in part upon information from third-party sources that we believe to be reliable, but which has not been independently verified by us and, as such, we do not represent that the information is accurate or complete. You should obtain relevant and specific professional advice before making any investment or other decision. Silicon Valley Bank is not responsible for any cost, claim or loss associated with your use of this material.
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