BSAD 356 HNU 471
ENTREPRENEURSHIP
Dr. Neil Maltby
September 5, 2023 - December 6, 2023
NOTICE REGARDING COPYRIGHT
This custom course package contains intellectual property that is protected by copyright law. It is
illegal to copy the material within this package without the written consent of the holder(s) of the
copyright. This material has been copied under license or with permission from the copyright holder.
Resale or further copying of anything in this package is strictly prohibited.
Unless otherwise stated, Copyright ©2023, Ivey Business School Foundation. Ivey Business School
is the leader in providing business case studies with a global perspective.
Table Of Contents
Reaching Crunch Time: Fight or Fold
4
Can Goodr Fight Food Insecurity at Scale?
12
Patreon: A New Service and Pricing Strategy for Subscription-based Crowdfunding
27
Threadless: The Renewal of an Online Community
41
GoPro: The Disruptive Innovator Faces Challenges
56
Local Pulse: Growing a Values-Oriented Firm
69
Speak-On: Projecting Cash Budgets for a New Venture
79
W27825
Anna Jenkins and Paul Spee wrote this case solely to provide material for class discussion. The authors do not intend to illustrate
either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying
information to protect confidentiality.
This publication may not be transmitted, photocopied, digitized, or otherwise reproduced in any form or by any means without the
permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights
organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western
University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveypublishing.ca. Our goal is to publish
materials of the highest quality; submit any errata to publishcases@ivey.ca. i1v2e5y5pubs
Copyright © 2022, Ivey Business School Foundation
Version: 2022-12-16
Startup founders Danielle McFarland and Sheree Evans had reached crunch time. It was November 2016, and
they were down to their last AU$15,000.1 With a burn rate of $3,000 per month and closing costs, they had
just over three months before they would be forced to shut down their businesses for good. McFarland and
Evans had spent the last five years working full time to build two startups in the health and wellness industry
while doing gig work on the side. After building Mystro, an online payment gateway for small or solo health
and wellness practitioners and massage therapists, McFarland and Evans pivoted to their second startup
attempt, Therapair, an online platform that matched massage therapists with customers, which they described
as “eHarmony meets Airbnb for the health and wellness space.” After validating their minimum viable product
(MVP) for Therapair, they needed further investment to automate their platform and build their market.
McFarland and Evans planned to use the upcoming weekend to analyze their options and plan their next
steps. Evans laid it all out: “We really have to think about what the futures of both companies look like,
because once this money runs out, we don’t have any more.”
McFarland and Evans knew they had a tough decision to make by the end of the weekend. Had they
sufficiently validated their new business model? They had two options: the first was fighting to keep the
businesses alive, which would involve both of them returning to full-time work and investing one of their
salaries fully into the startups to hire an offshore development team. Their second option was to fold and
shut both ventures down—after five years of trying, it might be time to walk away and invest their energy
into other things.
BACKGROUND TO THE IDEA: 2008–2011
Entrepreneurs Evans and McFarland lived on the Gold Coast in Queensland, Australia. Famous for its
world-class surfing, white sandy beaches, warm climate, and relaxed lifestyle, the Gold Coast was a health
and wellness mecca and attracted many sports and wellness enthusiasts. With a population of nearly
700,000, it was Australia’s sixth-largest city. It was also a popular tourist destination, with over five million
tourists staying at least one night in 2017.2
1
AU$ = Australian Dollars; AU$1 = US$0.75 in November 2016; All currency amounts are in Australian dollars unless
otherwise specified.
2
“Gold Coast Statistics & Facts,” Gold Coast, n.d., accessed October 1, 2022, www.goldcoastinfo.net/aboutgc/statistics/.
Page 4 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
REACHING CRUNCH TIME: FIGHT OR FOLD
Page 2
W27825
They spent nearly two years growing the massage clinic and had up to five therapists working for them at
any one time. McFarland built a website for the business and quickly became a savvy online marketer. She
managed the day-to-day operations of the clinic while continuing her freelance work. Evans focused on
building their massage clinic’s client base and recruiting and managing the therapists.
Their first startup idea came to them while reflecting on the challenges they experienced while managing
the day-to-day operations of the business, which included not being able to find software designed
specifically to meet the needs of health and wellness professionals. They were passionate about the industry
and could see a clear need for bespoke software. Then and there, Evans and McFarland decided to create
the business management software they wished they had for their clinic. They were so excited about their
idea that they stayed up all night designing the software. They paused their plans for starting a family and
buying a home, and dedicated themselves fully to pursuing their startup dream.
FOUNDING MYSTRO: 2012–2015
Committed to their idea of creating bespoke software for the health and wellness industry, Evans and
McFarland hired an Australian software development company in 2012. The aim was to build a payment
gateway called Mystro that would allow massage therapists (particularly those who were new to the
industry, in small clinics, or solo practitioners) to accept payments and manage their schedules without
lock-in fees and with a built-in acceptance of private insurance rebates. They envisaged that the software
would also have an online booking calendar and other useful features.
With a quoted cost of $90,000 for the product build, Evans took a sales job for one year in the finance
industry. The role earned a base salary of $40,000 plus commission. While it might not have been what she
was passionate about, Evans quickly became highly skilled in sales, earning monthly commissions of up to
$20,000—funds Evans and McFarland needed to get their idea off the ground.
However, they experienced problems with the software development company they hired. Product delivery
timeframes were drawn out and the quality of work was poor, leaving them with a product that didn’t even
have the required basic functionality. After paying $75,000 of the $90,000 for the product build, they
walked away in February 2014 with an unfinished product—18 months after commissioning it.
Like many entrepreneurs, Evans and McFarland learned from this setback and changed their approach.
They wanted to find technical co-founders who would be just as invested in the success of the product as
they were. As McFarland explained, “We knew we had to learn from our previous mistake—don’t hire
someone to do it. We needed to find someone who had some vested interest in our company, give them
some equity, then they’re in it for the long run, and they’re passionate about it like we are.”
In March 2014, they posted an ad in several programming groups on Facebook asking if anyone was
interested in joining their startup. Liam responded to their ad and joined as a backend developer. He
recruited his friend, Brian, a frontend developer with whom he had previously worked. As a team, the four
of them agreed McFarland would continue to do the UX design work.
Page 5 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
Evans had a passion for biology and health and wellness. She worked as an animal trainer at SeaWorld;
while she loved her job, her salary was low and her hours were long. Keen to try something else, she trained
as a massage therapist. During her training she met McFarland, a freelance graphic designer and
photographer. Shortly after meeting, they became a couple and began working together. Their first project
was establishing Evans’ massage clinic.
Page 3
W27825
To realize their dreams, Evans and McFarland focused all their time and energy on the startup. Evans
stopped working in sales and returned to her mobile massage clinic with a few regular clients, earning $500
to $600 each week. McFarland continued her freelance graphic design and photography work, accepting
small jobs to earn a few of hundred dollars here and there. McFarland also set up and automated a side
business, Healthinomics, which created social media graphics for health and wellness professionals.
Together, they made approximately $45,000 a year.
With their reduced income, Evans and McFarland put all their belongings in storage and minimized their
living expenses by housesitting. As McFarland explained, “We move around just so we don’t have to pay
rent and look after other people’s homes and pets, just so we can keep putting money back into the business,
so we completely adapted our life to make sure everything works.”
Liam and Brian were equally committed to the startup. They resigned from their jobs and worked full-time
creating Mystro. Within three months, they had built an entirely new platform, and by January 2015, they
launched a beta version of the software.
The beta version of Mystro managed payments, scheduling, and insurance reimbursements. It didn’t,
however, have an online booking functionality—the most requested feature from therapists. This was the
next feature Liam and Brian would work on.
Evans explained their business model as “free for up to ten customers and then, over ten customers, you
pay $50 a month to use it for one staff member and, if you add another staff member, it’s $5 for every
additional staff member.” This enabled therapists to trial the product with a few customers for free before
paying the monthly subscription free. The functionality in the beta version consisted of a payment gateway
and in-house scheduling of appointments. There were no lock-in contracts to use the software. Evans and
McFarland felt that the built-in payment gateway was a strong selling point as it enabled therapists to accept
credit card payments through Stripe (a complete payments platform) without needing to sign up for
electronic funds transfer at point-of-sale contracts. Mystro was a global company from its launch,
generating a list of 2,000 interested users from 24 countries on its sign-up page.
With the product now in the market, the company started to generate some revenue. Unfortunately, with its
freemium business model, Mystro only had a handful of paying customers. The revenue generated was not
enough for any of the founders to pay themselves. Without the backing of a strong marketing campaign,
they struggled to attract new users beyond the word-of-mouth generated through their networks and social
media profiles.
Frustrated with the lack of revenue, Liam and Brian didn’t want to invest another four months of time
building the online booking functionality. Instead, after the launch, they stopped actively working on new
features for Mystro and switched to providing software support. Less than a year later, at the end of 2015,
Liam and Brian left the startup. Fortunately, all four founders had a good working relationship, and Liam
and Brian left the venture on good terms. Evans and McFarland bought back Liam’s and Brian’s equity for
$1,500 ($750 each).
Page 6 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
Evans and McFarland agreed to offer 15 per cent of the business’ equity each to Liam and Brian and to pay
both developers a weekly salary of $300. Liam’s and Brian’s share would essentially be “sweat for equity.”
The developers’ pay initially came out of Evans’ salary; later, Evans and McFarland used funds from the
tax offset available as part of Australia’s Research and Development Tax Incentive scheme. (This incentive
scheme also allowed Evans and McFarland to get back some of their initial investment from their previous
product build as part of their tax return.)
Page 4
W27825
JOINING AN ACCELERATOR: 2016
They delivered a pitch to the accelerator in January 2016 and were immediately accepted. (Only one per cent
of applicants made the cut, so the stakes were high.) In negotiating the accelerator’s equity stake, Evans and
McFarland agreed to part with 12.5 per cent equity for an investment of $25,000.3 The accelerator was
impressed by their passion for and commitment to their startup and their ability to create and launch a product.
Customer Discovery
The first activity in the accelerator program was to validate their value proposition through customer
interviews. Evans and McFarland started this process with the hypothesis that online booking functionality
was a feature that therapists wanted. It had, after all, been their most-requested feature and what they
planned to build next. As explained by Evans, their mentor asked them to keep an open mind: “Just because
you’re having that problem doesn’t mean that everyone else is, so you need to validate it; it’s great to have
a hypothesis, but go out there and prove yourself right.”
Evans and McFarland interviewed a wide range of their customers, believing that they would indeed be
proven right. However, what they found was a very different need in the market. As McFarland explained,
“We were doing the interviews to prove that the online booking feature was the next feature that needed to
be built, and then really it took a bit of a different turn, didn’t it?” Evans elaborated, “We ended up finding
out through all the people that we spoke with that there were three problems that therapists were dealing
with. One was struggling with marketing themselves; getting in new customers was a big struggle for them,
then once they’d get those new customers, it’s retaining them long term, so they keep coming back. And
then the business admin side of things.”
THE PIVOT
Based on this insight from their customers, Evans and McFarland pivoted from their idea of adding a booking
function to Mystro to creating a customer-facing platform where they could market the services of massage
therapists and provide an online portal for client bookings. They called this new platform “Therapair.”
By creating online profiles for all the therapists that also included a professional headshot and short video, the
aim of the platform was to enable a good match between the therapist and the customer. Their reasoning was
that if they could create a good match, they could also help therapists retain customers—addressing a pain
point identified in their customer interviews. They believed this would be an important point of differentiation
for Therapair. While there were other online therapist directories in the market, none offered customers any
information on the identity and profile of the massage therapist they were interested in booking.
3
These numbers are approximate and provided for teaching purposes.
Page 7 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
After losing Liam and Brian, Evans and McFarland decided they needed to either find two new technical
co-founders or an investor. In addition to needing online booking functionality, Mystro required ongoing
maintenance and customer support. In their search for technical co-founders, they came across an
accelerator that supported non-tech founders of tech startups.
Page 5
W27825
Creating an MVP
Talking a bit about their approach, Evans explained that she approached massage therapists “by email, went
to their clinics, spoke to them over the phone, things like that … I am contacting a lot of different therapists
now, so I’ll go on their websites [and] get their details. I find out a little bit more about them so I can help
understand where they might be coming from.”
Evans found that some therapists were keen to support them from the start, while others wanted to wait and
see how the platform performed: “People that jump right in, they’re happy to jump in; they don’t care.
They’ll take that risk with you, and they’ll support you. The second people will only come on board because
they’ve been told by someone else that you’re awesome!”
Evans focused on recruiting therapists to the platform while McFarland took therapists’ headshots and edited
their videos. McFarland was able to get her turnaround time to under two hours to complete the photos,
videography and editing but realized that if they were to onboard more therapists, they would need to hire
someone to do this. They estimated it would cost them around $325 per therapist to outsource this task.
Evans and McFarland initially kept their geographical scope to the Gold Coast, aiming to capture as much
of this market as possible as they validated their idea. From there, they planned to expand to Brisbane and
other areas of Australia. They created a signup page for interested therapists in other cities, building a
waitlist of 105 therapists to facilitate their expansion.
Keeping their MVP as simple as possible, Evans and McFarland had opted for a customer-facing website
without backend functionality. Customers coming to their website were able to view the profiles of massage
therapists and request a booking, but behind the scenes, Evans or McFarland needed to manually check if
the requested therapist was available at the requested time. This meant they always had to have their mobile
phones handy in case a visitor came to the website and requested a booking—even if this was at midnight.
To facilitate this, Evans and McFarland asked all of Therapair’s therapists to keep their availability up to
date using Mystro’s scheduling software (provided to the therapists free of charge). In real time, McFarland
would quickly log in to Mystro to check if the therapist was free and confirm or deny the booking. As she
explained: “We have a spreadsheet of everyone’s names and their login details and quickly log in to their
accounts. …We can view their availability, schedule in their bookings; we’re doing it all manually.”
This kept the process seamless from the customer’s perspective while allowing Evans and McFarland to
beta-test their new idea without the significant investment required to automate the booking process. In
Evans’s and McFarland’s words, “We give the illusion that they book online.”
Launching Therapair
Six months after joining the accelerator in July 2016, Evans and McFarland launched Therapair with 17
therapists on their platform. In the first week of going live, Therapair facilitated its first booking with
another five the following week.
Evans and McFarland took 20 per cent from each initial booking facilitated and $5 for each subsequent
booking made by the client.
During the first four weeks after launch, Evans and McFarland onboarded five more therapists, facilitated
12 bookings and generated $300 in revenue.
Page 8 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
To beta-test their new value proposition, McFarland created a simple MVP (a website) for under $500.
Evans and McFarland then started the process of recruiting massage therapists to Therapair.
Page 6
W27825
Marketing Therapair
To get a better understanding of how their ads and promotions performed on different platforms, some
weeks they trialed just Facebook ads or boosted Facebook posts; other weeks they trialed just Google Ads.
Evans explained the process:
We’ve tried Facebook paid advertising, which we did for the first couple of weeks. Then we’re
doing Google paid advertising. Because the issue we had was we didn’t know whether a booking
—so that’s like a conversion—where it was coming from exactly. We were asking people, once
they booked, where did you find us? They’re like, “Oh, on Facebook”, or “on Google”. But we
don’t know if it was paid Facebook [or] paid Google because it’s a manual process, and it’s all
through a little live booking widget.
In an effort to boost their bookings, Evans and McFarland were paying on average $1 per click on Google
Adwords and between $0.01 and $0.05 per view for Facebook videos and posts.
They increased their marketing budget and spent two weeks with a $40 per day budget for Google Adwords,
trying to gain conversions. At an average of $1 a click, they had 40 visitors each day but no requests for
bookings. As Evans put it, “What we really established is that with Google Ads as being the sole primary
driver of traffic, it just didn’t work at all.” McFarland added, “It was a couple of weeks where we literally,
we had no bookings. What Sheree had done is, turned off Facebook Ads, and kept Google Ads running.”
They found that boosting videos on Facebook had the highest conversation rate. In response, they posted the
profiles of different therapists on Therapair’s timeline on Facebook and promoted them. They found that the
profiles were then shared on Facebook, and through this sharing, traffic to their website increased. Evans
explained: “Per Facebook post, there’s probably a minimum of 10 to 15 likes [after 3 days]. Most people have
tagged at least one friend in every single post, and there’s been a few shares. …When people like and share,
which they are, you then get a greater exposure. I think that’s really accelerated us this week because we’re
not just getting our value, we’re getting the value of everyone liking, sharing, seeing it, or commenting.”
With this marketing strategy, they facilitated seven bookings in four days.
However, despite these successes, they struggled with getting customers to book subsequent appointments
through Therapair. Evans explained the process she used to follow up with customers:
Every time that we do a booking, two days after, I send the email to everyone to ask for their
feedback and to ask them if they want to rebook. No one’s rebooked back through us yet. Some of
them have rebooked through the therapist because they’ve gone for the appointment and, right then
and there, they’ve gone, “Can I book another appointment for you in two weeks?”
They also actively sought out media opportunities to raise their profile and created a Facebook group for
their therapists called “Therapair Tribe.” They formed a relationship with two massage schools, and
Therapair was integrated into the curriculum as part of running a health and wellness practice.
Therapair’s Financials
Evans and McFarland used the investment from the accelerator to cover their operating costs while they
focused on validating their MVP. Their approximate fixed monthly costs were $700 for the server to run
Page 9 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
Evans and McFarland tested different ways to market Therapair on Facebook and Google. They initially
started with a $100 budget for each platform each week. However, because of the limited functionality of
their MVP, they didn’t always know how a customer found them or which of their ad campaigns was driving
the traffic and conversions.
Page 7
W27825
the business management software (this was billed in US dollars, so the cost fluctuated slightly each month)
plus an additional $300–$1,000 for their advertising budget.
CRUNCH TIME: NOVEMBER 2016
Evans and McFarland spent five years investing everything into their startup attempts (a full timeline of
events is shown in Exhibit 1). But in November 2016, they had reached a point where they didn’t want to
continue scraping money together for general living expenses because they were unable generate a
sufficient profit from their ventures. The reality was that if they really wanted to make something of Mystro
and Therapair, they needed more funds. The $15,000 they had left would cover their basic operating costs,
but it wasn’t enough to enable any significant investments in product development or marketing.
It was late on a Friday afternoon when they acknowledged that the time had come to make some tough
decisions. Evans and McFarland spent the weekend evaluating their situation and weighing the options
available to make a decision.
The first thing they did was re-evaluate all their expenses—both personal and for their startups. They put
everything on the table. This included their professional and personal future goals, how much money they
had left, and the funds and commitment needed to make at least one of their startups successful.
They came to the realization that for either venture to succeed, they would need to find additional funds to
invest in product development and marketing. They discussed what would make their businesses successful
and kept coming back to online booking. It would enable them to bring Mystro and Therapair together,
creating an additional income stream for Mystro while automating Therapair.
To support product development, they calculated the type of support they would need and how much it
would cost. Evans and McFarland estimated that they would need to hire two developers at a combined
monthly cost of $3,500 to create the online booking feature.
With this knowledge in hand, the next question was how to finance the product build and support themselves
during this time. Ideally, Evans would go back to a salaried job while McFarland would continue to build
and manage the startups. But they both knew it was unlikely that Evans’ salary would cover the
development costs of their ventures and their living expenses. This left them considering the option of both
of them returning to salaried work. But there were other factors to consider, as Evans explained:
If we both went back to work, we could kill two birds with one stone without feeling like we’re
selling our soul again like we did years ago, and we just feel like we’re just paying for development.
We’ve got personal things in our life that we want to achieve as well: buying a house, having a
family. All that is put on hold for the next couple of years, so I think we’ve had to really think hard
about what the next steps are moving forward for both Mystro and Therapair.
Evans and McFarland came to the realization that “…it’s either we have to do this now and get a kickstart
on things in the view that we start development and move forward, or we have to start planning for failure
of the business and for it to be shut down.” They had to decide: fight or fold?
Page 10 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
With $90 as the average price of a massage, they made on average $18 per facilitated booking. They also
made $250 each month from their other customers on Mystro.
W27825
EXHIBIT 1: TIMELINE OF EVENTS
Late 2012: initiate
product build with a
software development
company
Mar. 2014: Developers
Brian and Liam join as
co-founders
Feb. 2014: walk away
from product build with
software development
company with a lowquality product after
paying $75,000
Nov. 2015: Brian and
Liam leave Mystro
Jan. 2015: Beta launch
of Mystro
Jan. 2016: join
accelerator
Dec. 2015: Launch side
business Healthinomics
and
pitch to accelerator
Note: For more information on McFarland’s and Evans’ side business “Healthinomics,” see the teaching note that accompanies this case.
Source: Created by the authors.
Page 11 of 84
Nov. 2016: decision
time— continue or
shut down?
July 2016: Launch
Therapair
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
Page 8
9 - 8 2 2 -1 4 3
DANIEL ISENBERG
WILLIAM R. KERR
Can Goodr Fight Food Insecurity at Scale?
Goodr is the only company to provide full spectrum synergy for clients to achieve sustainability, social good,
and supplier diversity, at a profit…Success for Goodr will be to redistribute 15% of the wasted food, which will
be sufficient to feed 25 million US families…. My lowest point has been fundraising; it’s very hard to convince
people to believe in your dream.
— Jasmine Crowe, Goodr CEO and founder
“I can’t believe we are seriously debating freezing contract negotiations with two huge national
customers,” Jasmine Crowe, Goodr founder and CEO, thought after she met with the Goodr growth
team on January 7, 2022 during their weekly standup. Since founding Goodr in 2017 out of her Atlanta
apartment, Crowe had been accelerating her personal mission to cripple food insecurity, breaking
down social, legal, and business barriers along the way to convince customer after customer to let
Goodr pick up their unused food and re-distribute it via Goodr’s platform to the food insecure. The
two potential customers would easily push Goodr past its $5 million target for 2022.
Also competing for the startup’s limited resources were recently signed contracts with all three of
the top three national food service companies, as well as SodexoMagic, which was Sodexo’s joint
venture with NBA Hall-of-Famer Earvin “Magic” Johnson to bring equitable food services to underrepresented communities. If managed well, each of those partnerships could create a cascade of
contracts that would add millions of annual revenues to Goodr in 2022. In addition, the Goodr growth
team was successfully generating outbound leads while customer referrals and PR were increasing the
inbound leads.
Crowe and the growth team knew that each of these new customers or partnerships would provide
a major boost to Crowe’s intense discussions with potential investors in the midst of Goodr’s current
Series A raise. The marathon of investor meetings and due diligence was exhaustive and exhausting.
Although there were more than enough investors who expressed initial interest in the $8 million round,
it was hard to get to signed term sheet and to eventual closing, despite profitably breaking $5 million
in revenues. All of her entrepreneur friends and mentors were commenting that those numbers would
normally put Goodr in an extremely attractive spot, raising a disturbing issue for Crowe:
Professors Daniel Isenberg (Babson College) and William R. Kerr prepared this case. Professors Daniel Isenberg and William R. Kerr contributed
equally to the development of this case and are listed in alphabetical order. It was reviewed and approved before publication by a company
designate. Funding for the development of this case was provided by Harvard Business School and not by the company. HBS cases are developed
solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or
ineffective management.
Copyright © 2022 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685,
write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu. This publication may not be digitized, photocopied,
or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.
Page 12 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
REV: OCTO BER 19, 2022
822-143
Can Goodr Fight Food Insecurity at Scale?
I believe that being a Black woman founder is a handicap in raising Series A funding
and I am seriously considering elevating one of my white male team members to cofounder to face investors. I won’t let personal considerations get in the way of my mission.
Born in Fort Worth, Texas, Crowe’s father’s military career saw her family frequently re-locating
within the US, with Crowe ultimately attending high school and college in North Carolina. Although
she herself had never experienced extreme hunger, Crowe did put herself through college, saving
money with food coupons and instant ramen. Upon graduating from North Carolina State University
in 2005, she began helping local celebrities – NFL and NBA players and famous entertainers - define
how they could use their star power for the good of their communities, which evolved into a consulting
practice, Black Celebrity Giving in 2010. Crowe also spent four months volunteering as an intake
coordinator at a local homeless shelter, an experience that gave her empathy for those experiencing
severe deprivation.
Driving through Atlanta one day in October 2013, Crowe was struck by the homeless people lined
up at food kitchens. That night she created a Facebook post announcing the start of “Sunday Soul,” a
mixture of soul music and food for the food insecure every other week, using food from a local food
bank to create full meals and serve them in a local parking lot. As Crowe recounted,
In 2014 the police kicked us out because the lot-owner complained, even though
hundreds of homeless people were living in the same lot. So, the food bank stopped giving
us food to avoid any legal risk, but I felt I need to keep doing this.
Crowe started collecting small donations, combining them with food coupons and two-for-one
deals to buy food that volunteers would then assemble into full meals to give out on weekends, offering
a variety of food options to fit individual preferences or diets. One day Crowe had an epiphany:
We let women and children get served first, until one day a shouting match erupted
among the men and the other diners. One homeless man had been hungrily waiting for
over an hour and began to shout: ‘If I don’t eat today, there is nowhere else I can get food
until next weekend!’ I thought, if I wait for an hour at a restaurant, at least I know I am
on a wait list and will eventually get food. I realized I was doing this all wrong.
Deciding to establish a pop-up restaurant to create a “dignified eating experience,” Crowe rented
tables and linens and brought hundreds of volunteers from local colleges to cook and serve. A video
of one event went viral. “I and other volunteers started shopping on Wednesdays and cooked in my
apartment until the weekend.” Crowe began to understand the daunting logistics of scaling food redistribution, involving large food coolers, numerous vehicles, packaging, etc., which all came to a head
when one video-commenter asked, “Who donated the food?” “I was doing it all myself, and that wasn’t
going to solve any problem at a societal level.” In the meantime, Crowe was struggling to make ends
meet, getting monthly checks from her father to cover half her rent, going to events and office hours
with free food. “I was food insecure myself at that point,” Crowe reflected.
Food waste and rescue
Crowe immersed herself in online information about food waste and was “upset and shocked” at
how much good food institutions were discarding, while food insecurity was so rampant. Crowe
learned in numbers what her personal experience had taught her: by June of 2020, 14 million children
2
Page 13 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
Jasmine’s Journey
Can Goodr Fight Food Insecurity at Scale?
