Hard Work is a Given, Luck is No Guarantee (A Lesson from YouGift)
Efrem Weiss didn't set out to become an entrepreneur. Like most New York founders, he had a perfectly suitable career in an old-guard industry. In his case, it was finance, and he was a success. He started as an intern at his uncle's hedge fund at age 15, and in 2003, he recommended his employer buy Apple at $12 a share.
The move made him a bit of a rock star, especially during the financial crisis, when many hedge funds were forced to close up shop. Efrem went on to write analyst reports for a bank and eventually attended business school.
Fast forward several years and he's building YouGift, a virtual gift site that allows users to send free "celebration experiences" to friends with gift cards attached.
It hasn't been an easy, linear road, paved with piles of VC money and actual celebrations. In fact, YouGift is an example of a somewhat painful lesson in the world of entrepreneurship: Hard work is a given, but the other crucial element to success -- luck --can be a bitch.
YouGift started as a business school class project, entirely unrelated to gifting. But an episode of "Curb your Enthusiasm" inspired Efrem to research the unredeemed gift card market, which is apparently a $10 billion gap. He set out to build a company that would solve the market's inefficiencies by making it liquid, raising a chunk of seed money from friends to do it.
He launched a site and then took it down four months later, because he couldn't figure out how to monetize it. Also, he had no differentiators from the existing players, Plastic Jungle and Cardpool.
The model he pivoted to was inspired, serendipitously, by the way he met his wife: a birthday message on Facebook. She was an acquaintance, and he used her birthday as an excuse to strike up a conversation with her. YouGift, it was decided, would be a celebration platform, an excuse for people to interact more creatively than a boring "happy birthday" on a Facebook wall. And if a small percentage of them attach gift cards to their messages, then YouGift would be a success. It's the Zynga model -- the company would make money from a tiny slice of its users, as long as the products were widely used.
He pivoted and hired Greg Bildson, one of the guys behind LimeWire, as his CTO. And he knocked on the doors of most New York venture firms.
Those VCs did the worst possible thing, he said. They didn't say no. Accustomed to direct communication in the finance world, Efrem said he didn't realize that in the VC world, "We'll be in touch," or "Maybe," basically means "No." While he was waiting to hear back, the market for gift-focused startups became insanely crowded: There's now Giftdrop. Wantful. Karma. Giftly. Wrapp, and its Samwer clone DropGifts. Most of them have several million in VC backing and are staffing up and building faster than YouGift can keep up.
Efrem tapped his seed investors again, bringing his total seed funding to $1.2 million. Six weeks ago, the company launched its beta version, hoping to prove its model when the company begins marketing later this year. But it's a scary thing. The money could very well run out by that time. YouGift is at a bit of a crossroads.
The company was a finalist for the latest class of New York TechStars, and acceptance would have been a huge win. But Efrem realized his chances were low after David Tisch made a personal investment in Giftly.
A bigger blow came after YouGift had signed a deal with CashStar, a 50-person startup with $21 million in VC funding, to buy its gift cards secondhand at a discount. Last week, Efrem learned CashStar's lead developer built a direct competitor to YouGift as a skunkworks project within CashStar. The developer, Charlie White, launched GiftDish last week, touting his access to top national retailers via CashStar. So that's awkward.
"They have vastly more resources than I do," Efrem said. "We launched 5 weeks before they launched. That's not enough of a head start to say we're first to market."
But it hasn't been all bad news: YouGift has a couple of new prospects for money and/or mentorship percolating, Efrem said.
YouGift launched with little fanfare, and it'll begin a real marketing push after it finishes developing the gift card component in the next two or three weeks.
As long as YouGift can accumulate enough users to prove the model works, Efrem is certain his take on the very crowded gifting space will catch on. I like the site so far, and its focus on free, seamlessly sharable cards sets it apart from some of the competition, which are more focused on the purchase.
YouGift is simple, social, personalizable, and the cards are, I think, really clever and well-designed. The site is cleaner and more seamless than, say, SomeEcards. These are things Efrem, Bildson, and their tiny team have toiled over to make perfect.
But none of them make up for good, old-fashioned luck.