leadership

How committed customers made Sprouter too popular to fail

Kath Walters /

In the hours after Sarah Prevette announced she was closing her company, Sprouter, to her staff, she went home and curled up in bed with a bottle of wine.

She thought telling her team that her company had to close – that she was giving up – trying to find the money to keep it going – was the worst day of her life.

She was wrong.

The worst day was the next one, when she had to announce the site’s closure to her customers – the hundreds of thousands of entrepreneurs who used Sprouter, a free service where entrepreneurs submit questions to be answered by other successful entrepreneurs, sharing information and skills.

The announcement of Sprouter’s closure unleashed a burst of fury. “All of sudden, people were publically telling me off for shutting it down,” Prevette told participants at the Dell Women’s Entrepreneur Network conference in Delhi last week. “We were not prepared for that reaction – it was frustrating – and my first emotion was anger… ‘where were you when we needed you?’”

When Prevette started Sprouter, which was a free service, in 2008 it was an instant success, rapidly attracting a big community of supporters. “We had an incredible group of global entrepreneurs – like the founder of Craig’s List – giving advice,” Prevette says. “We had big plans!”

The venture quickly attracted a lot of press, but as Prevette told journalists around the world about the success of the site, she was privately panicking about the lack of revenue. The site had no advertising. It ran events and published a weekly newsletter that took advertising.

At first, Prevette bankrolled Sprouter with the proceeds of a previous venture she had started and sold. She had planned to start a premium service, and charge for it, but the day-to-day cost pressures meant she couldn’t get it done. “We were just making the payroll. I hadn’t been paid in 18 months. We were not growing. I just kept believing in tomorrow,” she says.

Then a couple of big deals fell through, and Prevette realised she could not save the site. “I think the worst word in the world is ‘maybe’,” she says. “You should always press people to say no. People who say maybe are just wasting your time.”

Prevette lost her self-belief, her self-confidence. “I gave up. You know what it is like; you’re all entrepreneurs,”she told the audience. “You are fighting for your business every day, and you have already had crappy days, and then you have months of crappy days. At some point you start to wonder: am I going to win? I had an unbelievable team taking pay-cuts, I hadn’t been paid in a year and a half. The answer for me was: I can’t do it’. I am exhausted.

“It was a tough day, knowing I was going to call it. Talking to the team and investors, to the people who had believed in us, and to tell them I have let them down. I don’t know how I had the will power to do it.”

Prevette had no game plan other than trying to make sure her team of four got jobs. She does not disclose the amount of revenue she had at the time of closure.

Then something strange started happening:  “The acquisition offers started coming in. At first, all if felt was disbelief, but it became apparent they were real. It was about a week before I realised – holy shit, this is going to keep going!”

“But still you are not sure, you have lost all faith in yourself and your ability to move forward. So even when they offer to buy, you are thinking ‘Do I want to do it?’ You decide you have to bury your baby and then a whole new reality of a come back and saying to your community… just kidding…”

Prevette found support among other entreprenueurs, including Lauren Flanagan, a director of the women’s funding group, Springboard. “I am not spiritual, I have to come out and say that you learn who your friends are, who is there for you. I was astounded who came forward. My girlfriends didn’t really understand, because they don’t get the connection with the business. They were saying, hey you did alright…”

“The people who came forward were people who knew what I was going through. I met Lauren at DWEN and she called me every day, making sure I was getting out of bed. Having the support of legendary investors, knowing they believe in you even when you no longer believer in yourself, it was the big difference in me going forward or giving up entirely.”

Astonishingly, a bidding war for the company began. At the end of it, Prevett sold for an undisclosed amount to Postmedia in October 2011.

The deal concluded on a Friday at 4pm, and Prevette was back in the office at 7am on Monday to lead the company, where she is still until the end of a buyout clause. All four of her team were re-instated, and another six appointed.

Prevette has already started another company, BetaKit. “The key thing is that I have hit that bottom and I have come back, and I feel fine. I failed very publicly and loudly, and now I know I can take great risks.”

Prevette says she learnt many lessons from her commercial near-death experience, and that she made a “ton of mistakes”. The biggest was being too slow to realise that the cashflow was not enough, and not raising enough capital to build the premium content in time.

Another error was getting side-tracked by “conversations” with big companies that led nowhere.

“It is ultimately a crazy, humbling experience, it is hard to open up about my faults and failings and it still something I am working through.”

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