822-143
Crowe had a second epiphany when she uncovered an online report by the Harvard Law School
Food Law and Policy Clinic. 2 Recognizing that 40% of US food is uneaten, 160 billion pounds of food
are discarded annually, and 14 percent of US households were food insecure at some point in a year,
the report detailed a series of laws that gave all US businesses enhanced tax deductions for food
donations. Surprisingly, in subsequent talks with companies, Crowe learned that they neither knew
about nor utilized the deductions, preferring to discard uneaten food. Some claimed that they would
be legally liable for any problems that might be caused or claimed by consumers of it. “The disconnect
between waste and hunger is shocking, due primarily to just two factors, liability fear of the
corporations, and the lack of logistics. Goodr will attack both of these,” reflected Crowe.
Goodr is born
I had a conviction – this discarding food while millions went hungry just wasn’t right
– but I had no clue yet how to build a scalable business that could impact nationwide food
insecurity. I was inspired by ridesharing that was based on platforms that were scalable.
Could I do something like that to collect food and distribute it?
– Jasmine Crowe
Without any technical experience, in October 2016 Crowe applied at the last hour to a Georgia
Institute of Technology hackathon on “gentrification, nothing to do with food waste,” according to
Crowe, who “spun a story” in her application about how gentrification led to food waste. The
hackathon helped Crowe form the vision for Goodr as a platform to enable waste food pickup and redistribution, and she spent a lot of time learning from all the actors in the food chain – restaurants and
institutions, logistics, packaging, food banks, waste management. The biggest obstacle, recalled Crowe,
was the disbelief of her friends, family, and industry experts, who said it would never work. But for
Crowe, “That just motivated me more. I had learned that companies were already paying waste
management companies to dispose of their excess food.”
By early 2017 Crowe had developed a rudimentary application to allow corporations to order food
pickup and get reports on what happened to the food after it was collected.
Goodr’s products
From 2017 to 2019, Crowe experimented with numerous products and formats, see what worked
and what didn’t. By 2020 Goodr was offering a range of products including delivering snack packs and
meals, pop-up stores, Goodr grocery stores, corporate food rescue, and organic waste management,
with other services in the works. As Blake Engelhard, VP of growth, reflected, “Jasmine is unique in
her ability to come up with a great idea and break down walls to make it happen in no time. It is our
job to harness that and turn it into scalable products and processes.” By 2021 the team had organized
Goodr’s products into two groups, hunger relief solutions and food recovery solutions, each with its
own sub-products.
3
Page 14 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
regularly missed meals, three times more than during the Great Recession and five times more than
before the COVID-19 pandemic. 1 In addition, 54 million Americans experienced regular hunger;
despite that fact, an estimated one-third of all food in the US was wasted, according to Crowe.
822-143
Can Goodr Fight Food Insecurity at Scale?
Hunger relief
For example, Atlanta-based Wellstar Health System contracted with Goodr to conduct a program
called “Food for Medicine,” in which Goodr hosted under Wellstar’s brand several pop up stores
(called “Mobile Markets”) around their hospitals to give out bags of food. Goodr managed the entire
operation, including media engagement and brand awareness, and provided signage and aprons with
logos and the like as well. Goodr also provided Wellstar with a detailed report on meals, families, and
other data. Families could select the food they wanted in a grocery-store like experience. Wellstar had
nurses on site and literature on nutrition and health care services. By early 2021 Goodr had activated
over 400 individual pop-up hunger relief activities. The impact of the pop-up stores surprised Crowe
herself occasionally: “One day during the Pandemic a flight attendant recognized me at the airport and
related that she had been furloughed and the Goodr pop-up stores were a godsend.”
The typical pop-up lasted several days and could feed, for example, 400 families who received forty
meals each. The customer paid Goodr an agreed up-front flat fee of anywhere $35,000 to $50,000, the
majority of which went to cover the cost of the food, part time staff (contractors) and the surrounding
logistics. Recent inflation was driving up material and labor costs.
By early 2022 Goodr had two permanent grocery stores dedicated to giving out food to the food
insecure under contract with customers. Crowe considered that the total relevant market for its grocery
stores was the 142 thousand school and senior center customers, worth a total of $8 billion. Projections
called for a total of 15 grocery stores by the end of 2022.
Food recovery
Goodr’s food recovery and distribution consisted of contracting with corporations, schools,
universities, and health care institutions, each of which served food in-house to its staff, to collect the
uneaten food. After Goodr contracted and onboarded the customer, the customer used the Goodr
application to order packaging materials, schedule pickups, and track distribution. The customer only
had to package the good, uneaten food, at which point Goodr would take ownership of the food, insure
it, and one of several third-party transport partners (e.g. DoorDash or Postmates, called “DoGoodrs”)
would collect it and deliver it for distribution via Goodr-vetted non-profits with food security as part
of their mission. For example, one financial services firm contracted with Goodr to recover un-eaten
lunch food from its main office (daily) as well as several satellite offices (several times per week). The
third party would pick up and deliver the food to a local non-profit, typically shelters.
The Goodr dashboard enabled customers to track the entire process and outcomes, and generated
reports for customers which included their tax savings [see Exhibit 1].
Pricing was set based on the size and frequency of the collections. A typical contract might cost
$10,000 for recovering food a few times per week for a modest-sized pick up, which might be almost a
hundred meals per pickup. The logistics partner would receive a percentage of that, and a smaller
percentage going to packaging, insurance, and other variable costs. Goodr had over 80 corporate
customers under contract, some with multiple locations.
4
Page 15 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
Goodr’s hunger relief product came in two formats: Goodr-operated pop-up stores and permanent
stores. According to Goodr, the size of the US market for corporate-sponsored hunger relief was
derived from the 1% of corporate profits donated by the Fortune 1000, estimated at $15 trillion pre-tax.
Added to that was the total public funds for annual nutrition assistance of about $12 billion.
Can Goodr Fight Food Insecurity at Scale?
822-143
Marketing and partnering
We never sell to our customers, we partner.
— Blake Engelhard, Vice president, Goodr growth team
Sales – a word eschewed by the Goodr growth team, who preferred “partnering” – and marketing
were led by a three-person growth team including director of growth under the direction of Blake
Engelhard (see Bios). Marketing and sales had two components.
Branding A significant aspect of Goodr’s value to customers to was in the branding customers
obtained by partnering with Goodr and introducing its food recovery and hunger relief products. This
had impact on the customer’s own employees, its customers and its shareholders. When a customer
was onboarded, two tickets were automatically generated, one to operations and one to marketing
where, according to Engelhard, a well-organized media program was activated by the growth team.
Crowe considered the branding a particularly high-leverage component of Goodr’s marketing mix,
with the PR from each new deal generating an average of 1.8 new leads, with an average contract value
of over $60,000.
Playing pinball. Engelhard increasingly saw the impact of how Goodr could activate its major channel
partnerships and corporate customers, calling it the “pinball strategy.” There were increasing instances
in which Goodr contracted with the local office, for example, of a SodexoMagic customer for food
recovery, and the satisfied branch manager would recommend to the corporate officer in charge of
social responsibility, who would in turn refer Goodr to a second facility. Further, that second facility
might be managed by a SodexoMagic competitor where a business group manager might then refer
Goodr to other customers. Goodr did not yet have account managers to manage this process.
Goodr’s media presence, word of mouth referrals, and strategic partnerships were now generating
over 30 qualified leads per month with a 38% conversion rate. A typical sales cycle was about 90 days
(shorter if there were a master service agreement in place.) By early 2022, Goodr had 82 distinct
accounts (some multi-site) with an average annual contract value of $64K, and had been profitable for
11 consecutive months.
The growth team consisted of three people, Engelhard, Ryan Moore, and Beth Woodruff. Engelhard
and Moore split most sales between them, and Woodruff was responsible for (and incentivized by)
outbound lead generation.
Commented Engelhard.
Ryan and I each had about 35-45 active leads that were open, and potential customers
were pushing us to supply them information to close contracts and we couldn’t supply it
fast enough. Our sales cycle went up because we couldn’t match the pace or even have
time to update our CRM system, at which point the team decided that we would freeze
5
Page 16 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
As Goodr gained traction in food recovery, Crowe saw the need for related services that Goodr
could upsell, such as separating recoverable food from organic waste and managing the latter as well.
Goodr’s product road map included expanding to provide customers with holistic waste management.
According to Engelhard, the biggest problem with organic recycling was contamination from packaged
edible food. Crowe was also seeing demand from the non-profit distribution partners to handle nonperishable household products, such as paper towels and other essentials.
822-143
Can Goodr Fight Food Insecurity at Scale?
assigning any new deals until the pipeline was updated prior to our weekly review. We
gave Beth [Woodruff] the smaller, faster cycle deals in addition to handling RFPs and
outbound lead generation…
The second ticket generated after onboarding a new customer went to operations, requiring
significant coordination run by a team of seven internal staff, led by Lynette McKissick, and supported
by 40-60 contractors who supported Goodr’s Hunger Relief operations (e.g. working in the pop-up
stores). At any point in time, Goodr could have operations in 30 cities. In a recent event in Minneapolis,
four Goodr staff flew out to manage the event, ensuring the venue was organized and arranging for
music, trucks, communications collateral, and groceries to all be available.
People and organization
“When I was searching for my next role, I almost didn’t take the call about Goodr because it
sounded like a non-profit,” recalled Engelhard, but got interested as he quickly realized it was a real
business. “Only three people are still around from that period.” As Betsy Neal, operations manager,
explained, “Although many people think that volunteers support our operations, we have staff and
contractors, pay very competitively with benefits, and create a feeling of camaraderie with hoodies, tshirts, ‘feel-Goodr-Fridays.” The biggest problem, from the operations side of Goodr, was the turnover,
a phenomenon experienced by numerous small businesses in 2022 referred to as the “Great
Resignation.” In Goodr’s case this was exacerbated by the physically demanding work, inconsistent
schedule, and the need to work some evenings and weekends.
Recruiting for other functions was, on the other hand, very strong, with hundreds of applicants for
every open position. Prior to actually receiving the Series A investment, Crowe was recruiting for a
director of people and culture (“We had 150 applicants.”) and one customer success role. Following
the Series A, Crowe intended to hire several more customer success and sales people, and later a
director of finance and chief marketing officer.
Crowe was particularly proud of the culture she had instilled in the still-small staff of 13.
We offer very competitive salaries, have weekly check-ins, all hands meetings, feelGoodr-Fridays, benefits such as on-site daycare. Add to that the extraordinary sense of
purpose we have in solving hunger. These are all critical in bringing in top notch people.
[See Exhibit 2 for team profile.]
Fundraising
Crowe bootstrapped Goodr until 2018, when she raised a seed round of $1 million from Precursor
Ventures, and two years later raised an oversubscribed bridge of $1.5 million. 3 Participating investors
included Capital One Ventures, Backstage Capital, Techstars, Unreasonable Ventures, and others.
I probably took over 200 meetings to raise the first million dollars for Goodr. I was
told: ‘This sounds like a non-profit,’ ‘Hunger is already being solved,’ ‘Your team isn’t
experienced enough and too young,’ The fundraising for me has not been something that
I’ve enjoyed. It hasn’t been easy.”
6
Page 17 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
Operations
Can Goodr Fight Food Insecurity at Scale?
822-143
One of the core elements of Goodr’s scale up strategy was to form partnerships with large food
service companies who managed food facilities and food serving on behalf of large organizations such
as corporations and hospitals. The three leading food service companies were Sodexo, Aramark, and
Compass, with very approximately equal market share in the US and aggregate US revenues and
employees of approximately $30-$35 billion and 500,000 employees respectively. b Collectively they
covered most of the relevant US market, according to Crowe. Goodr entered into partnership
agreements with Compass (EO 2019), Sodexo (via a subsidiary, EO 2021), and was poised to sign with
Aramark in February, as well as with the smaller Guckenheimer (EO 2021).
SodexoMagic
The agreement with SodexoMagic announced in November, 2021 [see Exhibit 3] was different.
According to Selena Cuffe, SodexoMagic president, SodexoMagic was established in 2006 as a joint
venture between the multinational food services company, Sodexo (49%), and NBA hall-of-famer
Earvin “Magic” Johnson’s business entity, Magic Food Provisions (MFP, 51%). Founded in 1966, by
2022 the France-based Sodexo was a $19 billion institutional food and facilities service provider with
over 400,000 employees in 55 countries, over 100,000 of whom worked in North America. 7
MFP’s majority share in SodexoMagic certified it as a minority business enterprise (MBE) by the
National Minority Supplier Development Council, which conferred to SodexoMagic’s customers
benefits in reaching their corporate responsibility objectives. MBE certification could also provide
tangible benefits to SodexoMagic’s customers by, in some cases, qualifying them for tax benefits with
some municipalities, for example, or qualifying them to bid for certain government contracts.
SodexoMagic managed food and facilities services in over 1700 sites across the US and employed over
6500 people, 8 according to four core values: uplifting communities, advocating for equity, ensuring
inclusion, and being a force for change. SodexoMagic’s proposals prominently emphasized
SodexoMagic’s commitment to these values, specifying the benefits of SodexoMagic’s services and
values to motivate and inspire SodexoMagic customers’ consumers. Proposals to corporate customers
specified SodexoMagic’s markup over expenses, as well as the identities of many of the tier 2 suppliers
(e.g. food & beverage products, support and professional services) to demonstrate its commitment to
supplier diversity and provide a distinct experience to the end user. In fact, according to Selena Cuffe,
SodexoMagic president, “43% of SodexoMagic’s spend to contractors and suppliers was to diverse
suppliers, compared with under 2% of all US corporations.” SodexoMagic’s website stated:
We sustain and empower communities everywhere through healthy food and
exceptional services. We stand with our employees and partners to ensure quality of life
services that safeguard wellness for all communities to create a just and more equitable
future for all people. Through who we are, through what we do, through our legacy, we
stand committed to…serving equality…8
SodexoMagic served five markets – corporate, K-12, universities, sports and leisure, and healthcare
services. An example was the five-year, $45 million contract, announced in July, 2020, for SodexoMagic
a Unless explicitly noted otherwise, all information in this section was provided by Cuffe and Stiell.
b Authors’ estimate based on aggregating public reports, cited above, of worldwide and North American employees and
revenues; since the food services industry was particularly impacted by the pandemic, results fluctuated dramatically between
2019 and 2021. The estimates do not distinguish among diversified businesses but food services accounted for the majority.
7
Page 18 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
Partnerships 4 56 and SodexoMagic a
822-143
Can Goodr Fight Food Insecurity at Scale?
to take over the provision of dining services of Morgan State University (a historically Black university
based in Baltimore), including expanding meal offerings and facilities upgrades. [see Exhibit 4].
Relations between SodexoMagic and Sodexo were complex since both targeted similar customers
in the US. When SodexoMagic won a new contract and hired the required staff, they would contract
with Sodexo to provide certain administrative (e.g. HR) and operational back-end support for both
SodexoMagic workforce administration as well as customer fulfillment (e.g. supply logistics). The
operating agreement required each parent partner to provide select inputs to deliver business results;
in practice it could become complicated. Furthermore, at times Sodexo and SodexoMagic would
separately compete for the same business with the same customer. As a result, when she joined
SodexoMagic in 2020, Cuffe led a re-branding strategy review to sharply differentiate SodexoMagic
clearly from Sodexo, explaining:
SodexoMagic’s reason-for-being is to be a purpose-driven, quality-of-life services
leader that champions supplier diversity, economic development, and sustainability,
which differentiates us from Sodexo. Goodr represents how we think about community
impact and is a way to differentiate us as an exclusive, strategic national partner to deliver
on our promise of serving equality to all communities. What could be better for that than
recovering uneaten food for the benefit of communities?
To deepen SodexoMagic’s community engagement, in January 2021 Cuffe hired Robbi Stiell as VP
of business development and community engagement. Stiell had worked as an executive in one of
Cuffe’s previous food-related businesses and had almost three decades of experience in the food service
supply chain. Based out of Orlando, Florida, Stiell’s key role was to grow revenue and create
partnerships to develop SodexoMagic’s community involvement, including with tier 2 MBE suppliers
who would help SodexoMagic deepen its community impact as well as help these MBEs themselves to
use SodexoMagic’s client network to grow their own business activities. As Stiell recounted, “Prior to
joining SodexoMagic, I had been trying to do some good and found Goodr online, donated personally,
and thought this is fantastic, wherever I work next, I will bring them with me. When I joined, Selena
was totally supportive of the idea.”
After considering various non-profits as partners, in February 2021 Stiell reached out to Crowe and
started a dialog that quickly moved into contract discussions with the goal of finalizing a master
services agreement that would facilitate creative joint marketing efforts. Dealing with Goodr was the
easy part, according to Stiell; dealing with SodexoMagic was more complex because the proposed
partnership necessitated flexibility, whereas the SodexoMagic lawyers wanted to specify the costs of
services in advance. Furthermore, Stiell wanted to have the flexibility of co-branding in some situations,
and sole-branding in others. “What type of program do you want to create?” “I don’t know, we have
to see in each situation.” As internal discussions within SodexoMagic and with Sodexo continued,
Goodr entered similar kinds of partnerships with SodexoMagic’s competitors, including a Sodexo
subsidiary.
On October 15, 2021, SodexoMagic and Goodr executed a three-year master services agreement
(MSA) with the following key clauses:
8
Page 19 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
In 2020, Johnson recruited Cuffe, an experienced food industry executive and entrepreneur, as
president. Cuffe reported to Johnson (Chairman and CEO), who also managed other businesses under
an umbrella holding company.
822-143
-
Accelerating the sales pipeline and growth of each party primarily by generating new service
contracts for the other party, particularly for the purpose of engaging SodexoMagic’s customers
in food recovery, since food provision was SodexoMagic’s core business.
-
Each specific customer engagement would be governed by a separate statement of work
detailed the services to be provided and the compensation;
-
Special collaborations to utilize the expertise of each other for projects, to be determined.
Decisions
Crowe sat back after the meeting and considered her options. She was accustomed to – even
embraced – challenges: “I am really motivated by the naysayers.” But all the immediate decisions
facing her were inter-connected.
Series A fund-raising. Fund-raising was going slower than Crowe had hoped, which was delaying
Goodr’s planned ramp up of marketing and operations to meet strong inbound demand, and hindered
her personal goal of ending food insecurity, giving Crowe an acute sense of urgency. But the bar of a
Series A investment was high: investors were looking for strong evidence of market acceptance,
business model, scalability, and coherence at a level of certainty that no startup, Crowe thought, could
give, even with Goodr’s tangible results. They were questioning whether Goodr could scale while
attacking several large vertical markets, with several products.
As Engelhard had said in the meeting,
My team has meetings with different investors every week, and often follow-ups. Not
only do they want to see the pipeline, its trajectory, and how predictably we manage it.
They want to see that our last quarter was our best quarter, and our last month was our
best month. Then in addition to pipeline and conversion rates, they want to see repeat
customers. On top of that, they want to see proof of our ability to upsell from food
recovery to organic waste management to holistic waste management. That means that
we really need to deliver on a potential contract with Emory University that is just going
live and could be a significant minority of our 2022 revenues.
Some investors questioned whether Goodr should drop hunger relief entirely and focus on food
recovery, where margins were 10-15% higher, had recurring revenues, and where Goodr did not have
to directly control the food distribution. One even said if Goodr dropped hunger relief they would
invest. Crowe commented:
Not only are our stores and pop-ups a heart string for me personally, but they are also
synergistic with food recovery. Wellstar started with a pop-up series and now we are
discussing food recovery. The physical pop-up stores generate more and faster visibility
for our partners than food recovery, and that is a non-trivial part of our customer value.
As Engelhard explained,
The disadvantages of the Hunger Relief product raised by the investors were more
apparent than real. A typical event would generate $20K or so in revenues (in contrast to
a few thousand dollars for Food Recovery during the same period), and we had control
over the logistics because our people ran them on site. And because of contract size,
Hunger Relief is still the majority of our revenues.
9
Page 20 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
Can Goodr Fight Food Insecurity at Scale?
822-143
Can Goodr Fight Food Insecurity at Scale?
Many have heard the phrase, “Black people need to run twice as fast to go half as far.”
I am not complaining, but it is a reality – As a Black woman CEO, we need to execute
flawlessly with the customers we have... Particularly in technology startup investing
where there are just one or two examples, part of the investment decision for the VC is
pattern matching and being Black and a woman just doesn’t fit the patterns. After George
Floyd d it was easy for Black founders to raise seed rounds, but for Series A and beyond it
is different….. Even though I don’t like it, I want Goodr to be successful regardless of
whether I am at the helm. I am considering making someone else a co-founder and the
face to the investors. We have a group of Black women founders and this is the
conversation we have; even for white women who succeed in raising Series A and beyond,
many of them have male co-founders.
The national food center opportunity. A contract with one or both national food distribution
centers could be worth millions per year and catapult Goodr to a new level of revenues and more
complex logistics. One of the centers, for example, might receive a returned truckload of thousands
pounds of cooked, portioned chicken breasts that a center’s customer (e.g. a restaurant chain’s regional
warehouse) couldn’t use, and the center would require immediate pickup and re-distribution via
Goodr’s non-profit partners. However, Goodr’s current application was linked to gig economy small
delivery vans, and it was unclear how to contract a semi-trailer on a 1-2 day notice.
Juggling opportunities. Crowe, Engelhard, and the growth team faced several options going
forward in balancing the advantages and disadvantages of pursuing the two large contracts; focusing
on all the inbound leads; leveraging the national partnerships with SodexoMagic and others; and
continuing full speed ahead. As Engelhard commented, “No one in a startup, certainly not the
salespeople, wants to be the one to step on the brakes.”
Adding to the complexity were the increasing numbers of inbound inquiries from outside the US,
including Canada and some European countries. 9 Crowe realized that the problem of food insecurity
was not unique to US residents: over 9% of the global population (about 690 million people) were
considered food insecure, a number that would increase to 840 million people by the end of the decade.
About a third of all food produced worldwide was never consumed, about 2.6 trillion pounds of food
annually. All the food produced but uneaten in the world could sustainably feed two billion people,
and the waste created by discarding food represented the third largest pollutant by volume.
SodexoMagic. The first-refusal clause with SodexoMagic, which made a lot of sense almost a year
ago when Goodr and SodexoMagic started their discussions, was increasingly causing discomfort,
particularly for Cuffe and Stiell, who saw Goodr as a strategic differentiator. Crowe, from her side, did
not experience the term as very limiting: “I don’t believe that SodexoMagic will actually stop us from
solving the hunger problem with other partners… That would not look very good.” Nevertheless, the
c HBCU stood for “historically Black colleges and universities.”
d A highly visible case in which a Minneapolis police officer murdered a Black man, triggering nationwide protests.
10
Page 21 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
The challenges of being a Black female founder. Underneath the surface of investors’ questions,
Crowe was aware of the possibility that these later stage investors were unconsciously uncomfortable
about her being a Black female entrepreneur. Comments, such as “Is an HBCU your alma mater?”c
reinforced that concern.
Can Goodr Fight Food Insecurity at Scale?
822-143
The potential of each strategic national partnership was “huge,” according to Engelhard, with any
one of them operating thousands of sites. Engelhard estimated that 20% of these sites might be big
enough, which couple potentially translate into a thousand or so contracts worth about $10,000
annually each. Some of the sites were large enough to be candidates for upselling to organic waste
management, an order of magnitude larger contract (but with thinner margins).
Crowe, leaning back in her chair, noticed that it was approaching time to pick up her year-old
daughter, recalling a recent conversation:
No one prepared me for how lonely it would be as an entrepreneur… If there were
one piece of advice I would give my younger self it would be, ‘Pay more attention to your
personal life.’
Crowe realized she would have to make some decisions quickly.
11
Page 22 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
pinball strategy was creating an accelerated number of qualified leads, and Crowe did not rule out the
need to prioritize those strategic relationships.
822-143
Can Goodr Fight Food Insecurity at Scale?
Source:
Internal company documents
Exhibit 2
Source:
Goodr Dashboard
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
Exhibit 1
Goodr Organization
Internal company documents
12
Page 23 of 84
Can Goodr Fight Food Insecurity at Scale?
The Sodexo-Magic Partnership (excerpts)
Beverly Hills, CA – Nov. 18, 2021 –Today, SodexoMagic announced a partnership with Goodr,
a minority-owned, woman-led hunger relief and food waste management company. This partnership
creates easy and ongoing access to fresh food at no cost and as well as a way forward for diverting
edible food waste from SodexoMagic’s extensive nationwide food service operations. This helps get
food in the mouths of those that need it most.
In addition to surplus food recovery, Goodr offers a variety of hunger relief solutions which include
pop-up grocery markets, student snackpacks, grocery and meal delivery and the company’s newest
offering, the Goodr grocery store. The Goodr grocery store converts unused space in an existing facility
into an on-site grocery store that offers fresh produce, meat, grab-n-go items, and shelf-stable goods at
no cost for individuals and families. SodexoMagic plans to a combination of these hunger relief
solutions across college campuses by year-end and expand to additional campuses, corporate accounts,
healthcare facilities, and more next year.
The pandemic has caused a lot of undue stress, said Selena Cuffe, president of SodexoMagic, a joint
venture between food services and facilities management leader Sodexo and majority-owner Earvin
“Magic” Johnson, NBA Hall of Famer and CEO of Magic Johnson Enterprises, LLC. We hope to lessen
the stress and anxiety on those in need.
We are proud to partner with SodexoMagic on such an important initiative, said Goodr Founder
and CEO, Jasmine Crowe. This partnership will allow us to provide free meals, groceries and snacks
to even more people experiencing food insecurity across the country and explore opportunities to work
together on surplus food recovery and organics recycling at SodexoMagic locations across the country.
The partnership with Goodr is an example of SodexoMagic’s commitment to support diversity and
inclusion through purchases of goods and services from minority and women-owned businesses. For
more information, visit SodexoMagic.com.
Source:
Sodexo Press release, “SodexoMagic and Goodr Partner to Combat Food Insecurity and Waste,” November 18, 2021.
https://us.sodexo.com/media/news-releases/sodexomagic-goodr-partner.html, accessed September 23., 2022.
13
Page 24 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
Exhibit 3
822-143
822-143
Can Goodr Fight Food Insecurity at Scale?
