NEW YORK — Serial entrepreneur Keith Smith knows all too well that building a superior product isn’t the same as building a lasting business.
That’s where things went sour for his last startup, Seattle-based BigDoor. Smith admits it was a punch in the gut when he was forced to cut his losses, sell the company and walk away. But he dusted himself off, moved out to New York City and started over again with his next venture, payment acceleration company Payability.
Next time he has a midlife crisis, Smith jokes, he’ll probably just buy a car.
“[BigDoor] is a good reminder constantly to not get overly bullish on what you’ve accomplished,” he said during a recent interview with GeekWire at Payability’s New York office. “Just because you’ve proven you can add value doesn’t necessarily mean you can scale the business and do it profitably.”
Smith is no stranger to that moment when you realize the startup you’ve been nurturing and obsessing over for years isn’t the “rocket ship” you always thought it would become.
As a serial entrepreneur, he’s been there before and found himself back at that turning point in January, this time with his six-year-old gamification company BigDoor.
The startup had built a platform to help big brands implement loyalty programs. It saw early success, even being used by websites for the NFL and MLB.
It was significantly better than what its competitors were offering, but Smith admitted it still wasn’t recognized as such in the industry.
BigDoor had raised $17 million in venture capital by that point, but it simply wasn’t seeing VC-caliber revenue growth. The startup’s investors sat the CEO down and posed a tough question: is this really what you want to do for the next 10 years?
“It just was much more difficult to unseat the incumbents than what we expected,” Smith said. “So it was going to be a slog. It was going to be a long, slow slog. That’s just when it became obvious we needed to make a change.”
He ended up selling the company to an investment firm for an undisclosed sum and handing over the reigns to a new CEO.
BigDoor is still humming along and investors got some equity in the new owner out of the sale. So there’s still a chance they’ll see returns down the road — but it never happened under Smith’s watch.
“I’ve always been blessed with investors who are OK with [losing their money], but that doesn’t mean I’m OK with it,” he said. “There’s a process you go through when you realize, this wasn’t the outcome we expected it to be.”
The BigDoor sale was finalized in December, and by January Smith was on to his next venture.
He had been advising Payability since it was founded about 10 months earlier, and in January — the same month he announced BigDoor had sold — Smith joined the company as CEO.
Payability offers a service to help startups get paid sooner for downloads they sell through major marketplaces. If a business sells an app through iTunes, for instance, it often won’t see any money from that sale for about a month while it makes its way through Apple’s processing system.
So Payability steps in, tracks sales, pays businesses ahead of time each week and then collects payment from the marketplace whenever it comes through. Cash-strapped startups get the money they need sooner, and Payability, in turn, gets a cut of all the payments it accelerates.
Smith traveled back and forth to New York for his first six months on the job, but in June moved out to New York. He says he’s settling in nicely, finding the tech community out there to be more favorable for things like raising capital and recruiting employees with financial backgrounds.
He said past startup failures can make entrepreneurs a little gun shy the next time they find themselves at it again, so he tries to be mindful of that as he works on his latest venture, taking into account lessons learned from BigDoor.
“When that kind of stuff happens,” he said, “you just need to get smarter and get better and move forward.”