From Ramen to Riches

We met the founders of Needish, a Chilean company that launched ClanDescuento, a GroupOn clone that was eventually acquired by GroupOn to run its South American operations.

The founders were extremely humble. They talked about raising $500k for 10% of their company Needish three years ago on the strength of a PowerPoint presentation and 2,000 users. The site was a personal service lead generation engine. People would ask “Where can I find a plumber to install a new sink?” and Needish would charge a plumber to answer (and presumably get the job).

Two years in, they’d gotten up to two million users and started looking for additional funding, but the business just wasn’t getting the traction they’d hoped for. They were running out of money and distributing equity widely to employees in lieu of cash compensation, which grew their “founding” team from two to six. They were on the verge of shutting down when they heard about GroupOn and decided to copy the business model in Chile. That was in January 2010. They built the product in about 6 weeks, got delayed by a magnitude 8.8 earthquake at the end of February, and launched at the end of March. At this point they had 8 employees. They booked $10,000 of revenue the first day and never looked back.

By June they were trying to fundraise again, but the deal fell apart as rumors of a big GroupOn deal swirled. GroupOn ended up buying CityDeals (the most successful European GroupOn clone), apparently deciding that it was easier to buy their way into international markets, rather than come in as a minor player later and try to dislodge an incumbent.

Later that month later GroupOn bought ClanDescuento[1], and by the end of November, they’d grown from 8 dejected employees in Chile, about to close up shop to 350 employees across all of Latin America and a grand success story.

Nearly every class in business school told a story like the one above about difficult times and difficult choices. There was always a lesson. I’m not sure what to take away from this story other than “keep persevering.” The longer you stay in business and keep pivoting, the more likely it is that you’ll land on a business model that works. That the business model they found worked quite as well as it did may have been luck, but they put themselves in a position to take advantage of the lucky break by refusing to give up.

1. How did they become the leading GroupOn clone in Chile? The buzz is that they may have been doing some pretty spam-y email marketing. If that’s true, they don’t appear to have paid a penalty for it.