Morgan State University Press Release: SodexoMAGIC takes over Morgan St. dining
Morgan State University and Gaithersburg-based dining services provider SodexoMAGIC
announced a five-year, nearly $45-million…food services contract beginning with the fall 2020
semester… SodexoMAGIC will install facility upgrades and renovations, technological integrations, a
variety of dining options and food locations, student-friendly meal plans and the promise of an overall
elevated dining experience to the Baltimore campus. … The university received proposals from four of
the nation’s leading dining service providers, with SodexoMAGIC, chaired by NBA legend Earvin
“Magic” Johnson, emerging with the winning bid. The partnership marks SodexoMAGIC’s first with a
Historically Black College and University (HBCU) in Maryland.… During a three-month period that
preceded the call for proposals, University administrators solicited the feedback of Morgan’s campus
community and incorporated the responses received into the final RFP. Among the top options and
services respondents desired from their next dining services provider were a salad bar, fresh fruit and
vegetables, hot breakfast foods, made-to-order sandwiches, guest meal passes, online/mobile
ordering, expanded electronic payment and 24-hour dining.
… Morgan will see a number of enhancements and additions that include:
• A “Best of Baltimore” food concept package that will bring some of Baltimore City’s best
eateries to campus on a rotating basis including Miss Shirley’s Cafe, Famous Chaps Pit Beef,
Connie’s Chicken and Waffles and Tarharka Brothers Ice Cream Factory
• The addition of national brands Starbucks, Qdoba Mexican Eats, and Panera Bread. Baba’s
Pizza and Halal Shack will also be included among the food options
• Menus will be crafted by SodexoMAGIC’s Chief Culinary Adviser, Executive Chef and Author
G. Garvin
• Allergen-friendly meal programs to support vegetarians and other specialized dietary needs
• Convenient food locations throughout Morgan’s 152-acre campus, including food option
locations on West and North Campus
• A new mobile app feature for ordering takeout and made-to-order items
• Smart technology vending machines
• Robot food deliveries via Starship
• Contactless payment via Mobile Wallet and seamless campus card and POS system
configuration
Source:
Morgan State University, “SodexoMAGIC Selected to Bring New Student-Centered Dining Experience to Morgan State
University Campus,” July 24, 2020. https://news.morgan.edu/sodexomagic-dining-experience/. Accessed June 8,
2022.
14
Page 25 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
Exhibit 4
contract
Can Goodr Fight Food Insecurity at Scale?
822-143
References
1 Bauer, Lauren, “About 14 million children in the US not getting enough to eat,” Brookings Institute,
2 “Tax Deduction for Food Donation: A Legal Guide,” Harvard Food Law and Policy Clinic, https://chlpi.org/wp-
content/uploads/2013/12/Food-Donation-Fed-Tax-Guide-for-Pub-2.pdf Accessed May 19, 2022.
3 “Sustainable Waste Management Platform Goodr Exceeds Goal by $500k in Pre-Series A Funding Round,” SAP.io,
https://sap.io/sustainable-waste-management-platform-goodr-exceeds-goal-by-500k-in-pre-series-a-funding-round/
Accessed May 22, 2022.
4Buzalka, Mike, “5 things: Sodexo reports 13.3% drop in North American fiscal 2021 revenues,” Food Management.
https://www.food-management.com/news-trends/5-things-sodexo-reports-133-drop-north-american-fiscal-2021-revenues
Accessed May 21, 2022.
5 Buzalka, Mike, “Aramark reports return to 90% of pre-COVID revenue level in fourth fiscal quarter,” Food Management.
https://www.food-management.com/news-trends/aramark-reports-return-90-pre-covid-revenue-level-fourth-fiscal-quarter
Accessed May 21, 2022.
6 Compass Group Results and Presentations, https://www.compass-group.com/en/investors/results-and-presentations.html
Accessed May 21, 2022.
7 “Number of Sodexo employees worldwide from 2011 to 2021, by region,” Statista,
https://www.statista.com/statistics/223881/sodexo-number-of-employees-byregion/#:~:text=As%20of%202021%2C%20Sodexo%20employed,staff%20employed%20in%20North%20America. Accessed
May 14, 2022.
8 SodexoMagic, https://www.sodexomagic.com/sodexo-magic.html, Accessed May 14, 2022
9 The information in this section is from internal company documents.
15
Page 26 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
https://www.brookings.edu/blog/up-front/2020/07/09/about-14-million-children-in-the-us-are-not-getting-enough-to-eat/.
Accessed June 7, 2022.
W31030
Sunghan Ryu, Shantanu Dutta, Mark Bergen, and Mark Zbaracki wrote this case solely to provide material for class discussion. The
authors do not intend to illustrate either effective of ineffective handling of a managerial situation. The authors may have disguised
certain names and other identifying information to protect confidentiality.
This publication may not be transmitted, photocopied, digitized, or otherwise reproduced in any form or by any means without the
permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights
organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western
University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveypublishing.ca. Our goal is to publish
materials of the highest quality; submit any errata to publishcases@ivey.ca. i1v2e5y5pubs
Copyright © 2023, Ivey Business School Foundation
Version: 2023-05-11
In 2013, the musician Jack Conte was disheartened by the challenges he faced pursuing a career as a
musician in the digital age. 2 Conte had spent US$10,000 3 to produce an original music video that he posted
on YouTube. The video was a hit, soon reaching one million views on YouTube. However, Conte’s share
of the advertising revenue generated by the video came to only $150, which he found unfair considering
the amount of work he had put into the project. Conte decided to find a better way for artists to receive a
fair share of the financial return that their work generated. Would fans pay a few dollars per month to
engage with the creative work of their favourite artists? 4 With that premise, Conte teamed up with a
developer to launch Patreon, a subscription-based crowdfunding platform for artists. 5 By using Patreon as
their platform to launch their creative work, artists could earn over 90 per cent of the total funds generated
by the work. The platform would only keep 5 per cent, and the rest would go to payment-related costs. 6
Conte’s idea was successful and Patreon grew rapidly immediately after its launch in May 2013. 7 By the
end of 2018, Patreon boasted three million fans and contributors, who were referred to as “patrons” on the
platform, to support over 130,000 artists and content providers, who were referred to as “creators” by
Patreon. 8 In 2018, Patreon helped its creators earn $300 million (see Exhibit 1), with the top earner reaching
$100,000 per month with over 20,000 patrons (see Exhibit 2). 9
Despite his success, Conte needed a plan for future growth if Patreon was to compete with the industry’s
giants, including YouTube, Kickstarter, and Twitch, who were charging their artists much higher rates. 10
Conte wanted Patreon to help its creators generate even more value and engage even more successfully
with the platform’s patrons.11 He started by developing advanced tools and options to provide more services
to help content providers enhance the experience of their fans and strengthen their relationship (see Exhibit
3). Research showed that the willingness of patrons to contribute funds varied according to the length of
the relationship (see Exhibit 4), as well as based on specific content areas (see Exhibit 5).
These findings had implications for Conte’s planned service offerings, and for their cost. Conte had held
customer discussions and market research to learn that any change would require expanding beyond
Patreon’s current one-size-fits-all offering and single pricing rate of 5 per cent. 12
Page 27 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
PATREON: A NEW SERVICE AND PRICING STRATEGY FOR
SUBSCRIPTION-BASED CROWDFUNDING1
Page 2
W31030
BATTLE FOR THE CONTENT CREATOR MARKET
Over the years, as the expanse of the Internet connected masses of content creators (e.g., artists, musicians,
authors), their expertise reached a global audience. 13 The wide reach also enabled them to earn a living by
uploading their work to online platforms such as YouTube and continuously expanding their fan base. 14
Generally, online media platforms tended to be supported by advertising, which meant that platforms had
to achieve a balanced relationship with both advertisers and content creators. A growing base of artists
eager to upload their work led to their diminishing negotiation power, giving greater control to the platforms
and advertisers, who were able to use their power to impose creative restrictions on the artists.15
Conflict among the various parties eventually led to an impasse in 2017 (known as the “adpocalypse”), when
over 250 brands withdrew their advertisements from YouTube in protest of what they saw as controversial
content, costing YouTube an estimated $750 million.16 In response, YouTube implemented a series of strict
filtering policies and demonetization schemes to address controversial content on its platform.17
Some artists were forced to change their creative work or the formatting of their creative work as a result
of the new policies, which affected their projects and their fan base. 18 With serious career and financial
repercussions, many artists looked for other ways to support their careers, such as the crowdfunding model,
which provided a promising new revenue stream without having to compromise to please advertisers. 19
Emerging Reward-Based Crowdfunding Platforms
The term “crowdfunding” referred to efforts by entrepreneurial individuals and groups (e.g., cultural, social,
for-profit) to fund their projects by collecting relatively small contributions from a large number of
individuals through online platforms, without the need for traditional financial intermediaries. The various
definitions of crowdfunding all shared several common aspects. 20
Crowdfunding was a new fundraising initiative that employed new approaches. It was held by a content
provider in the form of a campaign. Its scope was generally broader than more usual fundraising models
traditionally launched by entrepreneurs or social activists, for example. 21 Crowdfunding raised funds by
collecting relatively small amounts of money from a large group of contributors, which consisted of
undisclosed members of the public. This aspect, which was the most distinctive characteristic of
crowdfunding, differentiated it from traditional financing models such as venture capitalists and so-called
“angel investors.” 22 Finally, all transactions and communication between the content provider and
contributors operated strictly over the online platform. 23
Crowdfunding involved three main components: content providers, contributors, and a platform. Content
providers launched their creative work and sought funding from a crowd of contributors. Contributors
included a wide range of financial supporters who donated funds for various reasons, ranging from intrinsic
preferences (e.g., altruism, fun) to extrinsic benefits (e.g., rewards, relationships). A platform brought
together the needs and values of content providers and contributors. 24
Major forms of crowdfunding included using donations, lending, equity, and rewards, which could be either
tangible or intangible. Reward-based crowdfunding platforms provided a standard format for content providers
to pitch their campaigns, a payment system that allowed for numerous low-amount financial transactions, a
display of the funding progress, and communication tools for the content providers and the contributors. 25
Page 28 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
Advertisement-Based Online Media Platforms for Content Creators
Page 3
W31030
If the funding amount reached or exceeded the campaign’s goal within the designated period, the platform
operator transferred the collected funds to the content provider, after deducting a brokerage fee of 5–10 per
cent of the total amount. The content provider was then tasked with fulfilling the duties associated with
developing the campaign and delivering the promised rewards to contributors. Typically, if the funding
campaign failed to reach the targeted amount within the set period, the platform operator would cancel all
contributions, with no financial loss to contributors. However, some platforms allowed the content provider
to keep all contributed funds, whether or not the goal amount was reached.
Subscription-Based Crowdfunding
The basic crowdfunding model, which involved collecting small amounts of funding from members of a
crowd to support a specific campaign, evolved into diverse derivational models intended to promote creativity
in different domains. For example, the subscription-based crowdfunding model allowed providers to solicit
money from their audiences monthly or based on each creative work. It also allowed them to distribute their
work directly to specific audiences. This model had drawn considerable attention from both artists and fans.27
The subscription-based crowdfunding model was able to effectively tackle key issues. Although creating
and distributing content through online platforms (e.g., YouTube, Instagram) had become popular and
relatively easy, monetizing creative work remained challenging, especially for artists with large and loyal
audience bases. It was also difficult to determine who was paying attention to the work and to understand
what kept fans or followers interested, which reduced the ability to form relationships. Feedback from
audiences was essential for developing new creative work. 28 These were some of the issues that
subscription-based crowdfunding addressed.
In 2012, the musician Amanda Palmer set a new record by raising more than $1.2 million to fund her new
album on Kickstarter, a world-leading reward-based crowdfunding platform. 29 From Palmer’s perspective,
the core value of the Kickstarter campaign was that it allowed her to create art and proved that the
community supported her creativity. 30 Yet, she did not return to the platform, even though she highly
appreciated its value. Instead, she turned to Patreon because she found Kickstarter’s reward-based model
not sustainable for musicians, who typically made serial content in relatively short cycles, compared to
other types of creative work such as film or theatre. 31
Because musicians were more likely to ask audiences to subscribe to their projects, the subscription-based
crowdfunding model helped build relationships with fans and redirected core fans to support the work
through periodic financial pledges. From late 2017 onward, many established platforms launched their own
version of subscription-based crowdfunding, such as Kickstarter’s Drip. 32
Page 29 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
Content providers were required to provide key information about their campaign such as the goal amount,
the funding duration, and planned rewards for contributing, as well as information about the contributor in
some cases. The platform had to approve the campaign before it went live. 26 Contributors accessed the live
campaign and paid their chosen amount, which was reflected on the campaign page in an aggregated format
that included total funding and total number of contributors to date.
Page 4
W31030
KEY PLAYERS IN THE MARKET
Launched in 2005, YouTube was arguably the most significant online video platform in the world, featuring
a wide variety of user-generated and corporate media content. 33 With a wide range of content that included
music videos, television clips, video blogs, and short original videos, YouTube captured 90 per cent of the
US market in 2018. 34 YouTube’s primary revenue source was advertising opportunities on its website and
on mobile applications (apps). The revenue model was based on the traditional cost per thousand advertising
revenue metric. Using this metric, YouTube charged advertisers a certain amount of money per 1,000 views
of the advertisement. The amount depended on various factors, including the video’s genre, the content
provider’s location, and the targeted viewers. Starting in 2007, all content providers who wanted to receive
a share of the advertising revenue had to be members of YouTube’s Partner Program, which kept 45 per
cent of all advertising revenue from videos for YouTube and offered the remaining 55 per cent to the content
provider. 35 As of September 2018, the Swedish video game commentator PewDiePie had the highest
number of YouTube subscribers worldwide, with almost 66 million users following his channel. The Indian
music network T-Series ranked second, with over 62 million subscribers. 36
In June 2018, YouTube launched its Channel Memberships feature, which offered fans the opportunity to
sponsor a channel for $4.99 per month. 37 This new feature provided access to exclusive content, such as
members-only posts, exclusive live streaming, custom badges and emojis, and early access to ticket sales.
To activate the feature, content providers needed to have more than 100,000 subscribers, be members of
the YouTube Partner Program, and be over 18 years old. 38
Kickstarter
Launched in 2009, Kickstarter was a representative reward-based crowdfunding platform based in the United
States.39 Contributors who backed Kickstarter campaigns received tangible or intangible rewards such as
custom editions and early releases. They also received unique experiences in exchange for their pledges.
Kickstarter charged content providers a 5 per cent service fee and a 3–5 per cent payment processing fee from
the total amount of funds raised. 40 In 2018, over three million contributors pledged more than $600 million to
over 19,000 creative projects. 41 Some of the most successful completed Kickstarter campaigns raised several
million dollars from their contributors. For example, Pebble, a first-generation smart watch, collected more
than $20 million during its funding campaign, providing the company with financial and public support and
with widespread attention (see Exhibit 6). The most popular Kickstarter campaign categories included music,
film and video, games, art, publishing, and design (see Exhibit 7). As of 2018, approximately $4 billion had
been pledged to more than 160,000 successful Kickstarter campaigns.42
Twitch
Twitch was founded by Justin Kan in 2011. Initially, the service was a spin-off of Kan’s pioneering
“lifecasting” concept known as Justin.tv. 43 Twitch was an online service that broadcast live or pre-recorded
videos of people playing nearly any genre of video games with audio commentary. A chat feature allowed
audience members to comment or ask questions to video game players being streamed live. By October
2013, the platform had 45 million unique visitors. In August 2014, Amazon.com Inc. (Amazon) recognized
the vast potential of Twitch and acquired the platform. 44 Twitch continued to grow in popularity, reaching
a total of 2.2 million viewers in 2018 with 15 million daily audience members. 45 By late 2018, Twitch
recorded an average of 41,000 concurrent broadcasters and 1.1 million concurrent viewers. For example,
Page 30 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
YouTube
Page 5
W31030
The Twitch platform was integrated with Amazon’s paid membership program Prime Video. The service
allowed broadcasters to earn funds by offering in-stream links for viewers to purchase games being played
in the broadcast video. Twitch’s revenue sources consisted of both advertising and subscription fees. 47
Advertisers consisted mainly of gaming companies, game portals, game developers, and game event
organizers, who could reach a highly targeted audience base for their specific products. Twitch also offered
a Turbo membership for $8.99 per month, which allowed users to watch advertising-free content and to
benefit from other enhanced features when using Twitch. 48 Broadcasters could apply to join the Twitch
partnership program for the opportunity to share the advertising and subscription revenue, which would be
split evenly between them and the platform. 49
PATREON
Patreon’s new approach helped artists develop a sustainable revenue stream and connect directly with their
fans in ways that the traditional advertising model could not provide. Reward-based crowdfunding
platforms, such as Indiegogo and Kickstarter, allowed artists to be independent of the advertising modelbased platforms. However, these platforms mainly focused on specific individual projects, rather than the
ongoing subscription model that Patreon provided as a substantial and continuous income base for its
content creators, which ranged from fine artists to video bloggers. 50 Patrons, as Patreon referred to fans,
benefited from close contact with their favourite artists, known as creators on the platform, and advance
access to exclusive content.
Patrons generally pledged to pay a fixed amount per piece of work and could make a significant difference
in the career of an artist such as Palmer, who was supported by over 11,000 fans by July 2018 (see Exhibit
8). 51 Although content creators could set different tiers of patronage, ranging from $1 to more than $100,
the average patronage per contributor was approximately $12, and the artist kept over 90 per cent of the
total. Patreon retained 5 per cent as fees and the rest went to transaction costs. Content creators could earn
from a couple of hundred dollars to tens of thousands of dollars each month. 52 Patreon provided its content
creators with the ability to develop and manage their direct relationship with contributors through patrononly posts, messages, or emails. They could also track payments and choose when and how to receive
payments (e.g., monthly via direct deposit). Patreon was also working on new tools for its content creators
(e.g., offering exclusive content at different price tiers), data analytics, seamless integrations with other
relevant applications, and premium customer support, all of which were also planned by other platforms to
retain content providers.53
Generating Value for Creators: Increasing Revenues
In its analysis of long-term relationships on the platform, Patreon found that approximately half of its firsttime patrons were still sending payments after one year (averaged across categories and segments). 54 Longterm relationships were a key success factor for content providers, as discovered by the ProfitWell business
intelligence service in a survey of 8,438 current, former, and potential contributors on Patreon and
Kickstarter. The survey found that the longer the term the more the contributor was willing to pay, from a
low average of $3.78 for first-year contributors, $5.89 for the second year (for an increase of almost 50 per
cent), $6.78 in the third year, and $8.32 in the fourth year, reaching an average of over $10 per contributor
in some cases (Exhibit 4). 55
Page 31 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
as one of the most successful content creators on the platform, Tyler “Ninja” Blevins was first to reach 10
million followers, with more than 200 million hours of his content watched in 2018. 46
W31030
The new services Patreon was developing were focused on increasing the willingness of contributors to
support creators and increasing their monthly earnings (see Exhibit 3). Conte wondered what service offerings
would be most effective to achieve this goal. 56 By increasing the level of contributions to content creators,
Patreon could grow and become much more sustainable. Conte wanted to increase the number of content
creators who earned over $1,000 per month. These people generated 70 per cent of the total patronage on the
platform. Patreon’s data service Graphtreon estimated that among the platform’s total of 132,500 content
creators, over 4,300 earned at least $1,000 per month and over 9,200 earned over $500 per month.57
Variation across Content Creator Categories
Patreon supported a diverse range of content creators with projects in a wide variety of categories including
podcasts, videos, music, games, comics, writing, crafts, photography, drawing, painting, magazines, and
animation. 58 The willingness to contribute funds by the platform’s supporters, or patrons, varied drastically
and was based on the type of project. Content creators had to deeply understand their category to ensure
that the rewards they offered were aligned with the expectations of patrons to pay for content (see Exhibit
5). 59 The willingness of patrons to pay for musical content was calculated as a median of approximately $5,
ranging up to a high of just over $10, while their willingness to pay for podcasts was calculated as a median
of $9, ranging up to a high of over $15. 60
As of early 2019, video and podcasts were the most active categories on Patreon. Video had the highest
number of content creators at 34,798, followed by 9,138 for podcasts. Video also had the highest number
of monthly individual pledges at 1,682,284, followed by 715,988 for podcasts (see Exhibit 9). 61 Content
creators of live video streaming, for example, could leverage Patreon to develop new content with
committed support from fans, thereby building a predictable revenue stream that was not dependent on
advertising. 62 Similarly, Patreon could help podcasters identify their most loyal listeners and provide them
with exclusive content, thereby helping podcasters develop and connect with their community. 63 These
initiatives would help to establish a recurring and reliable revenue stream on Patreon.
Patreon could also discover new and promising categories to target.64 In these new categories, Patreon could
test innovative services in a supportive environment to develop recurring revenue systems, which was
essential for content creators who worked on ongoing projects. Video and podcast were the leading
categories on Patreon in terms of supporters and revenue, but music, comics, games, and writing were
growing consistently, while photography, dance and theatre, magazines, and crafts were also showing
remarkable growth in 2017 and 2018 (see Exhibit 9). 65 The amount of patronage and growth witnessed
within specific categories could offer critical insight for the launch of new services and pricing strategies.
NEED FOR A NEW SERVICE AND PRICING STRATEGY
Some content creators (e.g., individual artists, hobbyists) were looking for low-cost and low-effort ways to
earn recurring funds and focus on their art. 66 Others hoped to provide different levels of exclusive content
at different pricing tiers. Services such as analytics, special offers, integration with other productivity and
e-commerce applications, and prioritized customer support to resolve issues were other features sought after
by content creators. Patreon also recognized that a segment of content creators operated much like media
organizations with dozens of employees, and needed flexibility to share accounts among their workers.
Finally, merchandise (e.g., signed photos, branded stickers) was considered an important offering by 85 per
cent of content creators to attract fans.67
Page 32 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
Page 6
Page 7
W31030
Conte realized that meeting the needs of different content creators meant evolving from the current onesize-fits-all service strategy that charged a flat fee of 5 per cent on all subscriptions. However, Conte also
worried that any major changes in service and pricing strategy could create a negative reaction from early
and loyal Patreon content creators. The company had already experienced a similar backlash to changes it
made to Patreon’s payment processing rates in 2017. 69
How could Conte limit opposition to new services and pricing strategies? What new service offerings and
pricing tiers would benefit content creators and patrons, while giving Patreon a strong competitive
advantage? 70 Could the new service offerings grow the revenue streams of content creators? Should Patreon
segment content creator groups? If so, which segments should Patreon target for each new service offering
and pricing level? 71 How could Patreon grow its business and profitability while pursuing the original
mission it was founded to serve?
The authors would like to thank Professor Kersi Antia for his valuable feedback in the development of this case.
Page 33 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
For a cost, Patreon was able to provide new packets of service offerings to content creators who required
more professional services to better serve their patrons (see Exhibit 3). These new service offerings allowed
them to increase earnings, build stronger relationships with patrons, and assess how effective the new
services were in attracting new supporters. Conte had to consider how new services and pricing tiers could
benefit content creators and patrons, and how they could help Patreon differentiate and compete against
YouTube or Kickstarter. 68
Page 8
W31030
Year
2016
2017
2018
Quarter
1
2
3
4
1
2
3
4
1
2
3
4
Content
Creators
26,703
31,744
38,286
45,162
55,603
67,717
80,059
91,847
106,821
117,993
124,078
130,170
Growth
(Q to Q, %)
—
18.9
20.6
18.0
23.1
21.8
18.2
14.7
16.3
10.5
5.2
4.9
Pledged
Monthly
869,926
1,032,523
1,228,832
1,458,474
1,829,141
2,279,545
2,630,802
2,918,619
3,607,304
4,080,616
4,580,971
4,838,949
Growth
(Q to Q, %)
—
18.7
19.0
18.7
25.4
24.6
15.4
10.9
23.6
13.1
12.3
5.6
Paid
Monthly
$4,948,264
$5,690,951
$6,842,222
$8,212,121
$8,513,426
$9,145,665
$9,607,430
$9,853,661
$10,994,317
$11,635,377
$11,811,309
$11,788,461
Growth
(Q to Q, %)
—
15.0
20.2
20.0
3.7
7.4
5.0
2.6
11.6
5.8
1.5
–0.2
Note: Q = quarter.
Source: Created by the case authors using data from Graphtreon, accessed January 17, 2020, https://graphtreon.com.
EXHIBIT 2: LIST OF TOP PATREON CONTENT CREATORS (AS OF FEBRUARY 2018)
•
•
•
•
•
•
•
•
•
•
Chapo Trap House (Podcast): 21,400 patrons, earning $95,000 per month
Dr. Jordan B Peterson (Video): 8,100 patrons, earning an estimated $70,000 per month
Amanda Palmer (Music): 11,200 patrons, earning $55,000 per month
Philip DeFranco (Video): 14,400 patrons, earning an estimated $50,000 per month
AvE (Video): 12,800 patrons, earning an estimated $44,000 per month
Seriallos (Games): 10,800 patrons, earning an estimated $37,000 per month
Kurzgesagt (Video): 10,500 patrons, earning $36,000 per month
Sword and Scale (Podcast): 10,000 patrons, earning an estimated $34,000 per month
Sam Harris (Podcast): 8,800 patrons, earning an estimated $30,000 per month
Second Captains (Podcast): 9,400 patrons, earning an estimated $29,000 per month
Note: patron = Patreon supporter.
Source: “Top Patreon Creators,” Graphtreon, accessed January 17, 2020, https://graphtreon.com.
Page 34 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
EXHIBIT 1: USER METRICS
Page 9
W31030
•
New basic service offerings (provided with the existing single fee structure)
o Patron-only posts and messages
o Track patron payments and information
o Flexible payment plans for content creators
o Creator-first education
o Mobile app access and usage
•
Premium service offerings (alphabetical order, provided with higher fee(s))
o Creator-led workshops support
o Membership (patron) tiers
o Merchandizing for membership
o Patron analytics and insights
o Patron support by handling their questions, payments, and concerns
o Priority customer support
o Special offers promotion tool
o Team accounts
o Unlimited applications and tool integrations to creator pages
Note: patron = Patreon supporter.
Source: Created by the case authors based on company document “Pricing,” Patreon, accessed January 17, 2020,
https://www.patreon.com/pricing.
EXHIBIT 4: WILLINGNESS TO PAY, ACROSS RELATIONSHIP PERIOD
Relationship
Period
Willingness to
Pay
Less than 1 year
1 to 2 years
2 to 3 years
More than 3 years
$3.78
$5.89
$6.78
$8.32
Note: N = 8,438 (current, former, or prospective customers of Patreon and Kickstarter).
Source:
Patrick
Campbell,
“Tearing
Down
Patreon’s
Pricing,”
ProfitWell,
https://www.profitwell.com/recur/all/patreon-pricing-page-teardown.
June
12,
2018,
EXHIBIT 5: WILLINGNESS TO PAY, BY CATEGORY
Category
Music
Podcast
Video
and Film
Painting/Photography/
Graphic Arts
Writing
Willingness to
Pay
$4.98
$8.78
$5.03
$5.59
$5.72
Note: N = 8,438 (current, former, or prospective customers of Patreon and Kickstarter).
Source:
Patrick
Campbell,
“Tearing
Down
Patreon’s
Pricing,”
ProfitWell,
https://www.profitwell.com/recur/all/patreon-pricing-page-teardown.
Page 35 of 84
June
12,
2018,
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
EXHIBIT 3: LIST OF POTENTIAL NEW SERVICE OFFERINGS
Page 10
W31030
Campaign (Year)
1. Pebble Time (2015)
2. Coolest Cooler (2014)
3. Pebble 2 (2016)
4. Kingdom Death: Monster 1.5 (2017)
5. Pebble (2012)
Funded Amount (in US$ Million)
20.34
13.29
12.76
12.39
10.27
Source: “Most Successfully Completed Kickstarter Projects as of July 2021, Based on Amount of Total Funds Raised,” Statista,
accessed December 20, 2020, https://www.statista.com/statistics/222489/most-successful-completed-kickstarter-projects-bytotal-funds-raised.
EXHIBIT 7: SUCCESSFUL KICKSTARTER CAMPAIGNS BY CATEGORY (2018)
Category
Art
Comics
Crafts
Dance
Design
Fashion
Film and Video
Food
Games
Journalism
Music
Photography
Publishing
Technology
Theatre
Total
Number of Campaigns
2,036
1,457
332
146
2,286
1,386
1,805
679
3,301
121
2,000
305
1,805
948
398
19,005
Percentage
11%
8%
2%
1%
12%
7%
9%
4%
17%
1%
11%
2%
9%
5%
2%
100%
Source: Created by the case authors cased on data from Kickstarter, accessed February 5, 2019, https://kickstarter.com.
Page 36 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
EXHIBIT 6: KICKSTARTER CAMPAIGNS FUNDED BY MORE THAN US$10 MILLION (AS OF 2018)
Page 11
W31030
$1 Per Thing
You are Here! Tier
You are here! You’re
supporting me, my team, and
my collaborators, and that’s
huge. You’ll get access to
patron-only posts, early
access to tickets and invites
to special events/gatherings
when I’m on the road. You’ll
also get downloads of some
of my larger/main projects. So
you know: your support is just
as important as some well-off
mofo giving me $100. THANK
YOU.
$3 Per Thing
Download Tier
This one’s for keeps. You’re
supporting me, my team, and my
collaborators, and you are
awesome. Thank you. You’ll get
access to the patron-only posts,
and you’ll also be DIRECTLY
emailed keepable/playable/readable
downloads of any content (PDFs,
MP3s, MOVs, etc.).
$5 Per Thing
Random Surprises Tier
You’re supporting me a lot
here, dear one and $5 a song
(or Thing) is really generous.
Thank you! You’ll get all of the
above, plus you’ll get random
surprises. I’ll share extra stuff
with you every once in a
while....that I don’t want out in
the public. In the past, I’ve sent
random little digital tidbits
(photos, musings, voice
memos, videos, demos) every
few months that seem to really
delight people. I’m always open
to ideas and feedback about
how to get weirder.
$10 Per Thing
$25 Per Thing
$75 Per Thing
Webchat Tier
Art-in-the-Mail
(Signed) Art-in-the-Mail +
Guestlist
This is a lot of money to give
I have been thinking for ages about
Same as the ART-IN-THEto an artist, and you are really how to reward people who want to
MAIL Tier, except you have the
showing me some serious
support at a higher level, and I’ve
option to have your art
art-love & support here.
found it! Introducing ART-IN-THEpersonalized + signed by me;
THANK YOU. I’ll try to make
MAIL. This tier will get all of the
the personalization can be for
it worth it: you’ll get all of the
above (access to all downloads,
anyone (including you). It’s a
above, random surprises and webchats, etc.) AND every once in
massive undertaking to get
all, plus access to my patron- a while, as a gesture of my extreme
things signed/shipped from
only webchats in which I’ll
gratitude, you can opt-in to receive
place to place (especially if I’m
chat/perform live/discuss
a piece of beautiful physical art. The
in Japan and you’re in Brazil),
things with you. for the last
art may be something I draw and
so we try not to do too much of
few years, ……
print in a limited edition, or
this....but I love the idea of
I love doing small webcasts
something I commission from
being able to do this as a
where real conversation can
another painter/artist/maker.
gesture of gratitude for the
……
take place. These happen
massive amount of dough you
In December 2019 we mailed
sporadically, sometimes
are contributing. You will also
custom AFP socks to everyone. If
monthly but sometimes less
get access to the guestlist (+1 often if the touring schedule is we can fit it in an envelope, we can
note that not every appearance
call it art. we’re gonna have fun with
a bit nuts (all webchats are
I do has a guestlist, i.e., if I’m
archived and available to this this one.
playing a festival. but for my
tier in perpetuity).
own headlining shows, we
should be able to accommodate
everybody). THANK YOU AND
I LOVE YOU.
$100 Per Thing & $250 Per Thing Tiers Excluded
Source: “Amanda Palmer,” Patreon, accessed January 17, 2020, https://www.patreon.com/amandapalmer.
Page 37 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
EXHIBIT 8: MEMBERSHIP LEVEL EXAMPLE (AMANDA PALMER)
Page 12
W31030
Category
Video
Podcast
Music
Writing
Games
Drawing and Painting
Comics
Animation
Photography
Dance and Theatre
Magazine
Crafts
Category
Video
Podcast
Music
Writing
Games
Drawing and Painting
Comics
Animation
Photography
Dance and Theatre
Magazine
Crafts
January 2019
Pledged
Paid
Monthly
Monthly
1,682,284 $3,731,788
715,988 $1,501,353
200,378
$595,131
234,425
$638,157
265,278
$868,085
103,345
$304,423
169,557
$429,016
31,835
$86,939
22,188
$50,388
8,003
$34,685
23,353
$71,373
8,708
$13,967
January 2017
Number of
Pledged
Paid
Creators
Monthly
Monthly
12,764
505,382 $2,429,796
2,872
180,226
$718,649
3,452
80,257
$464,845
3,039
69,427
$374,353
3,387
84,836
$437,765
2,995
38,717
$241,754
3,585
116,287
$466,113
544
15,918
$73,734
387
6,627
$44,344
135
1,870
$11,838
192
12,235
$66,370
111
1,559
$8,763
Number of
Creators
34,798
9,138
9,057
8,676
8,553
6,768
5,975
1,204
1,152
559
525
341
Number of
Creators
25,990
5,934
6,468
6,415
6,218
5,679
5,445
973
938
331
386
244
January 2018
Pledged
Paid
Monthly
Monthly
1,122,759 $3,449,443
407,820 $1,159,033
130,001
$503,145
156,562
$617,831
165,497
$660,325
74,233
$297,146
161,825
$487,303
4,104
$74,492
14,124
$57,334
4,339
$25,581
17,017
$81,810
4,104
$12,946
Source: Compiled by the case authors based on data from Graphtreon, accessed January 17, 2020, https://graphtreon.com.
Page 38 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
EXHIBIT 9: NUMBER OF CREATORS, PLEDGES, AND PAYMENTS BY CATEGORY
FROM 2017 TO 2019 (IN US$)
Page 13
W31030
1 This case has been written on the basis of published sources only. Consequently, the interpretation and perspectives
presented in this case are not necessarily those of Patreon or any of its employees.
2
Harry McCracken, “How Crowdfunding Site Patreon Is Helping Artists Build Media Empires,” Fast Company, September 19,
2017, www.fastcompany.com/40457448/how-crowdfunding-site-patreon-is-helping-artists-build-media-empires.
3
All currency amounts are in US$ unless otherwise specified.
4
Sunghan Ryu, Beauty of Crowdfunding: Blooming Creativity and Innovation in the Digital Era (New York, NY: Routledge, 2019).
5
Jack Conte, “How Artists Can (Finally) Get Paid in the Digital Age,” April 2017, TED2017 video, 10:22,
https://www.ted.com/talks/jack_conte_how_artists_can_finally_get_paid_in_the_digital_age.
6
“Pricing,” Patreon, accessed December 9, 2020, https://www.patreon.com/pricing.
7
Harry McCracken, “Patreon Is on Track to Reach $1 Billion in Total Payments to Creators,” Fast Company, January 23,
2019, www.fastcompany.com/90295558/patreon-is-on-track-to-reach-1-billion-in-total-payments-to-creators.
8
James Hale, “Patreon Gained 1 Million New Patrons in 2018, Will Pay Out Its Billionth Dollar This Year,” Tubefilter, January
23, 2019, https://www.tubefilter.com/2019/01/23/patreon-amount-paid-out-creators-number-patrons.
9
Graphtreon, accessed January 17, 2020, https://graphtreon.com.
10
“About,” Patreon, accessed December 9, 2020, www.patreon.com/about.
11
Josh Constine, “Patreon Ups Its Revenue Cut, but Grandfathers in Old Creators,” TechCrunch, March 19, 2019,
https://techcrunch.com/2019/03/19/patreon-ups-its-revenue-cut-but-grandfathers-in-old-creators.
12
Constine, “Patreon Ups Its Revenue Cut.”
13
Li Jin, “The Creator Economy Needs a Middle Class.” Harvard Business Review, December 17, 2020.
https://hbr.org/2020/12/the-creator-economy- needs-a-middle-class.
14
Cal Newport, “The Rise of the Internet’s Creative Middle Class,” The New Yorker, June 15, 2022,
https://www.newyorker.com/culture/culture-desk/ the-rise-of-the-internets-creative-middle-class.
15
Julia
Alexander,
“The
Golden
Age
of
YouTube
Is
Over,”
The
Verge,
April
5,
2019,
https://www.theverge.com/2019/4/5/18287318/youtube-logan-paul-pewdiepie-demonetization-adpocalypse-premiuminfluencers-creators.
16
Julien Rath, “Analysts Predict the YouTube Advertiser Boycott Will Cost Google $750 Million,” Business Insider, March 27,
2017, https://www.businessinsider.com/analyst-predicts-the-youtube-ad-boycott-will-cost-google-750-million-2017-3.
17
Ben Popper, “YouTube will no longer allow creators to make money until they reach 10,000 views,” The Verge, April 7,
2017, https://www.theverge.com/2017/4/6/15209220/youtube-partner-program-rule-change-monetize-ads-10000-views.
18
Tim Mulkerin, “A bunch of famous YouTubers are furious at YouTube right now — here's why,” Business Insider, September
2, 2016, https://www.businessinsider.com/youtube-stars-advertiser-friendly-content-guidelines-2016-9.
19
Ryu, Beauty of Crowdfunding.
20
Ryu, Beauty of Crowdfunding.
21
Sunghan Ryu and Young-Gul Kim, “Money Is Not Everything: A Typology of Crowdfunding Project Creators,” Journal of
Strategic Information Systems 27, no. 4 (2018): 350–68.
22
Akhilesh Ganti, “Angel Investor Definition and How It Works,” Investopedia, March 22, 2022,
https://www.investopedia.com/terms/a/angelinvestor.asp
23
Ryu, Beauty of Crowdfunding.
24
Ryu and Kim, “Money Is Not Everything.”
25
Ajay Agrawal, Christian Catalini, and Avi Goldfarb, “Crowdfunding: Geography, Social Networks, and the Timing of
Investment Decisions, Journal of Economics & Management Strategy 24, no. 2 (2015): 253–74.
26
Ryu, Beauty of Crowdfunding.
27
Malloy Locklear, “Kickstarter’s Drip Takes on Patreon with Subscription Crowdfunding,” Engadget, November 15, 2017,
https://www.engadget.com/2017-11-15-kickstarter-drip-patreon-subscription-crowdfunding.html.
28
Locklear, “Kickstarter’s Drip.”
29
Olivia Seitz, “Amanda Palmer Is Home: Why the Kickstarter Queen Embraced a New Way to Fund and Create Art,” Patreon
Blog, July 17, 2017, https://blog.patreon.com/amanda-palmer-is-home.
30
Seitz, “Amanda Palmer Is Home.”
31
Jess Conditt, “The Crowdfunded Cult of Amanda Palmer,” Engadget, December 13, 2019, https://www.engadget.com/201912-13-amanda-palmer-patreon-kickstarter-social-media.html.
32
Locklear, “Kickstarter’s Drip.”
33
Statista
Research
Department,
“YouTube—Statistics
&
Facts,”
Statista,
July
12,
2021,
https://www.statista.com/topics/2019/youtube.
34
Statista Research Department, “YouTube.”
35
Eric
Rosenberg,
“How
YouTube
Ad
Revenue
Works,”
Investopedia,
June
4,
2020,
https://www.investopedia.com/articles/personal-finance/032615/how-youtube-ad-revenue-works.asp.
36
Carolyn Twersky, “The 10 Most Popular YouTube Channels EVER Might Surprise You,” Seventeen, September 18, 2018,
https://www.seventeen.com/life/tech-social-media/g22716788/most-youtube-subscribed-channels.
37
Sarah Perez, “YouTube Introduces Channel Memberships, Merchandise and Premieres,” TechCrunch, June 22, 2018,
accessed September 19, 2020, https://techcrunch.com/2018/06/21/youtube-introduces-channel-memberships-merchandiseand-premieres.
Page 39 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
ENDNOTES
Page 14
W31030
38
Perez,” YouTube Introduces Channel Memberships.”
M. Szmigiera, “Kickstarter—Statistics & Facts,” Statista, October 29, 2019, https://www.statista.com/topics/2102/kickstarter.
40
“How Can We Help You,” Kickstarter, accessed September 19, 2020, https://help.kickstarter.com/hc/en-us.
41
“Kickstarter
PBC
2018
Benefit
Statement,”
Kickstarter,
accessed
September
19,
2020,
https://www.kickstarter.com/year/2018/benefit-statement.
42
“Stats,” Kickstarter, accessed August 20, 2020, https://www.kickstarter.com/help/stats.
43
Mansoor Iqbal, “Twitch Revenue and Usage Statistics,” Business of Apps, September 16, 2021,
https://www.businessofapps.com/data/twitch-statistics.
44
Eugene Kim, “Amazon Buys Twitch For $970 Million In Cash,” Business Insider, August 26, 2014,
https://www.businessinsider.com/amazon-buys-twitch-2014-8.
45
Iqbal, “Twitch Revenue and Usage Statistics.”
46
Luke Goodling, “The Most Popular Individual Streamers on Twitch in 2018,” Dot Esports, December 30, 2018,
https://dotesports.com/culture/news/the-most-popular-individual-streamers-on-twitch-in-2018.
47
Timothy Li, “How Twitch.tv Works and Its Business Model,” Investopedia, October 2, 2021,
https://www.investopedia.com/articles/investing/082115/how-twitchtv-works-and-its-business-model.asp.
48
“Twitch Turbo,” Twitch, accessed December 9, 2020, https://www.twitch.tv/turbo.
49
Julia Alexander, “Monetization: How Twitch, YouTube and Patreon Work for Creators Revenue,” Polygon, June 25, 2018,
https://www.polygon.com/2018/6/25/17502380/monteization-youtube-channel-memberships-patreon-twitch-affiliate-partner.
50
Alex Hern, “The Rise of Patreon—the Website That Makes Jordan Peterson $80k a Month,” The Guardian, May 14, 2018,
https://www.theguardian.com/technology/2018/may/14/patreon-rise-jordan-peterson-online-membership.
51
“Amanda Palmer,” Patreon, accessed December 5, 2020, www.patreon.com/amandapalmer/overview.
52
“Top Patreon Creators,” Graphtreon, accessed December 20, 2019, https://graphtreon.com/top-patreon-creators.
53
Harry McCracken, “How Crowdfunding Site Patreon Is Helping Artists Build Media Empires,” Fast Company, September 19,
2017, www.fastcompany.com/40457448/how-crowdfunding-site-patreon-is-helping-artists-build-media-empires.
54
Erik Peckham, “The Business of Patreon,” Tech Crunch, February 13, 2019, https://techcrunch.com/2019/02/12/patreon-business.
55
Patrick Campbell, “Tearing Down Patreon’s Pricing,” ProfitWell, June 12, 2018, https://www.profitwell.com/recur/all/patreonpricing-page-teardown.
56
Brandon Gomez, “Patreon CEO Says the Company’s Generous Business Model Is Not Sustainable as It Sees Rapid
Growth,” CNBC, January 23, 2019, https://www.cnbc.com/2019/01/23/crowd-funding-platform-patreon-announces-it-will-payout-half-a-billion-dollars-to-content-creators-in-2019.html.
57
Peckham, “The Business of Patreon.”
58
Peckham, “The Business of Patreon.”
59
Campbell, “Tearing Down Patreon’s Pricing.”
60
Campbell, “Tearing Down Patreon’s Pricing.”
61
Compiled by the case authors based on data from Graphtreon, accessed January 17, 2020, https://graphtreon.com.
62
Olivia Seitz, “The 18 Best Patreon Benefits Video Creators Can Offer,” Patreon Blog, June 22, 2018,
https://blog.patreon.com/the-18-best-patreon-rewards-video-creators-can-offer.
63
Kati Holland, “6 Ways to Make Money from Your Podcast,” Patreon Blog, December 23, 2016,
https://blog.patreon.com/make-money-podcasting.
64
Gomez, “Patreon CEO Says.”
65
Compiled by the case authors based on data from Graphtreon, accessed January 17, 2020, https://graphtreon.com.
66
Campbell, “Tearing Down Patreon’s Pricing.”
67
Campbell, “Tearing Down Patreon’s Pricing.”
68
Gomez, “Patreon CEO Says.”
69
Josh Constine, “Patreon Ups Its Revenue Cut, but Grandfathers in Old Creators,” TechCrunch, March 19, 2019,
https://techcrunch.com/2019/03/19/patreon-ups-its-revenue-cut-but-grandfathers-in-old-creators.
70
Gomez, “Patreon CEO Says.”
71
Constine, “Patreon Ups Its Revenue Cut.”
Page 40 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
39
9- 6 2 1 - 056
SHANE GREENSTEIN
KARIM LAKHANI
CHRISTIAN GODWIN
Threadless: The Renewal of an Online Community
In December 2020, Jake Nickell, founder and CEO of Threadless, an online apparel company and
artist community, sat at his desk in his home office and reflected on the business’s progression over the
past few years. Due to the revolution in digital printing and print-on-demand technologies, Threadless
had jettisoned its warehouse where the company had stored its screen-printed inventory, in favor of a
network of third-party digital printing suppliers around the world, supported by the company’s own
proprietary software.1 This shift had coincided with the launch of a new platform called Artist Shops
that allowed artists to release content on their unique webpage, and, if the artist chose to, also sell it on
a marketplace on the Threadless website. This had brought a new group of artists and customers into
the Threadless community. Also, the company had recently closed its office in response to the ongoing
global COVID-19 pandemic and began working within a completely virtual framework. Nickell felt
that the company was as successful as ever under the current remote work model and he wondered
whether this could be a permanent shift.
The steady path toward virtual work—first in the transition away from screen-printing and then
moving to sell the office—created several areas of concern and possibility. Over the years, the entire
Threadless team—still only around 40 people after two decades—had been located in the Chicago area,
but remote work offered the possibility of a more dispersed employee base. Would this erode the tightknit feel of the Threadless community, especially considering the digital transformation the company
had already undergone? Nickell also wondered whether a more permanent move to distance working
would interfere with Artist Shops’ continued growth, or if it may actually accelerate it. Even more
fundamentally, the company’s development of software and technology had changed its identity away
from being simply an ecommerce brand to being a technology company. Could these two roles
continue to coexist without sacrificing Threadless’s original mission—to support independent artists
and designers by providing them a platform to share their work with other artists and sell it to
customers?
1 Screen-printing was a manual printing method that pushed ink through a screen, cut with a unique design, to create a picture
or pattern. The ink was spread over the entire screen, only touching the shirt or other apparel item through the openings made
in the shape of the design. Digital printing worked like a typical paper printer, running the apparel item through the printing
machine and creating the design directly onto the item. Print-on-demand referred to the process of creating an item only after it
had been ordered by a customer, rather than pre-making unsold inventory.
Professors Shane Greenstein and Karim Lakhani and Associate Case Researcher Christian Godwin (Case Research & Writing Group) prepared this
case. It was reviewed and approved before publication by a company designate. Funding for the development of this case was provided by Harvard
Business School and not by the company. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as
endorsements, sources of primary data, or illustrations of effective or ineffective management.
Copyright © 2021 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685,
write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu. This publication may not be digitized, photocopied,
or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.
Page 41 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
F EBRUARY 23, 2021
621-056
Threadless: The Renewal of an Online Community
History of Threadless
Threadless was founded in late 2000 by Nickell, Jacob DeHart (Chief Technology Officer), and
Jeffrey Kalmikoff (Chief Creative Officer). 2 In its first decade, Threadless pioneered a crowdsourcing
model, supporting a diverse community of graphic artists who produced unique designs for millions
of customers in its internet community (see Exhibit 1 for a timeline). Graphic artists could submit their
own designs for t-shirts and other apparel through weekly design competitions. Other artists and
potential customers could vote on submitted designs. Threadless then printed the most popular of
these submissions and sold them in the online Threadless store.
Once the winning designs sold out, they were replaced by newer competition-winning designs.
Threadless further created a sense of community by allowing customers to post blogs, songs, and
videos inspired by their favorite designs. In this way, the Threadless community contained various
types of people: artists and designers who wanted to submit material into the weekly competitions,
consumers who simply wanted to purchase shirts, and others who wanted to interact through voting
or posting. 3
The weekly design challenges and voting process served as an inspiration for artists, even if they
never won the contest. They could set their creative thinking to a project and share their work with a
community of fellow artists and art lovers. Sometimes the contests were open-ended, and sometimes
organized around themes. Nickell commented, “The theme of the challenge acts as a way to give the
artists some kind of constraint that forces them to come up with an idea. That’s very helpful as a creator,
to get some sort of input. You’re not just creating something out of thin air.” Reflecting on this
innovation, the company’s Chief Financial Officer Jason Macatangay stated, “Jake certainly created a
new opportunity for business with Threadless, utilizing and fostering a community of independent
artists. I’m not sure the term ‘user-generated content’ even existed when he founded the company.”
Threadless’s business model was inspired by Nickell and DeHart’s experience on a messaging
board for designers called Dreamless, which organized a t-shirt design competition that Nickell had
won. 4 Speaking about these early days, Nickell stated, “We started Threadless as a hobby, and as an
outlet for the community of artists on Dreamless. Our next step was starting SkinnyCorp, which was a
Web development company. We had Threadless as a side project to prove to our clients that we actually
could make Web sites. And then, Threadless just really started growing. At first, we were selling just a
couple of hundred t-shirts out of my 900 sq. ft. apartment, and then it started snowballing.”5
In 2006, as the company continued to grow, Threadless was eventually able to move into a 25,000
square foot warehouse and bring in millions of dollars of revenue every year. 6 Its success was due to
its unique crowdsourcing model, as it overcame the challenge of minimum order quantities through
the mechanism of having users vote on their favorite designs. Minimum order quantity was a necessary
reality during the age of screen-printing because of the cost required to create a new screen for each
2 Karim R. Lakhani and Zahra Kanji, “Threadless: The Business of Community,” HBS No. 608-707 (Boston: Harvard Business
School Publishing, 2008).
3 Lakhani and Kanji, “Threadless: The Business of Community.”
4 Lakhani and Kanji, “Threadless: The Business of Community.”
5 Lakhani and Kanji, “Threadless: The Business of Community.”
6 Lakhani and Kanji, “Threadless: The Business of Community.”
2
Page 42 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
Early Days: Pioneering the Crowdsourcing Model
Threadless: The Renewal of an Online Community
621-056
Transition to Print-on-Demand
During the early 2010s, however, as digital printing emerged and reached higher levels of quality,
the issue of minimum order quantities faded as a concern for artists. Designers could now print just
one unit of a product using the software provided by websites like Redbubble or Printful. On the new
competition provided by print-on-demand, Nickell stated, “Why would an artist bother submitting to
a design challenge and having less than 1% of a chance to get their design printed when they could just
upload and start selling immediately?” Although print-on-demand existed in the early days of
Threadless, through companies like Café Press and Zazzle, the products on these sites tended to be
poor quality, and digital printing was extremely cost-prohibitive because of ink, equipment, and labor
costs. 7 This sheltered Threadless’s high-quality, traditionally printed products.
As the quality of print-on-demand increased and the cost of digital printing decreased, allowing
designers and customers to produce one-off prints quickly, the company was forced to consider
changing its original model. The decision was not made easily, however. Macatangay stated, “We were
stubborn in wanting to make that shift because we had a warehouse already, with a long-term lease,
we had great relationships with suppliers who were all screen printers, and we could see the difference
from a quality control standpoint between screen-printed and digitally printed products.” Ultimately,
the increasing quality of digital printing allowed Threadless to make the switch while maintaining
artistic integrity. Nickell explained, “Now that cost and quality are pretty much on par, artists are really
looking to digital printing as a viable option. So, we slowly made that transition.”
In 2012, Threadless began printing products digitally and steadily transitioned to a full digital
operation by 2016. Once this transition was completed, Threadless found itself in an environment full
of competitors who had been in the digital printing space for years. Macatangay recalled, “By then, we
had other competitors who were already committed to digital because they had never had to consider
opening up a warehouse and staffing it. They were just living with the fact that they were selling an
initially inferior quality product, but it was print-on-demand with very little barrier to entry as long as
you knew how to set up a website.” This structural transformation also led to important changes in the
company’s business model—a shift enabled by the ability to print a seemingly limitless number of
designs using digital print-on-demand technology. The company had gone from printing 9,000 designs
through traditional screen-printing before 2012 to having around 1.5 million designs on the
marketplace by 2020. Such a large number of products made manually browsing through the entire
website impossible, requiring more specific product searches. Nickell commented, “The whole
shopping experience is different now. Rather than browsing for stuff and seeing what we release each
week, it’s more search-based. There’s new stuff coming out every five minutes on the website now.”
Not only were there millions of unique designs on the Threadless marketplace, each design could
be used to create 3,000 individual stock keeping units (SKUs). Artists could upload their designs using
Threadless’s software, using a single file with a transparent background. The artist could then choose
a color for the background and place the design on a virtually limitless array of products. Threadless
7
Steven Farag, “DTG vs. Screen Printing | Pros, Cons, How Much it Costs,” printavo.com,
https://www.printavo.com/blog/dtg-vs-screen-printing-pros-cons-how-much-it-costs#expensive, accessed January 2021.
3
Page 43 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
new design, making the cost per unit cheaper as the order quantity increased. On the sales side, this
could leave a company with unsold inventory if the demand did not exceed the producer’s minimum
order quantity. Nickell explained, “We knew that something was going to sell before we even printed
it because of the voting.” Macatangay added, “The natural barriers to entry that make it difficult for
independents to have a meaningful business—to some degree we benefited from that.”
621-056
Threadless: The Renewal of an Online Community
While many traditional printing companies were having to reckon with the industry’s digital
transformation, Nickell felt that Threadless approached the situation in a unique way. At first, in 2010,
the company tried investing in a company called Society6, eventually owning half the company.
Nickell stated, “Our plan was to work with them to service the digital side of our business, in terms of
software and the platform, where we were going to make it so that any submission that an artist
uploaded, you could also buy right away. In the early days, Society6 was powering digital stores for
blogs like Cool Hunting and stores like Urban Outfitters. But then they pivoted to be more of a B2C
type business and became a competitor of ours. So in 2013, we ended up selling to Demand Media,
now Leaf Group, and they’re running Society6 separately now.” After this, Nickell and the Threadless
team wondered what path they should take to complete their digital transformation. Nickell explained,
“We knew we needed to do something and the big ‘aha’ moment in 2015 was when he thought,
‘Wouldn’t it be cool if artists could have their own branded store rather than being in a marketplace?’
So more of the Shopify [a platform which allowed users to launch their own online stores] version of
digital printing, which didn’t exist in any way when we first started.”
Artist Shops
Out of this moment of inspiration, Threadless created a new platform called Artist Shops, which
allowed any artist to sign up for a store, create their own brand name, upload their art, and start selling
immediately (See Exhibit 2 for the Artist Shops sign-up page). Artists could set up their shops at no
cost, taking a percentage of the returns from each sale to pay for the free service and keep the business
going. Additionally, the best designs that appeared on Artist Shops were put on the Threadless website.
This selection process was carried out at the shop level, so an entire shop’s collection was either
included in the marketplace or not, depending on the quality and success of the shop’s designs.
The idea for Artist Shops was first announced in 2015, with artists being able to reserve their domain
names in advance, before a full launch in 2016. Although the original Threadless site continued to
attract customers, Artist Shops grew at an impressive pace, eclipsing Threadless by mid-2020. Not only
was the demand side of Artist Shops growing, but the supply side continued to expand due to the
independence granted to artists on the platform. Nickell commented on this, stating, “A whole ton of
artists that we work with on Artist Shops would never list their artwork on competitors like Redbubble
or Society6, or even on Threadless. They actually opt-out of the Threadless marketplace because they
want control of their own brand. They don’t want to be just another design in a marketplace of
hundreds of thousands of designs.” (See Exhibit 3 for example Artist Shops homepages.)
This allowed Threadless to support a new segment of the market and retain artists as they grew.
Not only were artists who were never interested in putting their designs on Threadless more likely to
join Artist Shops, artists who outgrew Threadless and desired their own brand could transition to
having an Artist Shop. A popular Threadless artist named Steven Rhodes described his transition: “I
started using Artist Shops in 2016, soon after they launched. I was already a regular contributor to
Threadless.com, so I think I was given a direct invitation by Threadless to be an early adopter of the
platform.” Some artists remained active on both platforms because the original Threadless design
challenges had a symbiotic relationship with their own brand, serving as inspirations to create content
for their Artist Shop.
4
Page 44 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
made this process easy by automatically adjusting the aspect ratio of designs to fit on both portrait and
landscape style products. Nickell explained the proliferation of SKUs in the digital era: “There’s
hundreds of products with thousands of SKUs. Just a regular t-shirt comes in 30 colors and each of
those colors has six different sizes. That blows out the SKUs like crazy.” On top of this, other products
could be created using special templates, such as shoes, backpacks, and duffel bags.
621-056
Threadless even helped their artists go beyond online retail, helping them get their designs sold in
brick-and-mortar stores like Hot Topic and Spencer’s. Nickell stated, “You may see a shirt that doesn’t
say Threadless on it anywhere. The label is the artist’s name or the artist’s brand. But we’re helping
them do that. We’re helping them get into the store.” Threadless worked with Artist Shops artists in
this way primarily through licensing, essentially acting as the artist’s agent. Nickell explained, “We
license the content to licensees to then sell it into the retailer. For example, we have a notebook licensee
and they sell into anywhere from Walmart to JOANN Fabrics to Barnes & Noble. But they’re the ones
actually manufacturing and doing the sales process to get the product into the store. The amount we
pay artists for these deals varies, but at a minimum, we give them 20% of our earnings.”
Threadless also helped its artists on Artist Shops get their products into online stores through a
service they called “Virtual Catalogs.” Threadless would create a plugin to websites like Shopify to
have Threadless/Artist Shops apparel drop-shipped—or sent directly to the consumer from
Threadless—through these third-parties. Nickell summed up this approach, “We try to find as many
distribution channels as we can for the artists.” Macatangay added, “20 years ago, Threadless was the
only place you could find these unique, funny t-shirts on the internet, but today you can find graphic
t-shirts everywhere. Ecommerce is a competitive business compared to two decades ago. So we are
utilizing the artist content and finding as many ways to monetize and commercialize that content as
possible.”
Initially, Threadless worried that launching Artist Shops would cause the original website to lose
customers. Still, after reviewing the first year of sales, they found that the new venture was not
cannibalistic. Around 90% of customers who bought on an Artist Shop had never placed an order on
Threadless. Therefore, instead of competing against themselves, each new distribution channel that
Threadless added for artists was incremental in adding new customers.
Dealing with the growth and new artists creating their own Artist Shops brands required Threadless
to deal with artists in different ways. Nickell stated, “We have a long tail approach where anybody can
sign up and use the platform as much as they want. But then we also have a top-tier outreach team at
Threadless where a whole crew of people are doing one-on-one outreach and relationship building
with our top artists.” Commenting on the sales distribution of Artist Shops, Macatangay stated, “In
2020, the top ten shops accounted for one-third of Artist Shops’ overall revenue, and the top 100
accounted for 80% of the overall revenue. So this begs the question, do we develop features on our site
that incorporate the long tail or do we focus on this very small group of power-sellers and top-tier
shops?”
Through it all, Threadless tried to foster a hands-on approach with their artists, and Nickell talked
to artists every day in his role as CEO. But, Nickell said, “Even with half a million artists on there, it’s
not like every day, every artist needs to talk about something. We are there for them when they need
us and it’s never too overwhelming.”
Reflecting on all of the changes that had occurred over the years, Nickell felt most proud of
Threadless’s ability to provide artists with the opportunity to make their creative endeavors financially
sustainable and rewarding. Threadless had always provided artists with a reward for their design
challenges, starting with free t-shirts before increasing to $100, $250, and finally over $2,000 for winning
a competition. Then, they switched to a royalty model to make the reward fairer for best-selling
designs. Nickell explained, “In one case, an artist got paid $2,500 for a design but we probably sold
$500,000 worth of the product. On the flip side, we’ve had some designs we paid $2,500 bucks for that
never really sold much at all. So in 2012, we moved to this royalty model.” This further represented a
shift from the early days of Threadless, where the company would purchase the artist’s design for
exclusive use—moving instead to the licensing model that would go on to be used for Artist Shops.
5
Page 45 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
Threadless: The Renewal of an Online Community
Threadless: The Renewal of an Online Community
Through this updated system, popular artists could take their designing from being a hobby to
being a career. Nickell stated, “Now we have artists on our platform earning mid-six figures per year,
which is what I have always tried to do. Originally, Threadless was more of a side project for artists, a
way to make a little extra money on the side—but not making a living. Now we have artists legit
making more than a living on the platform.” And this ethos of providing for artists was carried over to
Artist Shops. Macatangay explained, “We recommend that an artist price a regular t-shirt at 20 bucks,
and for every sale they’re going to make five dollars. That royalty rate is 25% and that’s exciting if
someone makes their first-ever sale. Compare that to brick-and-mortar wholesale where you’ll sell a tshirt for $25 to $30, and the artist will only make 80 cents per unit.” (See Exhibit 4 for example prices
on Artist Shops).
Digital Innovation
Concurrent to its transition to digital printing and print-on-demand and the launch of Artist Shops,
the company had innovated in terms of proprietary technology and software. One aspect of this was a
program called Manage Shops that allowed Threadless to run ad campaigns, send newsletters, and
manage the marketing of products for artists who opted-in to the service. Threadless even ran the social
media accounts for some artists. Macatangay commented, “Having been doing this for a long time, we
realized that consistent promotion and high social media followings are big components in the success
of our top-tier artists. So we attempted to create features that automated these things.” Previously, if
there was a holiday like Memorial Day, Threadless would recommend their artists launch a Memorial
Day sale in their Artist Shops, but they found that few artists would follow the advice. With Manage
Shops, an artist could opt-in to allow Threadless to control the pricing within the shop and to run
promotional events automatically. Nickell commented, “If they don’t like it, they can opt-out and do it
themselves. But the proof is in the pudding—you earn more when you opt-in.”
By 2020, over 90% of artists had opted-in to the Manage Shops feature. Rhodes described the
benefits of this function for artists, stating, “As a creative person, it’s always been the goal to turn my
illustration into an income stream, but without business skills, or much knowledge of ecommerce, that
can be quite a challenge. This service makes it easy for someone in my position, who has art/design
skills but lacks the entrepreneurial side.” Beyond the opt-in feature available for all artists on the
platform, a small number of elite artists also received hands-on management. Elizabeth Schmidt,
Threadless’s digital marketing director stated, “In many ways, Threadless acts as an agent for these
top-tier artists.” This more hands-on service included directly brokering to get an artist’s apparel into
brick-and-mortar stores if the artist opted-in.
Schmidt credited the company’s software, especially the Manage Shops feature, for Artist Shops’
success. She stated, “The thing that has really propelled its success is this managed pricing tool that
our digital team has developed.” The software was developed in-house by the company’s eight-person
digital team, avoiding the need for third-party services. This homemade technology, and the success it
brought to artists, attracted established companies like Cliff Bar and Archie Comics to the Artist Shops
platform. Typically these larger companies would receive the same profit as a typical Artist Shop,
although occasionally Threadless would negotiate one-off deals. Nickell stated, “Traditionally, that
would be done through a licensing deal where we are trying to get a company to be able to sell their
intellectual property rights (IPR), but now they are just signing up on their own.”
This led Nickell to embrace the idea that Threadless had transformed into more than just an apparel
company: “I think we kind of rebelled against it for a little while, but we really are a technology
company now.” Threadless preferred to develop technology in-house because of Nickell’s background
in software development and because the company understood the functions that new technology
6
Page 46 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
621-056
Threadless: The Renewal of an Online Community
621-056
should perform after years of working in the online apparel space. Accordingly, Threadless used a
technology roadmap that prioritized feature development based on feedback from users and artists
(see Exhibit 5).
In 2016, due to the switch to print-on-demand, Threadless transitioned away from having a
warehouse. While keeping a central office, the company began to outsource storage to outside vendors.
While Threadless had always used third-party printers, it had to find new digital printers to facilitate
the transition. The first holiday after Threadless had fully transitioned to print-on-demand, after
closing its warehouse, the company only had one vendor in its nascent supply network. Vice President
of Digital Dustin Henderlong stated, “We had no inventory, and we had all our eggs in one basket.
That basket did not work out. We learned the hard way that if that one vendor has an issue, then that’s
our issue and our customers’ issue.” This experience led Threadless to make connections with as many
vendors as possible to avoid reliance on a single supplier.
Threadless created the software that converted uploaded designs into various SKUs for different
products and sent the order information to the closest location on the supply chain. Threadless
eventually created a network of 40 manufacturers worldwide to ship products ordered through the
website. Nickell explained the process, “We have a Rolodex of manufacturers that we have
relationships with, and as soon as we need more capacity, we know exactly where we’re going to go.
There is no single digital partner on the face of this earth that could manage our volume. You have to
build a network of multiple partners. So we send the order to the fewest number of vendors in our
network that can produce the items in the order as close to the customer as possible.”
The manufacturing process was made more difficult because special software often needed to be
developed for each new garment and color, which required two to three weeks for development.
Threadless streamlined this process through its software—called Shipshape—which analyzed which
nodes in its manufacturing network could fulfill the order. Nickell explained, “When we take an order
from the customer, our software looks at it and asks, ‘Can the entire order be printed at one vendor?’
And if not, it breaks the order up into multiple vendors. Then the software considers all kinds of other
variables like, ‘How close is a vendor to the customer? How had the vendor’s quality been over the last
month? How much capacity do they have? What is the cost for this supplier?’ We consider all these
variables, and then we route to the most optimal partner.” A typical order might contain approximately
three items that could be produced by approximately two suppliers, while costs could vary anywhere
from $0.50 for a sticker to $400 for an aluminum print. The shipping costs also varied greatly depending
on the product’s size and destination.
Optimization was also a big factor when choosing new partners to include in the supply chain.
Henderlong stated, “When we’re looking at new vendors and somebody only makes socks, if we
integrate with them we know that every single sock order is going to be a separate shipment. So, the
fewer shipments the better.” Conversely, vendors benefited by being able to handle a diverse array of
products. Henderlong continued, “We really reward people for being a one-stop-shop; because if they
can do everything in that cart, they’ll get that order. And once the vendors realize that, they have more
incentive to expand their production capabilities.”
The software automatically made most of the optimization decisions, thousands of times a day, with
Threadless manually updating factors like recent output price and quality across different vendors.
Quality control was carried out by making weekly orders through all of Threadless’s suppliers and
taking measurements, and performing quality assessments on the products. Having this network in
place was also a timesaver for artists. Rhodes stated, “I live in Australia, and the bulk of my sales come
7
Page 47 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
Digital Supply Chain
621-056
Threadless: The Renewal of an Online Community
This shift from owning a warehouse and printing on location to partnering with a network of
vendors across the globe had a large impact on how the company saved and invested. Under the
warehouse model, Threadless would invest millions of dollars in inventory before holidays, hoping to
sell all of the invested merchandise during the holiday season. By contrast, the manufacturing network
model required no upfront investment for holidays. Nickell described the benefits of this transition,
“We’re working on negative working capital. The benefits of that are just crazy when you think about
all the inventory you never sold. We don’t have that problem at all, which is also just bad for the
environment.”
Despite all the success Threadless had achieved with its software development and supply chain
management, Nickell stated, “I still feel like our core asset as a company is our relationships with our
community and the content we make together with them. Without that, it’s just a race to the bottom of
the apparel supply chain. Sure, it’s helpful to get retailers on a digital supply chain, but when it also
comes with 1.5 million pieces of artwork to sell, that’s where I think we set ourselves apart as a
business.” Supporting this idea, Threadless found that most outside companies interested in using
Threadless’s software also wanted access to its collection of artwork. In turn, this collection was
powered by the unique community that Threadless had created. For this reason, Nickell viewed all of
these aspects of the company as forming a seamless whole.
Threadless was able to reinvest its revenues to continue to grow. Nickell stated, “I think that the
biggest area to invest in right now is our top-tier team. We do have a long tail of artists who use our
platform, but that’s almost a side effect of working with some of the best artists out there. Everybody
wants to work with us. So we have really invested in attracting new top-tier artists. We have a whole
team dedicated to bringing on really high profile, really talented artists with large followings.”
Threadless also focused on building a ladder for new artists to climb, building their brand, and
becoming top artists in their own right. They did this while also remembering to maintain Threadless’s
brand reputation for helping independent artists and caring for their work, positioning Threadless as
the best means of monetizing art and growing a brand. Nickell stated, “We think of it like a 360 deal
for a musician, where you come in and work with a record label, and they’re not just there to help you
record your album, but they’re going to help you go on tour and set up a merch shop. There’s a lot of
stuff we do for artists that aren’t obvious Threadless-related things, but I think we are here to help
artists and people know that.”
The COVID-19 Pandemic and the Transition to Virtual Work
In 2020, after the COVID-19 pandemic ushered in lockdown and social distancing measures across
the U.S., Threadless bought out the lease for its office and transitioned to remote work. This marked
the total transformation of Threadless from a centrally organized, warehouse-based company to a
decentralized, print-on-demand company. Initially meant to be temporary, the remote work model
worked for Threadless. Nickell explained:
We only had a year and a half left on our lease. So we thought when things opened up
a bit more, we’d see if we should open the office back up, but right now, remote work is
working out really well for us. Pre-pandemic, 30% of our staff would be working from
home on any given day, and we did have three or four people already go fully remote:
8
Page 48 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
from the U.S., so the logistics of that would be very difficult to manage by myself, especially without
industry connections. I’ve never tried to manufacture or ship my own products, so it’s difficult to
quantify how much time I’m saving, but I assume it would be substantial.”
Threadless: The Renewal of an Online Community
621-056
While this allowed Threadless employees more freedom of movement, and allowed the company
to hire new employees regardless of location, there were some tradeoffs, such as less direct interaction
with customers. Nickell looked forward to creating new ways to interact: “Maybe we should be doing
more virtual events or something to get face-to-face time. I love what videogames like Fortnite do in
terms of hosting concerts in the game or releasing a Star Wars trailer where you had to actually go in
the game to watch the special clip. I’m excited to see what happens over the next few years with how
we’ll be able to replicate those real-world things digitally.”
Nickell also wanted to launch more initiatives related to diversity and inclusion within the
community, especially promoting artists from different backgrounds and situations. Threadless was
trying to expand its supply chain to keep its artist community international. “We have found Artist
Shops is a little less international now compared to the original Threadless community,” Nickell
explained, “because when you’re a shop owner from a country like Australia, it feels weird to have
everything you ship coming from the States. So we’re adding an Australian supplier as we speak and
we have a number of European suppliers in the queue ready to go.” Beyond this, Threadless needed
to grapple with local languages and local currencies. Nickell stated, “We’re still pretty far behind on
that stuff.”
Despite the significant changes the pandemic brought, Nickell found that the company’s original
mission was stronger than ever during this period. He stated, “It was never so in my face that our
purpose was clearly driving our strategy as during the pandemic.” During the first few weeks of the
pandemic, Threadless saw major declines in its sales. Instead of pursuing short-term gains, Threadless
decided to hold to its mission of supporting independent artists. Nickell continued, “We cut costs
everywhere we possibly could in the business and then paid our artists 70% more. That’s what we
decided to do and our business grew around 130% in Q2, year over year. We were able to sign on so
many new artists. There was a very clear vision that we were able to articulate to our community that
really resonated because of the purpose.”
While Threadless maintained all of its staff during this time, cost-cutting measures included ending
contracts with SaaS suppliers, shutting down its Bucketfeet website and merging it with the Threadless
marketplace, pausing some employee benefits, instituting pay reductions, renegotiating deals with all
suppliers, reducing ad spends, and cutting back on licenses. Threadless also utilized government
stimulus programs like paid sick leave and payroll tax deferral. Moreover, although Nickell was
initially hesitant to release face masks, Threadless saw high sales of masks featuring artists’ designs
during the pandemic, making the garment its number one bestseller—even surpassing t-shirt sales.
Looking Forward
As 2020 came to a close, Nickell and the Threadless team looked forward to the next chapter in the
company’s history. Threadless had to deal with the typically busy holiday season in the immediate
future while navigating the unprecedented public health measures launched in response to the
COVID-19 pandemic. Also, in the short term, Threadless would need to navigate its transition to virtual
work. Would this be a permanent transition for the company, even after the pandemic? Beyond these
immediate hurdles, the company would need to maintain its edge in the realm of e-commerce and
apparel and continue its growth in the area of technology. Nickell was particularly interested in finding
new artistic innovations, like finding new items to print designs on and expanding the types of printing
9
Page 49 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
move out of state, keep their jobs, and be fully remote. That’s been working well. So, it’s
kind of just naturally going that way anyway.
621-056
Threadless: The Renewal of an Online Community
In the long term, Threadless was also interested in licensing its proprietary software to other
companies, which would solidify its standing as a technology company. However, Nickell wanted to
make sure Threadless entered this space while maintaining Threadless’s commitment to apparel and
graphic design. He stated, “We can get into that without it becoming a distraction by only focusing on
areas that involve licensing the artwork. Although we could be a pass-through software solution for
digital manufacturing, I feel like that has nothing to do with what Threadless is about.”
As digital printing and print-on-demand continued to lower the barriers to entry for competitors,
how could Threadless maintain its established position in the industry? As market conditions changed,
how could the company maintain its unique brand and continue fulfilling its mission of supporting
independent artists? Beyond apparel, what next steps should Threadless take to crystallize its emerging
status as a technology company and software intermediary for other firms? Was this avenue the true
future for Threadless in the long term or a potential distraction? Nickell was aware of the challenges
ahead, but remained confident that whatever steps Threadless took, the company would continue to
thrive and would remain a welcoming home for artists and designers around the world.
10
Page 50 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
options available for traditional items—allowing designs to be printed on the backs of t-shirts, for
example.
Threadless: The Renewal of an Online Community
Threadless Historical Timeline
•
2000
Threadless begins as a hobby.
•
2002
skinnyCorp web consultancy founded; Threadless ran as an internal side project.
•
2004 All skinnyCorp clients fired. Nickell and his team focus on their own projects like
Threadless.
•
2006
Threadless becomes poster child for “crowdsourcing,” brings on a minority VC investor.
•
2007
Co-founder leaves the business.
•
2008
Company goes all-in on Threadless.
•
2009
Threadless hires a CEO, Tom Ryan.
•
2010 Threadless starts making investments in other businesses like Society6 & dabbling with
print-on-demand apparel decoration.
•
2012 Company runs into trouble after a rough, underperforming holiday, Nickell returns as
CEO.
•
2014 Threadless lays off ~30% of its staff, begins restructuring/rethinking its business model,
and invests in digital printing.
•
2015 Threadless begins building Artist Shops and converts its entire catalog and supply chain to
“make-on-demand” and develops custom software to manage.
•
2016
Threadless launches Artist Shops to the public.
•
2018
Threadless begins opening up supply chain software to third parties via API.
•
2020 Transformative Year: the COVID-19 pandemic, face masks, community action plan, and a
shift to remote work. Artist Shops triples in size, becoming a bigger business than Threadless. The
company as a whole grows 60%.
Source:
Company documents.
11
Page 51 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
Exhibit 1
621-056
621-056
Threadless: The Renewal of an Online Community
Artist Shops Sign-up Page
•
Create 100s of print-on-demand apparel, home décor, and accessory items in minutes.
•
Make your Artist Shop unique with a fully customizable storefront.
•
Set your own prices with our easy-to-use pricing tool or let Threadless do it for you.
•
Have your art and Shop featured in the Threadless Marketplace (or opt out – it’s optional!).
•
Save money on your own products when you order samples for yourself.
•
Get access to customer contact info for email opportunities.
•
We handle the inventory, manufacturing, shipping, and customer care.
•
World-class hosting and checkout experience by Threadless: a 20 year e-commerce business.
•
Sell to anyone in the world, or create products just for you.
•
Completely free to sign up for and use (with no minimums)!
Source:
Artist Shops Sign-up Page, https://www.threadless.com/artist-shops/signup/art, accessed January 2021.
12
Page 52 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
Exhibit 2
Threadless: The Renewal of an Online Community
Source:
Steve Rhodes Artist Shop, https://stevenrhodes.threadless.com/, accessed January 2021.
Exhibit 3b
Source:
Steven Rhodes’s Artist Shop
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
Exhibit 3a
621-056
Nathan Pyle/Strange Planet’s Artist Shop
Nathan Pyle Artist Shop, https://nathanwpyle.threadless.com/, accessed February 2021.
13
Page 53 of 84
621-056
Threadless: The Renewal of an Online Community
Source:
Artist Shops Example Prices
Artist Shops Sign-up Page, https://www.threadless.com/artist-shops/signup/art, accessed January 2021.
14
Page 54 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
Exhibit 4
Page 55 of 84
Source:
Threadless Technology Roadmap
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
Company documents.
Exhibit 5
621-056
-15-
9B18A049
Rishi Dwesar and Geeta Singh wrote this case solely to provide material for class discussion. The authors do not intend to illustrate
either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying
information to protect confidentiality.
This publication may not be transmitted, photocopied, digitized, or otherwise reproduced in any form or by any means without the
permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights
organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western
University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com.
Copyright © 2019, Ivey Business School Foundation
Version: 2018-07-30
Because it’s a small company that’s living on its innovation, GoPro’s got to try and innovate like hell or
else it just dies.2
David Cray, business analyst and professor, Carleton University, 2015
On March 15, 2017, American technology company GoPro, Inc. (GoPro), once the fastest-growing camera
company in the country, announced it was reducing its workforce by 270 employees. This announcement
marked the third time that the company had reduced its workforce since the start of 2016.3 Also, the stock
price of GoPro had hit an all-time low in early March 2017. There were several reasons for the company’s
fragile condition. GoPro had launched some new products; however, analysts were skeptical about whether
these products would help the company regain its lost charm and lead to the same impact it had created
earlier.4 One main problem was that GoPro faced severe competition from innovative companies such as
Garmin Ltd., Sony Corporation, YI Technology, Nikon Corporation, and Polaroid Corporation, which had
also started producing action cameras.
How did the problematic launch of GoPro’s new camera and the delayed release of its much-anticipated
drone affect GoPro’s reputation in the market? What strategies could GoPro executives adopt to re-enter
the market with better competitive strength, and regain the confidence of its customers and investors? Of
the few options available, which should GoPro choose to bounce back in the market so that its new
development would pay dividends and restore its health?
INCEPTION
GoPro’s history could be traced back to 1999, when a young man in his early 20s, Nicholas Woodman,
started an online gaming services company, Funbug. The company soon folded after the dot-com crash of
2000–01, in which Funbug investors lost US$3.9 million.5 After suffering such a heavy loss, Woodman
needed to refocus his vision, so he went on a surfing trip to Australia and Indonesia. Being a passionate
surfer, Woodman wanted to capture photos of himself riding waves. While surfing and trying to capture the
perfect wave moments on his Kodak camera, Woodman used a contraption he had made from a broken
surfboard leash and rubber bands. This device helped him dangle a camera from his wrist for easy operation.
After returning from the trip, Woodman worked for sessions of up to 18 hours at a time to build the first
prototype of his waterproof camera and its required accessories.6
Page 56 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
GOPRO: THE DISRUPTIVE INNOVATOR FACES CHALLENGES1
Page 2
9B18A049
RISE OF GOPRO
Initially, Woodman invested $30,000 from his own savings, $35,000 from his mother, and two $100,000
investments from his father, an investment banker. Woodman engaged his roommate and college friend,
Neil Dana, as the company’s first employee. By the end of its debut year, GoPro had sold products worth
$150,000. These products mostly retailed at surf shops and specialty sports retailers. Woodman would go
on business trips to convince customers, while Dana phoned surf retailers across the country to sell them
cameras. The duo appeared on the QVC shopping channel, which further increased their sales. In 2005,
Woodman and Dana managed to sell approximately $350,000 worth of cameras.10
Woodman started targeting newer market segments, including mountain biking and skiing enthusiasts, and
the company’s revenues totalled $800,000 in 2006. In the meantime, Woodman’s friends suggested he
transition from film to digital; this advice led him to launch his first digital action camera, the Digital HERO.
The camera had no audio-recording capability but could film 10-second videos without the need for 35
millimetre (mm) physical film.11 Then, in 2007, Woodman launched the first GoPro with sound, the Digital
HERO3. Unlike previous cameras, it captured activities with unlimited video and audio.12
In 2008, the company released the Digital HERO5, a camera installed with wide-angle lenses. This camera gave
its users a distinct panorama shot and could be mounted on anything from surfboards to ski poles. That year, the
company exceeded $8 million in sales. In 2009, the camera market got its biggest competitor when Apple Inc.
introduced the iPhone 3GS, its first phone equipped with the ability to capture 3 megapixel video; this phone
posed direct competition to traditional camcorders and video cameras.13 However, for GoPro, the release of its
high-definition HERO HD (1,080 pixel video at 127 degree wide-angle) meant a new market was developed.
As Woodman explained, “GoPro created a new category of camera with the HD HERO back in 2009, and it’s
gone on to become one of the bestselling video cameras in the world.”14 The camera positioned GoPro as the
name-brand camera for unique point-of-view perspective videos. GoPro had disrupted the traditional camera
industry and overtaken the mainstream market15 (see Exhibit 1). In 2010, the company earned $64 million in
revenue, more than tripling sales from the previous year. According to Woodman, the company was in the right
place at the right time: when smartphones were replacing traditional digital cameras, GoPro became a pioneer
of high-definition cameras16 (see Exhibit 2 for total, worldwide action camera sales).
In May 2011, GoPro received Series A funding of approximately $88 million through a strategic investment
from five venture capital firms. In October 2011, Woodman launched HERO2, with an 11 megapixel
camera and improved low-light capability. Later, this camera was upgraded by doubling the pixels, giving
it more depth than previous cameras. By early 2012, GoPro cameras formed one-third of all the U.S. units
shipped. In December 2012, the company was valued at $2.25 billion after it received an investment of
$200 million from Chinese electronics manufacturer Foxconn Technology Group.17
In 10 years of business, Woodman Labs had advanced from selling 35mm film cameras to selling highdefinition digital video camcorders. During this decade of evolution, the company released more than seven
iterations of cameras, and every new version addressed the limitations of its immediate predecessor. From
2012 to 2014, the company continued its yearly product refresh with the smaller, lighter HERO3 and
HERO4; some of these cameras were introduced with screens for watching the videos after filming.
Page 57 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
In October 2002, Woodman created Woodman Labs, the parent company of GoPro.7 In September 2004,
Woodman finally debuted his camera at an action-sports retailer trade show in San Diego.8 He then entered
into a deal with a Chinese camera company—Hotax Manufacturing Co. Ltd.—to manufacture each camera
for about $3, which he then sold to surf shops for $14.9 With the launch of this camera, Woodman created an
entirely new product and market: the action camera.
Page 3
9B18A049
In 2015, GoPro launched two more cameras, the GoPro HERO LCD and the GoPro HERO4 Session, both
with improved photo and video resolution; these devices incorporated Bluetooth and Wi-Fi, touch screens,
and updated editing software.21
REDEFINING CONTENT MARKETING
Since the debut of its first camera in 2004, GoPro’s sales had more than doubled every year until 2012. By 2013,
it had become The United States’ fastest-growing digital imaging company.22 The reach of GoPro cameras was
not restricted to youngsters who strapped the cameras to helmets, handlebars, and surfboards. GoPro cameras
were also used by Hollywood directors, police forces, the U.S. military, doctors, and oceanographers.
GoPro adopted a strategy to go from niche to blockbuster, which could be attributed, in large part, to its social
media friendliness. Since 2008, the company had been marketing its cameras as mountable devices that could
be attached to ski poles, car frames, and surfboards, allowing people to film themselves and produce remarkably
high-quality videos. Around the same time, it became a growing obsession for people to share their most
exciting—or even most monotonous—moments on social media.23 GoPro equipped people with its cameras to
create and share videos that could be uploaded on various social networking sites such as YouTube, Vimeo,
LLC, Facebook, Inc., Instagram, and Pinterest. Public video sites gave people a platform to gain publicity, and
GoPro helped them create such content. For people who enjoyed doing extreme sports only on weekends, GoPro
cameras became the easiest way to get them their own three minutes of glory. These regular GoPro customers,
who wanted their moments of triumph to be recognized by others, became GoPro’s advertisers.24
Analysts believed that GoPro was innovating—not just its products but also around the products—to make them
more valuable for its customers.25 GoPro created a dedicated library on its website, displaying the best content
generated by its users. Customers would upload their videos, view specific playlists, or create their own favourite
lists.26 GoPro also bought the rights to self-shot videos that contained unique and inspiring content. After refining
these videos, the company posted them on its channel and requested its users to create emotional and impactful
content to share with the world.27 A GoPro hashtag helped users categorize their content; the hashtag also helped
GoPro’s social media team find new videos to upload on various networking sites.28
Furthermore, GoPro launched contests such as the GoPro annual awards, GoPro Video of the Day, and Photo of
the Day to encourage its customers to upload more videos and photos, and win awards; it distributed annual
awards of up to $5 million in prizes to the best content submitted. To ensure that the content was relatable to
audiences, GoPro either provided stories through its videos or shared videos with surrounding stories.29 By 2013,
GoPro had become the fifth-largest YouTube brand, amassing approximately 3 million views globally.30 The
company’s public relations team thanked individual users for their contributions, along with advising users and
answering their questions on YouTube.31
GoPro’s success on social media substantially reduced its marketing expenses and dependence on paid media.
From 2010 to 2011, the company doubled its net income to $24.6 million but had spent merely $50,000 more
on marketing. Similarly, in 2013, GoPro’s marketing costs increased by only $41,000.32 For its advertising
and marketing, the company did not spend money hiring an art director, acting cast, or team of videographers
but simply handed over its wearable cameras to amazing athletes. By September 2015, at least 6,000 GoPro-
Page 58 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
In February 2014, the camera maker officially changed its name from Woodman Labs to GoPro, Inc.18 In June
2014, Woodman took his business public in New York with an initial public offering (IPO). The IPO valued the
company at $3 billion, which rose to around $11.5 billion, up 283 per cent on the starting price.19 By the end of
2014, GoPro was the market leader in the action camera industry, with approximately 47 per cent of market share,
followed by other brands such as ION (12 per cent market share), Sony (8 per cent market share), and others.20
Page 4
9B18A049
GoPro entered into partnerships with more than 130 professional athletes, including Olympic snowboarder
Shaun White, professional skateboarder Ryan Sheckler, and even a National Hockey League (NHL) player, who
provided glimpses into the life of a professional sports athlete. Inspired by these videos, GoPro’s customers
would go out with their cameras rolling to record more adventures. It was not only amateur filmmakers who
started using GoPro cameras to achieve a moment of glory; even action sport-oriented companies such as
RedBull GmbH used GoPro to promote their brands. GoPro partnered with sports empires such as the NHL and
ESPN, which used GoPro cameras during live broadcasts. GoPro also joined with hotels such as the Marriott
hotels in the Caribbean and Latin America, which offered their guests complimentary cameras and encouraged
them to upload and share their GoPro adventures.34 GoPro also sponsored the GoPro Mountain Games in Vail,
Colorado, which attracted as many as 3,000 athletes and 53,000 spectators each year.
GoPro did not limit itself to sports activities; it also covered daily routine activities. The company wanted to sell
it products to people who were living regular lives and did not frequently participate in extreme sports activities
or stunts; therefore, it shared videos of regular activities, silly things, and even a few sad moments. GoPro
distributed its content by keeping its audiences in mind. For example, knowing that 85 per cent of Pinterest users
were female, GoPro skewed its content for female audiences, and featured videos and images of women using
GoPro cameras. Rather than promoting and talking about itself directly, GoPro used user-generated content
shared on its website and on social media platforms or videos created with partners such as the NHL.35
THE BIG FALL: HOW GOPRO LOST PACE WITH INNOVATION
Despite being successful for almost a decade, soon after GoPro’s IPO, the bumpy ride began. Throughout
most of 2015, the company saw slowing sales; analysts opined that GoPro’s inability to innovate beyond
its core product line hampered growth. Around this time, GoPro also started to face competition from
innovators entering the action camera market. New entrants and globally recognized brands such as ION,
Polaroid, Sony, Muvi, and Panasonic, started offering action cameras. In 2012, Sony launched its own
action camera, with image stabilization and stereo sound-recording capabilities, positioning it as a strong
contender in the action camera market.36
In 2015, GoPro launched its HERO4 Session camera. The Session, priced at $399, was marketed as the
smallest, lightest, most convenient GoPro possible for those who wanted to capture everyday moments.37
However, the pricing parity with more powerful cameras that had already flooded the U.S. market led to
disappointing sales, and even Woodman admitted that the Session’s price was too high. The company lowered
its price to $299. Sales still did not pick up, pushing the company to further reduce the price to $199.38 Polaroid
then launched a compact camera at just $99, targeted against the GoPro Session. Another video camera maker,
Graava, Inc., launched a small and attachable camera, which could edit its own footage.39
Apart from competition from camera makers, analysts believed that GoPro faced tough competition from
smartphones.40 Woodman agreed that when GoPro gained publicity from its IPO, the company failed to
recognize the need to revamp its marketing, and relied mostly on viral videos and word of mouth.41
During these years, the market eventually witnessed another technological innovation: drones. Drones had the
ability to shoot unique cinematic footage that had previously been difficult to obtain. Since 2013, this
technology had become accessible to the general population, and people started using drones in a personal
capacity—for weddings, holidays, and sports. In 2014, Nixie Labs manufactured wearable drones that could
Page 59 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
tagged videos were uploaded to YouTube every day, and some 380 videos of the athletes sponsored by GoPro
succeeded in garnering more than 50 million views each on YouTube.33 Moreover, GoPro became a leading
brand on YouTube, with more than 4.9 million subscribers in 2016 (see Exhibit 3).
9B18A049
fly off, capture the moment, and return like a boomerang. Similarly, in 2015, a camera drone start-up, Lily
Robotics, Inc., released a drone camera equipped with GPS (Global Positioning System) technology; this
camera could autonomously record footage using a wearable tracking device.42 GoPro, by this time, was
working with drone manufacturers such as Chinese technology company DJI and 3D Robotics. In 2015,
almost 10 per cent of the total GoPro cameras sold were attached to drones.43 The nascent drone market was
still in the early stages of innovation trigger, according to the 2015 Gartner Hype Cycle of Consumer Devices
(see Exhibit 4), and had the potential to transform the action camera market.44 GoPro found this era a great
opportunity to start manufacturing its own drone.
In late 2015, GoPro announced that in the first half of 2016 it would launch its first-ever drone, Karma,
against its biggest competitor, DJI’s foldable drone—the Mavic Pro. Karma would be equipped with an
innovative, foldable, removable stabilization system. However, its release was postponed to the 2016
holiday shopping season. (See Exhibit 5 for a popularity comparison of GoPro HERO, GoPro Karma, DJI
Phantom, and DJI Mavic.)
GoPro also invested huge resources to manufacture its first unmanned aerial vehicle (UAV). The investment
involved bringing in other UAV start-ups to learn to build a device from scratch, and hiring influential
developers and engineers. From December 2014 to September 2016, GoPro’s research and development
(R&D) expenses doubled from $46 million to $96 million. The company pushed itself to manufacture the
drone before the crucial Christmas period, and finally, in October 2016, launched Karma. However, within
16 days of its release, Karma was recalled due to a fault in the design of the latch holding the drone’s battery
in place, which resulted in the drone’s mid-air power failure. This design fault led GoPro to announce that all
2,500 units sold were to be returned immediately.45 Some experts argued that the rush and pressure to hit
unreasonable deadlines led to Karma’s failure, while others pointed to the management personnel hired to
oversee the product’s manufacture, such as Pablo Lema, who had no technical background. The Karma recall
took place at a time when GoPro had already failed to meet revenue expectations for the last quarter of 2016.46
GoPro’s UAV program was a costly affair, as it was a huge investment in R&D and external human
resources. In 2016, the company spent more than half of its revenue on operating expenses, which were
likely to cause large losses by the first quarter of 2017 (see Exhibit 6).47
Some analysts believed that GoPro cameras were still technically far behind traditional single-lens reflex
cameras. Others believed that GoPro cameras had a disappointing battery life and huge disc space. Further,
it was found that though it was easy to capture footage with a GoPro, managing and editing raw video
footage shot by its devices was too difficult, which disheartened some consumers and discouraged them
from buying newer GoPro devices.48
From 2011 to 2015, GoPro’s annual revenue growth dropped from more than 250 per cent to just 16 per
cent (see Exhibit 6).49 By the end of 2015, the two price cuts on the HERO4 Session resulted in the company
bearing a cost of $40 million. Through these years, GoPro’s stock price was also severely affected. After
launching a promising IPO in 2014 and reaching a record value of $93.85 per share in October 2014, GoPro
stocks plummeted 72 per cent in 2015. In February 2016, GoPro stock tumbled to $9.78 per share, its lowest
price since going public. In addition to all of these woes, GoPro’s president, Anthony Bates, quit the
company by the end of 2016 after serving it for three years.50
GOPRO’S FURTHER ATTEMPT TO REVIVE INNOVATION
Woodman conceded that GoPro’s growth slowed in the second half of 2015 and it needed to refocus on
developing better products with better software solutions to offer its customers easier ways to offload,
Page 60 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
Page 5
9B18A049
access, and edit videos shot on its cameras. By 2015, GoPro had entered many strategic relationships. It
acquired French virtual reality (VR) and media solutions company Kolor, and teamed up with Alphabet
Inc. to create a 16-camera rig (dubbed Odyssey) to capture immersive, three-dimensional VR content.51 In
2016, GoPro collaborated with live streaming app Periscope to incorporate live streaming aimed at
enhancing the user experience.52 In the same year, Woodman acquired two more video editing software
businesses: Stupeflix and the Splice video editor app.53 GoPro also entered the media production and
entertainment business, planning to make itself into an online entertainment empire. The idea was to make
multi-episode series that could be sold to TV services such as Netflix or be monetized with advertisements.
GoPro committed a $5 million investment to this division over the following year.54
In late 2016, along with Karma, GoPro launched HERO5.55 This camera had such features as a faster
processor, built-in waterproofing, linear horizon stabilization, a touch screen, and improved sound quality.
The main attraction of HERO5 was the advanced new software package. Karma, when launched, was sold in
a package consisting of HERO5 and a Karma Grip. With the recall of the drone, customers were asked to
return all the components of the package, including the camera. However, the company gifted a brand-new
HERO5 (Black) to customers who returned the defective drone. In relation to the recall, GoPro announced,
“All components included with the Karma drone bundle, including Hero5 Black and Karma Grip, must be
returned for a full refund. Once your complete return has been processed and refund issued, we will send you
a Hero5 Black as a thank you.”56 GoPro HERO5 subsequently became the best-selling digital camera in
several regions, including the United States. It helped GoPro attract more followers on social media—its
Instagram presence was up by 53 per cent, and views on YouTube increased by 86 per cent.57
Although the HERO5 was a success and helped GoPro by improving sales, the Karma recall affected
confidence in the company. GoPro tried to identify factors that caused the Karma drone to crash mid-air.
The company started mapping out possible potential problems, hiring an outside team of engineers and
experts who worked with GoPro for a few weeks to identify and diagnose the problem. On February 1,
2017, the improved Karma was relaunched. Analysts stated that GoPro was hoping that its Karma drone
would help it revive sales. Nevertheless, the company’s stock price hovered around $9 per share, much
below the stock price of the initial periods.58
COULD GOPRO BOUNCE BACK?
Many analysts believed that GoPro could still rebound. With increasing pressure to return to profitability,
the company initiated a few strategic steps from late 2016. Out of its six available action cameras, it planned
to discontinue three action cameras: the HERO+LCD, HERO+, and HERO entry-level cameras.
Furthermore, in an attempt to return to profitability, GoPro closed its entertainment division in November
2016 and announced it would cut about 15 per cent of its workforce. By late 2016, Woodman started
refocusing his company’s strategies. He was optimistic about reviving GoPro. He believed that the
company’s new software would make video editing easier and content more shareable, while Karma would
help it win over new customers. Woodman admitted that the company should streamline its focus: “We’re
guilty of having reached too far and we stumbled. We’ve decided to return back to that very focused
business that does just a few things extremely well, instead of doing too many things marginally.”59
With GoPro’s refocus, experts believed that the drone business and the new camera lineup offered new
hope for the company and would help differentiate it from competitors. Indeed, GoPro had a meteoric start,
and the company had evolved over the years through improved action cameras. Nevertheless, the recent
downturn and challenges that the company had grappled with left many questions unanswered. Was it a
wise decision to relaunch Karma? Would this move help the company succeed? Would closing the
entertainment business help Woodman revive the dwindling GoPro and regain its lost charm?
Page 61 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
Page 6
Page 7
9B18A049
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
Furthermore, given the forecast that the global action camera market would grow at a compound annual
growth rate of not less than 22.2 per cent from 2014 to 2019,60 would GoPro be able to cap this opportunity
and grow in the coming years? What should the company learn from its past experiences and failures, and
what could it do to be more innovative and successful in the future? How could GoPro protect its brand
among hobbyists and filmmakers alike to extend its market lead and fend off low-cost competition?
Page 62 of 84
Page 8
9B18A049
EXHIBIT 1: GOPRO, INC’S DISRUPTIVE MODEL
GoPro’s Disruptive Technology
 Aesthetics
 Zoom
Attributes offered by
GoPro cameras
 Small, wearable,
weatherproof, and shockproof
 170-degree and 360-degree
view
 Best video quality
Integrative design of products
 Developing custom lenses,
chips, and light sensors
 Targeting action sports
enthusiasts
 Leveraging user-generated
content for marketing goals
 Fit in customer’s hand
Source: Kyle Ahonen, “GoPro Is Disruptive,”
https://prezi.com/nu6wk9jtiqhh/gopro-is-disruptive/.
Prezi,
February
12,
2013,
accessed
June
18,
2018,
EXHIBIT 2: ACTION CAMERA UNIT SALES WORLDWIDE, 2010–2016 (IN MILLIONS)
Year
Units of action cameras shipped worldwide
2010
2011
2012
2013
2014
2015
2016
0.2
0.9
1.8
3.3
6.1
8.4
10.5
Source: Statistica, “Unit Sales of Action Cameras Worldwide from 2010 to 2016 (in Millions),” accessed June 18, 2018,
www.statista.com/statistics/326898/worldwide-unit-sales-action-cams.
EXHIBIT 3: GOPRO, INC’S FAN BASE ON VARIOUS SOCIAL MEDIA PLATFORMS
Social Media Platform
Number of Followers/Fans/Views
Twitter
2.28 million followers
Instagram
12.8 million followers
Facebook
10.39 million likes
Google Plus
617,000 followers
YouTube
4.9 million subscribers/1.48 billion views
Source: Compiled by the case authors from official GoPro social media channels, accessed July 10, 2016.
Page 63 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
Attributes valued by
existing camera technology
 Picture quality
GoPro’s Disruptive Model
Page 9
9B18A049
Note: Gartner hype cycle methodology, developed by American research and advisory firm Gartner, Inc., was used to study how
a technology or application evolved over time, along with providing a sound source of insight to manage its deployment in the
context of specific business goals; OLED TVs = organic light-emitting diode televisions; UHD TV = ultra high definition television.
Source:
Garner,
Inc.,
“Hype
Cycle
for
Consumer
Devices,
2015,”
2015,
accessed
June
18,
2018,http://blogs.gartner.com/smarterwithgartner/files/2016/01/Gartner_HC_ConsumerDev_Infographic_2-01.png. Used with
permission from Gartner, Inc.
Page 64 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
EXHIBIT 4: GARTNER HYPE CYCLE FOR CONSUMER DEVICES, 2015
Page 10
9B18A049
EXHIBIT 5: POPULARITY COMPARISON OF THREE DRONES—GOPRO HERO, GOPRO KARMA,
DJI PHANTOM, AND DJI MAVIC
120
80
GoPro Karma
60
DJI Phantom
DJI Mavic
40
GoPro HERO
20
0
Note: This graph represents search interest relative to the highest point on the chart. A value of 100 is the peak popularity for
the term, whereas a value of 50 means that the term is half as popular.
Source: Google Trends, accessed June 18, 2018, https://trends.google.com/trends/explore?date=2014-10-01%202017-0701&q=gopro%20karma,DJI%20phantom,DJI%20Mavic,Gopro%20hero.
Page 65 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
100
Page 11
9B18A049
Q1
2015
363.1
45.2
49.4
Q2
2015
419.9
46.4
58.4
Q3
2015
400.3
46.8
67.4
Q4
2015
436.6
29.6
66.4
Q1
2016
183.5
33.0
77.0
Q2
2016
220.8
42.4
93.0
Q3
2016
240.6
40.6
96.2
Q4
2016
540.6
39.5
92.7
Q1
2017
218.6
32.3
66.2
56.0
63.0
66.0
83.0
79.0
85.0
92.0
113.0
68.0
115.1
129.1
139.8
150.8
157.5
182.9
186.3
182.1
131.0
49.1
65.8
47.5
(21.6)
(96.8)
(89.3)
(88.6)
31.6
(60.3)
35.6
50.7
36.6
(11.4)
(86.7)
(72.6)
(84.3)
42.4
(62.8)
Revenue by Channel
Direct
Distribution
Total
162.4
200.7
363.1
197.8
222.1
419.9
190.8
209.5
400.3
290.8
145.8
436.6
83.9
99.6
183.5
128.0
92.8
220.8
147.9
92.7
240.6
290.3
250.3
540.6
114.8
103.8
218.6
Revenue by Geography
Americas
Europe
Asia and Pacific
Total
180.1
139.1
43.9
363.1
212.3
137.2
70.4
419.9
190.8
156.6
52.9
400.3
285.5
102.3
48.8
436.6
85.3
60.3
37.9
183.5
124.6
60.7
35.5
220.8
135.9
77.3
27.4
240.6
274.0
168.0
98.6
540.6
95.7
67.9
55.0
218.6
1,342
1,647
1,593
2,002
701
759
1,018
2,284
738
1,076
1,284
1,460
1,539
1,483
1,621
1,722
1,552
1,327
Revenue
Gross Margin (%)
Research and
Development Expenses
Sales and Marketing
Expenses
Total Operating
Expenses
Operating Income
(Loss)
Net Income (Loss)
Camera Units Shipped
(in Thousands)
Head Count
Source: Compiled by the case authors using GoPro annual and quarterly reports from “Investor Relations,” GoPro, Inc.,
accessed June 18, 2018, https://investor.gopro.com/overview/default.aspx.
Page 66 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
EXHIBIT 6: GOPRO, INC. INCOME STATEMENT, REVENUE BY CHANNEL, REVENUE BY
GEOGRAPHY, UNITS SHIPPED, AND HEAD COUNT, Q1 2015 TO Q1 2017 (IN US$ MILLIONS,
EXCEPT AS NOTED)
Page 12
9B18A049
1
This case has been written on the basis of published sources only. Consequently, the interpretation and perspectives
presented in the case are not necessarily those of GoPro, Inc. or any of its employees.
2
Jesse Winter, “GoPro Needs to Innovate to Survive: Analyst,” David Mckie, January 31, 2015, accessed June 18, 2018,
www.davidmckie.com/gopro-needs-to-innovate-to-survive-analyist/.
3
Sean O’Kane, “GoPro Eliminates Almost 300 Jobs in Third Round of Cuts Since 2016,” The Verge, March 15, 2017, accessed
February 22, 2018, www.theverge.com/2017/3/15/14938946/gopro-layoffs-job-cuts-stock-price.
4
Mark Huffman, “Facing New Market Challenges, GoPro Gets a Reality Check,” Consumer Affairs, February 4, 2016, accessed
June 26, 2017, www.consumeraffairs.com/news/facing-new-market-challenges-gopro-gets-a-reality-check-020416.html.
5
All currency amounts are in U.S. dollars; Ryan Mac, “The Mad Billionaire behind GoPro: The World’s Hottest Camera
Company,” Forbes, March 4, 2013, accessed June 18, 2018, www.forbes.com/sites/ryanmac/2013/03/04/the-mad-billionairebehind-gopro-the-worlds-hottest-camera-company/#7e375bfe7471.
6
Ibid.
7
Ryan Mac, “Action Camera Maker GoPro Files for $100 Million IPO,” Forbes, May 19, 2014, accessed March 21, 2018,
www.forbes.com/sites/ryanmac/2014/05/19/action-camera-maker-gopro-files-for-100-million-ipo/#3efc93da605b.
8
Forbes, “The Early Years of GoPro and Founder Nicholas Woodman,” accessed June 20, 2017, www.forbes.com/pictures/
emdh45gfif/nick-woodman-in-his-senior-year-book-2/#6ee74ad9600a.
9
Karl Taro Greenfeld, “Can GoPro Rise Again?,” Fast Company, October 17, 2016, accessed June 19, 2017,
www.fastcompany.com/3064066/gopro-looks-to-the-skies; Ryan Mac, “GoPro Evolution: From 35mm Film to America’s FastestGrowing Camera Company,” Forbes, March 4, 2013, accessed June 18, 2018, www.forbes.com/sites/ryanmac/2013/03/04/goproevolution-from-35mm-film-to-americas-fastest-growing-camera-company/#21871aef6406.
10
Celebrity Rave, “How a Former Surfer Became a Billionaire Thanks to GoPro Cameras,” June 27, 2014, accessed February
26, 2018, https://celebrityrave.com/article/how-a-former-surfer-became-a-billionaire-thanks-to-gopro-cameras.
11
Mac, “GoPro Evolution: From 35mm Film to America’s Fastest-Growing Camera Company,” op. cit.
12
Eleanor Cerny, “GoPro Camera Timeline,” Prezi, March 30, 2015, accessed February 26, 2018,
https://prezi.com/8bdrdnqgnhr1/gopro-camera-timeline/.
13
Mac, “GoPro Evolution: From 35mm Film to America’s Fastest-Growing Camera Company,” op. cit.
14
DPReview, “GoPro Launches HD Hero2 and WiFi Accessory Allowing Video Streaming,” October 24, 2011, accessed
February 27, 2018, www.dpreview.com/articles/3890053046/goprohdhero2.
15
Kyle Ahonen, “GoPro Is Disruptive,” Prezi, February 12, 2013, accessed February 26, 2018,
https://prezi.com/nu6wk9jtiqhh/gopro-is-disruptive/.
16
Mac, “GoPro Evolution: From 35mm Film to America’s Fastest-Growing Camera Company,” op. cit.
17
Lizette Chapman, “GoPro Going for IPO, Venture Investors Go for Gold,” Wall Street Journal, February 7, 2014, accessed
February 27, 2018, https://blogs.wsj.com/venturecapital/2014/02/07/gopro-going-for-ipo-venture-investors-go-for-gold/.
18
Mac, “Action Camera Maker GoPro Files for $100 Million IPO,” op. cit.
19
Archie Bland, “The Rise of GoPro: Why Wearable Cameras Make Us Film Everything,” Guardian, October 4, 2014, accessed
June 21, 2017, https://theguardian.com/technology/2014/oct/04/rise-of-gopro-wearable-cameras.
20
Parker Thomas, “GoPro Increased Its Revenue and Geographical Reach,” Market Realist, August 10, 2015, accessed
February 27, 2018, http://marketrealist.com/2015/08/gopros-market-shares-earnings-trend/.
21
Catherine Rowell, “The Rise of GoPro,” Business Chief, September 15, 2016, accessed June 24, 2017,
www.businessreviewusa.com/technology/5531/The-rise-of-GoPro.
22
Mac, “The Mad Billionaire behind GoPro: The World’s Hottest Camera Company,” op. cit.
23
Lynsey Hadfield, “The Rise of Gopro—Capturing Millions of Meaningful Life Experiences,” Zircom, February 6, 2015,
accessed June 28, 2017, https://zircom.uk.com/2015/02/the-rise-of-gopro-capturing-millions-of-meaningful-life-experiences/.
24
Kevin Bobowski, “How GoPro Is Transforming Advertising as We Know It,” Fast Company, July 1, 2014, accessed February
28, 2018, https://fastcompany.com/3032509/how-gopro-is-transforming-advertising-as-we-know-it.
25
David Robertson, “Low-Risk, High-Reward Innovation,” Harvard Business Review, interview by Sarah Green Carmichael,
May 4, 2017, accessed July 2, 2017, https://hbr.org/ideacast/2017/05/low-risk-high-reward-innovation.
26
GoPro Channel, accessed February 24, 2018, https://gopro.com/channel/.
27
Russel Cooke, “Go Big or GoPro: How the GoPro Marketing Strategy Defines Content Marketing,” Business 2 Community,
November 3, 2014, accessed March 1, 2018, www.business2community.com/content-marketing/go-big-gopro-gopromarketing-strategy-defines-content-marketing-01055894.
28
The Drum, “2014: GoPro Grabs User-Generated Content by the Horns,” March 31, 2016, accessed, June 23, 2017,
www.thedrum.com/news/2016/05/18/marketing-moment-51-gopro-grabs-user-generated-content-horns.
29
Julia McCoy, “Content Marketing Success: Two Case Studies,” Social Media Today, January 27, 2015, accessed June 24,
2017, www.socialmediatoday.com/content/content-marketing-success-two-case-studies.
30
Touchstorm, Touchstorm Video Index, accessed June 29, 2017, http://cdn2.hubspot.net/hub/210670/file-358976915pdf/docs/touchstorm-video-index-top-brands-edition.pdf.
31
Cooke, op. cit.
32
Bobowski, op. cit.
33
Ibid; Ardath Albee, “Get Your Fans to Share Their Love: What Every Brand Can Learn from GoPro,” Content Marketing
Institute, September 1, 2015, accessed July 14, 2017, http://contentmarketinginstitute.com/2015/09/brand-learn-from-gopro/.
34
Ibid.
Page 67 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
ENDNOTES
9B18A049
35
Ibid.; Liz Bedor, “How GoPro’s Content Marketing Puts Content before eCommerce,” Bluecore, June 16, 2016, accessed
March 22, 2018, www.bluecore.com/blog/gopro-content-marketing/; Manya Chylinski, “Adventures in UGC Marketing,
Featuring GoPro,” This Moment, March 10, 2015, accessed June 19, 2018, www.thismoment.com/content-marketingblog/adventures-in-ugc-marketing/.
36
Ryan Mac, “The Sky Is Falling for GoPro,” Forbes, February 2, 2017, accessed March 1, 2018,
www.forbes.com/sites/ryanmac/2017/02/02/behind-recall-gopro-karma-drone/#73b234da4ec9.
37
Clinton Stark, “GoPro’s Hero 4 Session Cube Camera Is Pure Innovation,” Stark Insider, July 6, 2015, accessed June 21,
2017, www.starkinsider.com/2015/07/gopros-hero-4-session-cube-camera-is-pure-innovation.html.
38
Tamara Walsh, “3 Major Headwinds to GoPro’s Growth Story: Should Investors Worry?,” The Motley Fool, January 11, 2016,
accessed July 18, 2017, www.fool.com/investing/general/2016/01/11/3-major-headwinds-to-gopros-growth-story-should-in.aspx.
39
Huffman, op. cit.
40
Kyle Anderson, “GoPro Inc (GPRO): Challenges Facing the Stock,” ETF Daily News, October 3, 2014, accessed June 25,
2017, https://etfdailynews.com/2014/10/03/gopro-inc-gpro-challenges-facing-the-stock/.
41
Greenfeld, op. cit.
42
Inga Kiderra, “Selfies Reach New Heights with Wearable Drone,” UC San Diego News Center, November 20, 2014,
accessed March 2, 2018, http://ucsdnews.ucsd.edu/feature/selfies_reach_new_heights_with_wearable_drone; Business
Wire, “Self-Flying, Throw-and-Shoot, Lily Camera Is Unveiled,” May 12, 2015, accessed March 2, 2018,
www.businesswire.com/news/home/20150512005462/en/Self-Flying-Throw-and-Shoot-Lily-Camera-Unveiled.
43
Emily Gallagher, “Is GoPro Going to Lose Its Monopoly with the Rise of the Drone?,” Beyond, June 16, 2015, accessed
June 18, 2018, https://bynd.com/news-ideas/is-gopro-going-to-lose-its-monopoly-with-the-rise-of-the-drone/.
44
Gartner, Inc., a technology research group, publishes a hype cycle that seeks to identify where technologies are in their
path to maturity; Gartner, Inc., “Gartner Hype Cycle,” accessed July 10, 2017, www.gartner.com/technology/research/
methodologies/hype-cycle.jsp.
45
Alistair Charlton, “Karma, Drama and How GoPro Fell from Grace,” International Business Times, December 1, 2016,
accessed, July 24, 2017, www.ibtimes.co.uk/karma-drama-how-gopro-fell-grace-1594401.
46
Mac, “The Sky Is Falling for GoPro,” op. cit.; Rishika Sadam, “Delayed Karma: GoPro Pushes Drone Launch to Winter,”
Reuters, May 6, 2016, accessed March 3, 2018, www.reuters.com/article/us-gopro-results/delayed-karma-gopro-pushesdrone-launch-to-winter-idUSKCN0XW296.
47
Selina Wang, “GoPro Earnings Plunge after New Camera Fails to Impress,” Bloomberg, February 4, 2016, accessed March
4, 2018, www.bloomberg.com/news/articles/2016-02-03/gopro-earnings-plunge-as-hero4-camera-failed-to-inspirfe-sales.
48
Bland, op. cit.
49
Charlton, op. cit.; Selina Wang, op. cit.; Rick Munarriz, “Can GoPro Stock Bounce Back after Last Week's 10% Drop?,” The
Motley Fool, March 12, 2017, accessed June 19, 2018, www.fool.com/investing/2017/03/12/can-gopro-stock-bounce-backafter-last-weeks-10-dr.aspx.
50
Leo Sun, “Why Did GoPro Inc. Waste $20 Million on Its Own Stock?,” The Motley Fool, February 17, 2016,
www.fool.com/investing/general/2016/02/17/why-did-gopro-inc-waste-20-million-on-its-own-stoc.aspx; Leo Kelion, “GoPro Makes
Cutbacks after Drone Crashes,” BBC, November 30, 2016, accessed March 6, 2018, www.bbc.com/news/technology-38161918.
51
Huffman, op. cit.; Walsh, op. cit.
52
Brian Barrett, “GoPro and Periscope Team up So You Can Livestream Being Extreme,” Wired, January 26, 2016, accessed
March 7, 2018, www.wired.com/2016/01/a-new-gopro-and-periscope-team-up-gives-both-a-lift/.
53
Janko Roettgers, “GoPro Acquires Stupeflix, Vemory to Build Better Video Editing Software,” Variety, February 29, 2016,
accessed March 7, 2018, http://variety.com/2016/digital/news/gopro-stupeflix-vemory-acquisition-1201718557/.
54
Janko Roettgers, “GoPro’s New Strategic Focus: The Plan to Expand into Original Content,” Variety, August 31, 2016,
accessed June 19, 2018, https://variety.com/2016/biz/features/camera-company-gopro-1201846760/.
55
Ibid.
56
Joe Bacaron, “GoPro Karma Recall News: Affected Customers Receive GoPro Hero 5 Black s ‘Thank You,’” BREATHEcast,
November 30, 2016, accessed March 8, 2018, www.breathecast.com/articles/gopro-karma-recall-news-affected-customersget-gopro-hero-5-black-for-their-troubles-36804/.
57
Hillary Grigonis, “Sales Are High for GoPro, but Confidence in the Firm Drops after Karma Recall,” Digital Trends, February 2,
2017, accessed March 8, 2018, www.digitaltrends.com/photography/gopro-reports-mixed-2016-financials/.
58
Ibid.; Mac, “The Sky Is Falling for GoPro,” op. cit.; April Glaser, “GoPro’s Future Is Now Tied to the Revival of Its Karma
Drone—The One That Fell out of the Sky Last Year,” Recode, February 1, 2017, accessed June 19, 2018,
www.recode.net/2017/2/1/14467292/gopro-relaunching-karma-drone-recall; Wang, op. cit.
59
Brittany Hillen, “GoPro to Discontinue Three Cameras and Exit Entry-Level Market,” DPReview, February 5, 2016, accessed
March 8, 2018, www.dpreview.com/news/6451740776/gopro-to-discontinue-three-cameras-and-exit-entry-level-market.
60
“Global Action Camera Market 2015–2019—Popularity of Social Networking Sites & Rise in Number of New Entrants,”
Cision, February 25, 2015, accessed June 18, 2017, www.prnewswire.com/news-releases/global-action-camera-market2015-2019---popularity-of-social-networking-sites--rise-in-number-of-new-entrants-300041294.html.
Page 68 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
Page 13
W27024
Cheryl Gladu wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or
ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to
protect confidentiality.
This publication may not be transmitted, photocopied, digitized, or otherwise reproduced in any form or by any means without the
permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights
organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western
University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveypublishing.ca. Our goal is to publish
materials of the highest quality; submit any errata to publishcases@ivey.ca. i1v2e5y5pubs
Copyright © 2022, Ivey Business School Foundation
Version: 2022-12-13
Kent Fawcett enjoyed the expansive view of Kamloops, British Columbia and its rolling hills from a bench
on the Ridge View Trail of Peterson Creek Park. He watched his dog, Fletcher, explore his senses around
him, and realized it had been just a year since the COVID-19 pandemic in March 2020 changed everything.
Fawcett was lucky—he and his fiancé were healthy and happy, and his plant-based food processing
business, Local Pulse, had fared well while online sales and wholesaling had increased. However, he could
not help but think that as things returned to normalcy for the rest of the world, they would surely change
for him as he considered growing his business to meet increasing demand. With an emerging opportunity
to help another local food hub, he would soon have to seek investments to ramp up his own business, or
work to develop a more collaborative approach to scaling it.
INDUSTRY OVERVIEW
Local Pulse was part of the growing Canadian food and beverage processing industry, which was the second
largest manufacturing industry in Canada in terms of the value of production, with sales worth $117.81
billion in 2019.2 The industry was Canada’s largest manufacturing employer, employing almost 300,000
Canadians. Most of these establishments were small businesses, with 91 per cent having less than 100
employees.3 The industry supplied approximately 70 per cent of all processed food and beverage products
available in Canada and was the largest buyer of agricultural production. Exports accounted for 33 per cent
of production value, with most (72 per cent) of these exports going to the United States.4
The industry was regulated by the Canadian Food Inspection Agency, which oversaw licensing, food handling
guidelines and laws, inspections, and enforcement of proper food labelling, among other specific
requirements.5 A high degree of regulation was to be expected, given that food played an essential role in the
health of Canadians. Despite its regulatory context, it was also a highly innovative industry—most firms
introduced at least one type of new product, process, or organizational or marketing innovation during the last
few years. Nearly half introduced new methods in their processing operations. During the period 2016-2018
almost 40 per cent of food and beverage companies introduced a new or improved product to the market.6
The Canadian Food and Beverage Processing Industry was one of the most concentrated food systems in
the industrialized world,7 which was a challenge for suppliers. The four largest Canadian food retailers held
Page 69 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
LOCAL PULSE: GROWING A VALUES-ORIENTED FIRM
Page 2
W27024
Shifting demographics contributed to changing food preferences moving companies toward offering more
convenient foods that were also nutritious, ethical, and environmentally sustainable.10 One such company was
Local Pulse. The heterogeneity of the Canadian market allowed for the existence of niche products that catered
to more diverse tastes. Canadians were particularly supportive of the buying local food trend and preferred to
purchase products containing Canadian ingredients.11 In 2020, 71 per cent of Canadians said they aimed to
purchase healthy foods all or most of the time.12 This included a reduced interest in meat proteins, with 7 per
cent of Canadians having already abandoned meat, and more than 60 per cent intending to decrease their meat
consumption.13 In 2019, sales of plant-based food ingredients in Canada (organic and non-organic) were valued
at approximately US$294 million and projected to grow to reach US$604.3 million in 2026.14
Hummus, one of Local Pulse’s primary offerings, fell into the dips category of retail foods. This category
fared well during the COVID-19 pandemic and saw a 5.1 per cent increase in Canadian sales in 2020 while
more people cooked at home, but still sought the need for convenience. 15 In 2014, approximately 30 per
cent of the Canadian population reported buying hummus.16 The global market share for hummus was
approximately US$2.62 billion in 2020 and was expected to grow to $6.60 billion by 2028, in response to
snacking trends and health consciousness in consumers.17 In the United States, the majority of hummus
purchases were made in supermarkets and grocery stores, and were provided by a fragmented group of
producers ranging from food giants like Nestlé, to smaller players not unlike like Local Pulse.18
The category responsible for the production of breakfast cereals (another offering in Local Pulse’s product
portfolio) was somewhat concentrated in Canada, including large players such as General Mills, Inc., PepsiCo.,
Post Holdings, Inc., and Kellogg Company.19 The North American market dominated the global breakfast cereal
market, which was valued at $90.9 billion in 2020 and was projected to reach $180.3 billion by 2030.20
Most production activities in the Canadian food and beverage processing industry required considerable
capital investment, which increased capital intensity in the arena of breakfast food production.21 That said,
other entrants were able to gain a foothold in the industry by opting to develop and sell healthier and/or organic
options. Nature’s Path was a family-owned social enterprise launched in Richmond, British Columbia in 1985
that produced a wide range of organic breakfast cereals and snacks. Nature’s Path was the fifth largest cereal
production company in Canada in 2021.22 All of its products were vegetarian and many were vegan. Holy
Crap seed-based cereals launched in 2009 at the Sechelt Farmers’ & Artisans’ Market, is another small-town
food business success story. In 2019, it was purchased by Plant & Co., an emerging health and wellness
company who sought to buy successful brands of plant-based products.23 The success of this brand was
partially due to its appearance on the hit entrepreneurial pitch show, Dragon’s Den.24
COMPANY BACKGROUND
Local Pulse was founded by Kent Fawcett. Like many entrepreneurs, Fawcett described his route to creating
Local Pulse as a “random and non-linear path.” With an interest in science and medicine, but having
struggled with food sensitivities and anxieties, Fawcett came to see food as a kind of medicine, and believed
that good food could “both heal you and the planet.” For years, he had made and shared food with friends,
stating that it was one of the easiest ways to connect with people. Fawcett had dreamed of making food a
part of his life’s work.
Page 70 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
nearly 72 per cent of the national market share.8 Sentiments were that the move to e-commerce would not
counter this heavy concentration because of the high barriers to setting up an effective distribution network.9
W27024
Prior to founding Local Pulse, Fawcett received a bachelor of science in biochemistry from the University
of British Columbia and worked as a Research Technologist at STEMCELL Technologies in Vancouver,
BC. In 2018, Fawcett left his career in stem cell research and moved to the small city of Kamloops, British
Columbia, where his fiancé, Nic Zdunich, had some family. This allowed him to package and begin selling
some of his own products at the local farmers’ market. He sold at his first farmer’s market in August 2018.
One product that he had been working on for a few years, dehydrated hummus, sold out on his first day.
What started as an experiment and a break from the big city quickly became a new life and growing
business. Fawcett initially ran the whole operation, from producing the dehydrated hummus in a church
kitchen (as the law required him to operate in a commercial kitchen) to selling the product locally and
online. Zdunich, a professional graphic designer, helped with branding and marketing on an as-needed
basis. Fawcett also received mentoring from the local innovation incubator as he looked to professionalize
his business. His first investments were limited to the cost of production and packaging of early batches
along with farmers’ market vendor fees, which began at $15/day.25 Returns from his initial sales were
invested back into the business for production, packaging, and an online presence.
The Local Pulse brand emerged—Fawcett believed that food choices were everyday decisions that could
have larger impacts due to their habitual nature, suggesting that “together we can make big changes through
little choices.” He was drawn to pulses, the category of foods consisting of dry beans, peas, and lentils.
Pulses were produced in great volumes in Canada, needed less water, and emitted less carbon dioxide than
more conventional sources of protein.26 Moreover, he believed that one healthier choice led to other
healthier choices, the same way that a more sustainable choice led to other sustainable choices. Thus, the
“pulse” in Local Pulse was more than just the ingredients he used, but represented the ripple-like nature of
change that Fawcett had come to understand. Local Pulse was a values-centric firm. Fawcett developed and
launched the company because he was passionate about the healing properties of food for both people and
the planet. He believed that no one should regret what they have eaten and stated, “Whatever your regular
diet is, we strive to help you reduce your ecological footprint and develop a healthy relationship with food
via one easy pulse-based choice at a time.”27
About the Products
Local Pulse produced a range of packaged, shelf-stable pulse-based foods, which included three plantprotein-packed mueslis and a range of "ready when you are" instant hummuses (see Exhibit 1). In February
2020, Local Pulse was awarded a bronze prize for Outstanding New Products at the From the Ground Up
Trade Show.28 Its first product, smokey curry hummus, sold well, but Fawcett began running into issues
scaling it. With Local Pulse’s existing production setup, Fawcett could not simply double the hummus
recipe and dehydrate the lot using the same process. He considered packaging other creations like breakfast
cereal that he had made for himself for years. This became known as Goopea breakfast Muesli, which was
a hit at the market with more repeat purchases than Local Pulse’s line of hummus.
Even though Canada was a leading producer and exporter of pulses worldwide,29 Local Pulse products were
not made from Canadian pulses, as Fawcett was unable to order the volume required by those suppliers.
The notion of not utilizing all local ingredients upset him and encouraged him to consider placing a larger
order. He intended to sell excess pulses via a line of branded, packaged products, but until then, sourced
pulses from a variety of non-Canadian producers. Wherever possible, Local Pulse made use of organic
ingredients, but was not yet able to call its products organic. Its products were vegan, although initially
reluctant to label them as such, Fawcett was fearful that consumers might associate veganism with activism
that did not appeal to his sensibilities. Most Local Pulse customers were not themselves vegan, but enjoyed
an occasional vegan meal with the help of its products. “Only about 2 per cent of the population is currently
Page 71 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
Page 3
Page 4
W27024
While the Kamloops farmers’ market had been the launching ground for Local Pulse products in 2018,
many happy customers purchased from its website when the market was closed in 2020 due to COVID-19.
Fawcett delivered local purchases himself and shipped out-of-town purchases direct to consumers for a
small fee. Eventually, local stores approached him to carry his products and he needed to start thinking
about selling wholesale. Until this point, he had managed Local Pulse to the best of his ability, learning as
he was going, but felt he needed more guidance. He sought help via a local not-for-profit pilot project
called the Food Hub, which was launched by the Kamloops Food Policy Council.30 Food hubs were
typically non-profit, shared-use food and beverage processing facilities, that allowed emerging food
businesses access to commercial quality processing space and equipment, in addition to local expertise and
other resources to support business development and growth.31 This helped Fawcett shift his thinking about
Local Pulse from a hobby toward developing a more sustainable business model. He learned skills needed
to approach sellers about carrying his products and became more proactive on this front. For a breakdown
of Local Pulse’s sources of revenues, see Exhibit 3. He had reached a decision point in the development of
Local Pulse—he knew he could not run the business on his own if he were to take advantage of the
opportunity to work with wholesalers.
Fawcett realized that he needed to invest in staff and manufacturing and to move away from working in the
business to instead working on the business. Local Pulse did not have the facilities to manufacture at a scale
to meet the needs of wholesalers, as it was based in the institutional kitchen at the Kamloops United Church,
and was already reaching the limits of using such a space in terms of time availability and equipment for
manufacturing and packaging. If Fawcett had staff for making and packing goods, he would have more
time to market and sell the products as well as develop and test new products. At its current small production
volume, prospective returns from wholesalers did not feel worth the effort required to meet demand. See
Exhibit 3 to understand how a similar volume of production can result in different incomes based on where
Local Pulse goods were sold.
Fawcett hoped to see Local Pulse products available across Canada and he imagined that it would be able
to support both himself and staff. He looked forward to creating a workplace culture that furthered his
vision of positive change. That said, he was somewhat unsure that this was what he wanted from the dayto-day management standpoint, stating, “You know, I just wanted to make some hummus and sell it at the
farmers’ market!” Now that he was in what he called an in-between “muddy middle” space, he knew he
had to intentionally decide which direction to take the business, whichever it may be.
DECISIONS, DECISIONS
Stay the Course
Fawcett felt he had a few options. First, he could continue to run the business as he had to this point. That
is, he could remain the sole proprietor of Local Pulse and act as the primary manufacturer and salesperson
for its full range of products. With the development of a COVID-19 vaccine, it was likely that face-to-face
selling would resume later in 2021, and his focus could return to meeting the needs of his local, highermargin clients. For example, the $19 bag of dehydrated hummus sold at the market cost approximately $8
in materials (see Exhibit 4), which left Fawcett a tidy margin to account for his time and investment in the
business. Within this context, he might consider increasing the number of sales run through his website,
while staying within the range of his current production capacities.
Page 72 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
vegan,” Fawcett said, “we could try to get 30 per cent of the people to be 100 per cent vegan, but it would
be a big struggle. But if you got most of the population to have just one plant-based meal a day, you would
have the same impact with less of a struggle.”
W27024
He knew there were challenges and risks associated with this approach, including not having sufficient
product on hand for existing customers, time constraints of in-person deliveries while having to be at the
market a few times a week, as well as relying on the manufacturing space, uncertain of how long its
relationship with Local Pulse might last. Also, he thought spending most of his time in the kitchen, rather
than building the business, would become trying over time. There was also the possibility that someone
else, a larger product manufacturer, would bring versions of Local Pulse’s products to the wider market,
increasing competition locally. Fawcett very much enjoyed his way of working but was aware of the
tradeoffs he faced continuing in that manner.
Scale Production
Another option was to scale-up production. If Fawcett wanted to meet the current and potential wholesale
demands for Local Pulse products, he would need to learn how to manufacture more efficiently. To appeal
to retailers, he would need to offer them at least a 40 per cent margin on products, while also factoring in
the cost of shipping. Should he make use of a distributor, he would expect to share a 20 per cent margin
with them as well. Based on existing costs and pricing, this left little to nothing for his efforts (see Exhibit
4). In conversations with those in the food and beverage processing industry, he learned that this was quite
normal. He was told, “This is what running a food business is like. You make, say $0.50 per item, but you
need to make at least 10,000 of them! If you want to be in grocery stores, it’s all about scale.” He knew that
if he was going to work with wholesalers, he needed to bring his costs down without negatively impacting
the quality of his products and the integrity of the brand. Learning to do this would take time and investment.
Fawcett was unsure that the processes he used to manufacture some of his goods would successfully scale,
as he had already run into issues while ramping up production of his dehydrated hummus. In particular, the
process he was using for dehydration did not scale-up very well; if he wanted to make a larger volume of
hummus, he would need new equipment. He had determined that the investment in a larger-scale dehydrator
facility would cost no less than $500,000. He had not yet established sufficient demand to require the
constant use of such a facility, and so he would need to rent a larger space on off-times for this scenario to
be financially viable. He was not sure that he wanted to be in the facilities rental market.
As he would need time to experiment with the latest production methods, he also needed to be able to hire
staff or attract a suitable partner to help run the business alongside a new facility. He investigated
outsourcing production while he grew the business but found the process too complicated to outsource
profitably. He would need help manufacturing and selling goods while he worked on new scaled versions
of Local Pulse’s products.
Also, while Fawcett had experienced increased demand for his products, it was moderate and his leading
dehydrated hummus product was still novel, which presented additional challenges for scaling. Unlike
refrigerated hummus that could be consumed as-is, dehydrated hummus needed to be re-constituted with water,
which meant that consumers had to learn to use the product. Consumer learning was common for a lot of
innovations. When talking with customers at the market about the dehydrated hummus, many found it difficult
to understand why the extra step of re-hydration was convenient. He often reminded people that a tub of hummus
meant to be eaten, could be easily pushed to the back of the fridge to inadvertently become mouldy. While this
type of interaction was possible at a farmers’ market, it was more difficult to be had at an anonymous grocery
store, where packaging on the shelf might have more influence. Moreover, some retailers were not sure how to
sell the product as “people don’t typically buy a $20 tub of hummus, so it’s hard to compare.” A product launch
would require an investment in this education via marketing and clever product design.
Page 73 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
Page 5
Page 6
W27024
A third option was that Fawcett could close Local Pulse. He was not in debt and he had made money on the
production of all his goods to date. That said, his returns had slowed considerably with the closure of the
public markets due to COVID-19 and with his pivot towards retail and wholesale. He knew that scaling
production would be different and riskier with more focus on managing costs and production and less about
speaking to clients about healthy eating, which he was not sure he wanted. He did not feel trapped by finances
at this stage and could choose to walk away from the business at any moment and try something new.
Collaboration with the Emerging Local Food Hub
Finally, an emergent option was to invest time and energy into collaborating with the local Food Hub. Fawcett
had already benefited from this initiative with mentoring and coaching from the local innovation incubator
that was collaborating with this project. He considered the creation of a shared institutional kitchen to meet
the needs of Local Pulse as well as other small-scale food producers. The pilot Food Hub project had taken
the lead on manifesting this idea, and identified the need for local food manufacturing facilities. As the Food
Hub project grew, it would be in a better position to invest in the time needed to run the shared facilities, as
Fawcett was not the only local entrepreneur that was at the muddy middle stage of development.
The Food Hub was ramping up to provide the infrastructure needed to reduce the barriers for local food
producers, processors, and farmers in the region, by implementing an institutional kitchen with
accompanying equipment. By giving his time and energy over to this community project, Fawcett would
be able to learn how to scale production while also helping other local food businesses become more viable.
In doing this though, he would forgo the limited time he had to dedicate to Local Pulse in favour of
supporting other food-based businesses.
How might Fawcett approach such a decision? Which option appears to be the best one? Are there
alternatives that he has not considered?
An earlier version of the case was awarded First Place in the 2021 John Molson Business
Ownership Case Writing Competition sponsored by the Bob & Raye Briscoe Centre in
Business Ownership Studies, John Molson School of Business, Concordia University.
Page 74 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
Close the Company
Page 7
W27024
EXHIBIT 1: LOCAL PULSE PRODUCTS
Instant Hummus Big Trio: Three Flavours of Instant Hummus
Source: Local Pulse company files
Page 75 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
Goopea Big Trio: Three Flavours of Plant-Protein Muesli by Local Pulse
Page 8
W27024
Local Pulse
Goopea Muesli
(available in 3 flavours)
Holy Crap Breakfast
Superseed Blends
Cereal (available in 4
flavours)
Jordans Morning
Muesli (available in 4
flavours)
Local Pulse Instant
Hummus (Available in 5
flavours)
Outdoor Herbivore
Instant Hummus
West Coast Kitchen
Instant Hummus
(available in 3 flavours)
Small Size*
Price per gram
Large Size*
Price per gram
$12.95*
(275 g)
.047
$19.95
(550 g)
.036
$10.39
(255 g)
.041
$39.99
(1 kg)
.399
$6.49 (450 gram)
.014
$6.95
(45 g)
.154
$18.95
(180 g)
.105
$9
(68 g)
.132
$28.33
(454 g)
.064
$9.95
(97 g)
.103
$21.95
(242 g)
.091
*Discounts of 10-20% available for products sold in multiples of 3 or more.
Source: Local Pulse company files
EXHIBIT 3: REVENUE SOURCES (IN CA$)
Year
2019
Channel
Farmers’ Market
Wholesale
Ecommerce
Total
Revenue
$28,747.81
$6,740.37
$5,165.08
$40,653.26
2020
Farmers’ Market
Wholesale
Ecommerce
Total
$6,155.5
$15,692.36
$6,664.52
$28,512.38
Note: Sales at Farmers’ Markets were severely impacted by restrictions due to the COVID-19 pandemic.
Source: Local Pulse company files
Page 76 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
EXHIBIT 2: LOCAL PULSE PRICING AND RANGE OF COMPARIBLES (IN CA$)
W27024
EXHIBIT 4: LOCAL PULSE PRODUCT COSTING ANALYSIS 2021 (IN CA$)
3
Unit
Cost
$2.83
Wholesale
Price
$4.20
Wholesale
Margin
32.62%
$1.37
Retail
Price
$7.00
Retail
Margin
40%
Wholesale
Case Price
$50.40
Retail $/
Serving
$2.33
180 g
12
$8.16
$11.40
28.42%
$3.24
$19.00
40%
$136.80
$1.58
45 g
3
$2.6
$4.20
38.10%
$1.60
$7.00
40%
$50.40
$2.33
180 g
12
$8.33
$11.40
26.93%
$3.07
$19.00
40%
$136.80
$1.58
45 g
3
$2.4
$4.20
42.86%
$1.80
$7.00
40%
$50.40
$2.33
180 g
12
$4.2
$11.40
63.16%
$7.20
$19.00
40%
$136.80
$1.58
275 g
5
$4
$7.20
44.44%
$3.20
$12.00
40%
$86.40
$2.40
550 g
10
$7.64
$12.00
36.33%
$4.36
$20.00
40%
$144.00
$2.00
275 g
5
$4.87
$7.20
32.36%
$2.33
$12.00
40%
$86.40
$2.40
550 g
10
$7.55
$12.00
37.08%
$4.45
$20.00
40%
$144.00
$2.00
275 g
5
$4.33
$7.20
39.86%
$2.87
$12.00
40%
$86.40
$2.40
550 g
10
$7.54
$12.00
37.17%
$4.46
$20.00
40%
$144.00
$2.00
Product
Size
Servings
Instant
Hummus:
Smoky Curry
Instant
Hummus:
Roasted Beet
& Red Onion
Instant
Hummus:
Chipotle &
Lime Black
Bean
GooPea PlantProtein Muesli:
Cranberry &
Pumpkin Seed
GooPea PlantProtein Muesli:
Cinnamon &
Raisin
GooPea PlantProtein Muesli:
Cocoa &
Buckwheat
45 g
Profit/Unit
Note: Wholesale price is the price of the product sold to retailers; retail price is the price of the product sold at market and online and is the same price sold by retailers in store.
Source: Local Pulse company files.
Page 77 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
Page 9
Page 10
W27024
ENDNOTES
1
All figures are in Canadian dollars unless otherwise specified.
Government of Canada, “Overview of the Food and Beverage Processing Industry,” Agriculture and Agri-Food Canada, July
16,
2020,
https://agriculture.canada.ca/en/canadas-agriculture-sectors/food-processing-industry/processed-food-andbeverages/overview-food-and-beverage-processing-industry.
3
“Overview of the Food and Beverage Processing Industry.”
4
“Overview of the Food and Beverage Processing Industry.”
5
Government of Canada, “Canadian Food Inspection Agency: Services and information,” Canadian Food Inspection
Agency/Agence canadienne d'inspection des aliments, December 15, 2019, https://inspection.canada.ca/.
6
Government of Canada, “Innovation in the Food Processing Industry, 2018,“ The Daily, December 12, 2019,
https://www150.statcan.gc.ca/n1/daily-quotidien/191212/dq191212f-eng.htm.
7
York University, “Corporate Concentration,” Corporate Concentration | Food Policy for Canada, (n.d.):
https://foodpolicyforcanada.info.yorku.ca/backgrounder/problems/corporate-concentration/.
8
“Corporate Concentration.”
9
“Corporate Concentration.”
10
Government of Canada, “Emerging Food Innovation: Trends and Opportunities,” Agriculture and Agri-Food Canada,
December 14, 2015, https://agriculture.canada.ca/en/canadas-agriculture-sectors/food-processing-industry/processed-foodand-beverages/trends-and-market-opportunities-food-processing-sector/emerging-food-innovation-trends-and-opportunities.
11
Neveen Zeit, “Food Processing Ingredients,” Ottawa: USDA Foreign Agricultural Service, 2021,
https://apps.fas.usda.gov/newgainapi/api/Report/DownloadReportByFileName?fileName=Food%20Processing%20Ingredien
ts_Ottawa_Canada_03-30-2021.pdf.
12
Mintel Canada, “Attitudes toward Healthy Eating,” December 2020.
13
“What is Your Opinion on Cutting Back on Meat Consumption?,” Statista, July 17, 2020,
https://www.statista.com/statistics/937738/consumer-attitudes-towards-reducing-meat-consumption/.
14
“Plant-based Food Ingredients Market Size in Canada from 2019 to 2026, by category (in million U.S. dollars),” Statista,
(July 2020): https://www.statista.com/statistics/1285803/plant-based-food-market-in-canada-by-category/.
15
Michele Sponagle, “Hip Dips and Sassy Sauces,” Canadian Grocer, December 15, 2021, https://canadiangrocer.com/hipdips-and-sassy-sauces.
16
“Share of Consumers who Purchased Hummus in the Past Year in Canada as of November 2014, by region,” Statista, May
30, 2015, https://www.statista.com/statistics/447074/share-of-consumers-who-purchase-hummus-by-region-canada/.
17
“Hummus Market Size, Share & COVID-19 Impact Analysis, by Type (Classic, Roasted Garlic, White Bean, Black Olive,
Red Pepper, and Others), Distribution Channel (Supermarkets/Hypermarkets, Convenience Stores, Grocery Stores, Online
Retails),
and
Regional
Forecast,
2021-2028,”
Fortune
Business
Insights,
August
2021,
https://www.fortunebusinessinsights.com/hummus-market-105632.
18
“Hummus Market Size, Share & COVID-19 Impact Analysis, by Type.”
19
“Cereal Production in Canada - Market Research Report,” IBISWorld, September 8, 2021):
https://www.ibisworld.com/canada/market-research-reports/cereal-production-industry/.
20
“Breakfast Cereals Market Size, Share & Growth with Forecasts,” Allied Market Research, accessed May 3, 2022,
https://www.alliedmarketresearch.com/breakfast-cereals-market-A14230.
21
“Cereal Production in Canada.”
22
“Cereal Production in Canada.”
23
Coast Reporter Staff, “Holy Crap Sold, but Will Remain in Gibsons,” Coast Reporter, October 10, 2019,
https://www.coastreporter.net/local-news/holy-crap-sold-but-will-remain-in-gibsons-3413309.
24
Dayana Cadet, “How Dragon's Den Catapulted One Artisan Cereal Out of This World,” Holy Crap Foods, accessed May 3,
2022,
https://holycrap.com/blogs/news/159359111-holy-crap-how-dragon-s-den-catapulted-one-artisan-cereal-out-of-thisworld.
25
“Become a vendor. Farmers’ Market,” Kamloops Regional Farmers' Market Society, accessed May 3, 2022,
https://www.kamloopsfarmersmarket.com/become-a-vendor.
26
Carolin Wood and Wayne Martindale, “Comment: Why Pulses Are the Eco-friendly Option for Feeding – and Saving – the
World,” The University of Sheffield; News Archives, August 17, 2016, https://www.sheffield.ac.uk/news/nr/pulses-feedingworld-1.598558.
27
“About Us,” Local Pulse, accessed May 2, 2022, https://localpulse.ca/about-us/.
28
Castanet Staff, “Kamloops Plant-based Company Takes Home Bronze at Provincial TradeShow,” Castanet, February 21,
2020, https://www.castanetkamloops.net/news/Kamloops/287551/Kamloops-plant-based-company-takes-home-bronze-atprovincial-trade-show.
29
Ellen Bekkering, “Pulses in Canada,” Statistics Canada,, November 30, 2015, https://www150.statcan.gc.ca/n1/pub/96-325x/2014001/article/14041-eng.htm.
30
The Kamloops Food Hub Pilot Project had a mandate to investigate how the Kamloops Food Policy Council and its
collaborators might facilitate the development of local food enterprises, processing facilities, distribution and aggregation and
food recovery in the region.
31
Ministry of Agriculture and Food, “What is a FoodHub?,” Province of British Columbia, July 22 2021,
https://www2.gov.bc.ca/gov/content/industry/agriculture-seafood/growbc-feedbc-buybc/feed-bc-and-the-bc-food-hubnetwork/bc-food-hub-network/what-is-a-food-hub.
Page 78 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
2
9B19B014
Jordan Sills wrote this case under the supervision of Ian Dunn solely to provide material for class discussion. The authors do not
intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names
and other identifying information to protect confidentiality.
This publication may not be transmitted, photocopied, digitized, or otherwise reproduced in any form or by any means without the
permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights
organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western
University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com. Our goal is to publish
materials of the highest quality; submit any errata to publishcases@ivey.ca. i1v2e5y5pubs
Copyright © 2019, Ivey Business School Foundation
Version: 2019-11-27
In August 2018, Harsh Amari, a student at Western University, was busy designing new themes for his
educational game Speak-On when he received a call from his former high school teacher, Mrs. Potter. She
informed Amari that the school thoroughly enjoyed the demonstration he had given at its professional
development day the previous week and was interested in buying several Speak-On packs. Amari had not
expected such a fast response. He was still in the throes of preparing for future demonstrations at schools
throughout September and October. While the government grant he received at the start of the summer helped
to fund the prototype of Speak-On, Amari needed to determine how much cash would be required in the first
year of business, once he incorporated on September 1. Furthermore, Amari was contemplating what to do
once he graduated next year and wondered if Speak-On could grow into a full-time venture or whether he
should focus on school instead. He knew the new venture would require a great time commitment.
COMPANY BACKGROUND
Speak-On developed from the idea that students, specifically in high school, were not being adequately
prepared in communication and public speaking skills. When Amari was in high school, he was involved
with an organization called DECA. DECA’s mission was to develop and help future leaders and provided
Amari with an immense amount of practice with public speaking.1 He had won several competitions at both
the provincial and national levels. In preparation for these competitions, he would play games intended to
improve his communication skills. DECA had provided Amari an avenue to develop his public speaking
skills, but he realized that most students didn’t get this opportunity in high school. Education guidelines in
Ontario described public speaking as an important skill to learn; many schools offered an optional public
speaking course, but Amari felt students were still unprepared once leaving high school.
Amari had developed the initial business plan for Speak-On ha while enrolled in Business 2257, an
accounting and business analysis course at Western University. He applied for and received a Government
of Ontario Summer Company Grant that allowed him to develop a prototype of the game.
1
“Home,” DECA Ontario, accessed September 10, 2018, http://deca.ca/.
Page 79 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
SPEAK-ON: PROJECTING CASH BUDGETS FOR A NEW VENTURE
Page 2
9B19B014
Speak-On was an educational game designed to be used in high school classrooms to improve
communication and public speaking skills in students. It consisted of a paper card deck, a digital rubric,
and an online tracking tool (see Exhibit 1). The questions in the card deck were organized by domain of
knowledge, relating to courses taught across high schools in Ontario. The main version of the game had
students coming to the front of the classroom, picking a card from the deck, and speaking about the topic
on the card for up to a minute. The digital rubric allowed teachers to grade and give feedback to students.
The online tracking tool to see progression was a future development Amari hoped to have ready next year.
Multiple variations on the standard version were provided in the instruction manual with Speak-On. The
rubric also integrated with the Ministry of Education’s curriculum.2 The initial versions Amari was planning
to sell in the first year of operations were for grade 10 business and grade 9 and 10 English classes. Biology,
chemistry, physics, math, French, geography, and history decks were under development.
CONSUMER ANALYSIS
Private Schools
Amari attended a private high school and decided to focus his sales efforts on these schools due to both his
relationships with past teachers and the financial flexibility these institutions had. Private schools generally
charged fees for students to attend and therefore had more financial resources available.3 To help attract students
and convince parents to send their children to private schools, rather than free public schools, private schools
needed to provide an exceptional learning experience.4 This led private schools to be early adopters of new and
experiential learning tools and games. Ontario had approximately 700 private schools.5 If teachers wanted to
procure a learning tool for their students, a pool of money was available for use. The teachers would approach
their department head, who had a budget of up to CA$1,5006 to spend on learning tools and games throughout
the department, as well as an additional $200 for each classroom. New learning tools and games would be used
for only two to three years as private schools were constantly innovating. Amari believed that public schools
would start implementing these games and tools after they had been widely used in private schools.
Students
Students’ future personal and professional success was increasingly tied to their competence with
communication and more specifically oral communication skills.7 Competent speakers were more successful
in conveying their knowledge, ideas, and opinions. This increasing importance had led to several countries,
2
“The Ontario Curriculum: Secondary,” Ontario: Ministry of Education, January 27, 2012, accessed September 10, 2018,
www.edu.gov.on.ca/eng/curriculum/secondary/english.html.
3
“Private Schools Industry in the US – Market Research Report,” IBIS World: Where Knowledge is Power, February 2018,
accessed September 10, 2018, www.ibisworld.com/.
4
Ibid.
5
“List of Ontario Private Schools,” Our Kids: The Trusted Source, accessed September 10, 2018, www.ourkids.net/ontarioprivate-schools.php.
6
All dollar amounts in Canadian dollars unless specified otherwise.
7
Sherwyn P. Morreale, Joseph M. Valenzano, and Janessa A. Bauer, “Why Communication Education is Important: A Third
Study on the Centrality of the Discipline’s Content and Pedagogy,” Communication Education 66, no. 4 (2017): 402–422,
accessed September 10, 2018, www.tandfonline.com/doi/citedby/10.1080/03634523.2016.1265136?scroll=top&needAccess
=true.
Page 80 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
SPEAK-ON
Page 3
9B19B014
INTIAL YEAR OF BUSINESS
Summer Company Grant
After developing the idea for Speak-On earlier in the year, Amari applied for a government grant through
the Ontario Summer Company program. The program was set up to encourage students to become more
entrepreneurial and gain valuable experience in running a company. Successful applicants received $1,500
to help with upfront costs and a further $1,500 after meeting all the program criteria. After applying in June,
Amari received the initial payment in July and completed the program requirements to receive the final
payment in September. He planned to incorporate the company in September but had already spent the
initial $1,500 grant. Amari had also planned to invest $500 of his own savings alongside the second half of
the grant payment in September.
Sales
The first year of operations had two distinct phases. Phase one consisted of prototyping the decks in
classrooms, leveraging Amari’s relationships with his previous teachers to better understand the consumer.
Once prototyping was done, Amari would start sales meetings in December. The sales process consisted of
a one-on-one meeting with teachers at select private schools where Amari demonstrated Speak-On and
described the potential benefits to their students. If teachers wanted to make a purchase, they would go
through their school procurement process and a sale would be completed one month after the sales meeting.
Given his inexperience, Amari expected to convert only 20 per cent of these sales meetings at first before
improving in future months. Amari assumed each teacher would buy an average of two decks per purchase
(see Exhibit 2).
Logo and Website Development
One of the first things Amari wanted to do was develop a permanent logo for Speak-On. The current logo
was a starting point, but Amari wanted to improve it. Logo Joy was a website that gave customers a
multitude of basic logos to choose from and then allowed customization. The one-time fee for the website
was $87, to be paid in September. After the logo was finished, Amari would then purchase a subscription
to Canva, a graphic design tool website, which allowed businesses to upload their logos to the website and
design marketing materials. The cost of the Canva subscription was $168 for the year and gave the member
access to the website. Payment was made in monthly instalments starting in September. Any marketing
8
Evelin Herbein, Jessika Golle, Maike Tibus, Julia Schiefer, Ulrich Traiutwein, and Ingo Zettler, “Fostering Elementary School
Children’s Public Speaking Skills: A Randomized Controlled Trial,” Learning and Instruction 55 (June 2018): 158–168,
accessed September 10, 2018, www.sciencedirect.com/science/article/pii/S095947521730628X.
9
Ibid.
10
Ibid.
Page 81 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
such as Germany, integrating public speaking into education standards.8 Mastering public speaking was now
seen as a core competency for well-educated students. Interestingly, while the question of how to promote
public speaking competence in pre-school to grade 12 and higher education had increased, research on higher
education had greatly outpaced research for elementary and high school students.9 When students were
developing public speaking skills, research had concluded that authentic learning tasks, opportunities to
practice, and self-assessment were best practices leading to positive effects.10
Page 4
9B19B014
Initially, Amari had planned to design the website on GoDaddy, a website builder and domain hosting
service, but then he discovered Fiber, which was a freelance software and programming website that
connected entrepreneurs with website programmers. Amari had connected with a programmer during the
summer and had contracted out the design of the Speak-On website for $633. Amari had negotiated for the
payment to be due once the website was functional in November. Once the initial build of the website was
complete, Amari would spend several months uploading specific content about the business. He had taken
several computer sciences courses in school and felt comfortable with the process. Even though Amari did
not design the website on GoDaddy, he was still going to purchase the domain name SpeakOn.com through
the website and pay for a membership. Claiming the domain name required a one-time fee of $10 to be
incurred in September with membership fees of $5 per month also starting in September.
Card Design
Amari had already designed Speak-On decks for English and business classes in high school. He was
currently designing a wider range of topics and purchased a membership to Component Studio. Component
Studio was essential in card development by helping to format images for cards, and Amari estimated he
would use the site more frequently as he developed new decks. The monthly cost was $20, and he had
started that subscription in July.
Banking Fees and Insurance
Incorporating the business was an easy process that would take only a few minutes. Amari would register
with the Government of Ontario under the name of Confidence Games Canada. The cost of a business
registration was $68 to be paid in September. Amari would also need business insurance. Insurance would
cost $138 for the first three months due in September and then revert to a monthly payment format. On the
same day of incorporation Amari would go to his bank and open a separate bank account for Speak-On.
His bank had told him monthly fees would amount to $20 per month and would be charged to his account
on the first day of the month following service.
Inventory
Amari had initially purchased prototype inventory in the summer, but he realized he would need to have a
supply ready before the sales process started in December. The supplier of Speak-On decks and Amari
negotiated 20 decks to be delivered in December. Further purchases of 70 decks in February and 40 decks
in May would ensure enough inventory for the busy spring season. All decks would cost $20, and payment
was due in the month of delivery.
Line of Credit
Speak-On would initially run based on the government grant and Amari’s investment. However, with future
investments required before sales could begin, more financing could be needed. Amari had been approved
for a line of credit with a $10,000 limit. The line of credit had an annual interest rate of eight per cent based
on the outstanding balance at the end of each month. Payment would be due the next month. If more
Page 82 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
materials made through Canva would be at an additional cost, and Amari planned to develop business cards
from Canva. The business cards would cost $60 and would be paid for in October.
Page 5
9B19B014
financing was needed above the line of credit, Amari was unsure where it would come from as his own
personal finances were stretched thin with school payments.
While Amari believed he was conservative with his sales projections, he also wanted to perform sensitivity
analysis on his calculations. The quick reaction and sales request from his old high school was unexpected,
and Amari wanted to see the effect on his cash balance if he started the sales process earlier than projected.
Amari assumed the same sales levels for September, October, and November as was projected for
December. For his supplier to deliver Speak-On decks in September, Amari would be charged a rush fee of
$5 per deck ordered. Amari estimated an additional purchase of 35 decks in September. Additionally, more
business cards would be needed, and the expense would rise to $80.
However, Amari also needed to see the negative effect slower sales would have on the business and the
potential need of a credit line. Amari assumed if other teachers were less receptive than his old high school
teacher, the number of decks sold would be 50 per cent less than projected. With a decrease in sales, he
would not require as much inventory. While the December purchase order could not be changed, Amari
would reduce his February and May orders by 35 and 20 decks, respectively.
CONCLUSION
Amari understood the impact Speak-On could have on high school students and their public speaking skills.
He needed to determine his financing requirements and project a cash budget for the first year of operations.
Upon analysis of the results, Amari needed to decide whether to continue to invest his time and money in
his new venture or focus on school and the upcoming employment recruiting experience. If Amari decided
to continue, he needed to choose whether to start selling earlier or continue with the original plan. With the
school year about to begin, difficult choices needed to be made.
Page 83 of 84
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
Other Options
Page 6
9B19B014
Source: Company files.
EXHIBIT 2: SALES ESTIMATE FOR FISCAL 2018
Meetings per Month
Sales Conversion Rate
Dec
20
20%
Jan
10
40%
Feb
0
N/A
Mar
10
40%
Notes: Speak-On decks were sold for $50 each.
Source: Company files.
Page 84 of 84
Apr
0
N/A
May
25
40%
Jun
45
40%
Jul
5
40%
Aug
5
40%
For use only in the course BSAD 356 HNU 471 Entrepreneurship at St. Francis Xavier University from 9/5/2023 to 12/6/2023.
Use outside these parameters is a copyright violation.
EXHIBIT 1: SPEAK-ON DECK