- Avni Patel-Thompson, the founder and CEO of Poppy, discusses the challenges and eventual shutdown of her childcare startup.
- She explains that the economics of the childcare industry made scalability difficult, as the pricing and margins were challenging.
- As the company grew, the dynamics and value proposition changed, requiring a shift in operations and team structure.
- Avni highlights some successful experiments, such as finding talented caregivers within local communities and organizing events like "Bring Back Brunch."
- However, over time, the transient nature of the caregiver population and the changing dynamics of the business led Avni to realize that Poppy was not a viable, scalable proposition.
- Avni had been mindful of this possibility for about a year before making the decision to shut down the company.

- The growth of Poppy has been steady but not as fast as desired, prompting the founder to experiment with new ideas.
- The company always focused on generating revenue, which allowed them to continue experimenting for several years.
- As the company's runway started to dwindle, the founder had to make important decisions about the future.
- The founder considered three options: pivot the company, seek acquisition, or shut it down.
- Conversations with potential acquirers revealed that acquisition was unlikely, leading the founder to consider shutting down the company.
- The decision to shut down was based on the realization that the original hypothesis and mission of the company were not going to be successful.
- The founder had conversations with team members, investors, and potential partners throughout the decision-making process.

- The speaker emphasizes the importance of transparency and communication during difficult times in a company.
- They believe in being transparent with the entire team, including junior members, about the company's financial situation.
- As the team grew, the speaker realized the importance of providing information to junior members who have the power to take action, rather than just giving them information without the ability to do anything about it.
- The speaker had conversations with trusted individuals, including investors and mentors, to discuss options and make decisions.
- The speaker had monthly investor updates and believes this transparency helped in the communication with investors when the company was winding down.
- The speaker found that their investors were understanding and supportive of the decision to shut down the company.
- The speaker advises other founders to maintain transparency and regular communication with investors throughout the process.
- It is important to do right by investors and maintain a good relationship for future endeavors.

- The speaker discusses the decision to shut down their company, Poppy, and the various factors they considered, including their duty to investors, employees, users, and themselves and their family.
- The speaker reflects on the emotional impact of shutting down the company and the grieving process they went through.
- They talk about taking time off during the holidays to heal and process their emotions.
- The speaker acknowledges the doubts and uncertainties they have about starting another company in the future.
- They mention that their family and close friends understand that they are not done and still have a passion for working on new ideas and projects.
- They view the process of shutting down Poppy as part of the journey of trying new things and are open to what the future holds.

- The speaker is in a good place after taking time to reflect on their next steps.
- They acknowledge that shutting down a venture can feel like failure, but it is important to have open conversations about it.
- The speaker emphasizes the importance of being responsible with investors' capital and considering the well-being of the team.
- They believe in the value of continuous learning and trying new ventures.
- The speaker is passionate about solving problems for working mothers and parents.
- They are exploring different areas of interest and learning new skills while figuring out their next move.
- The speaker values kindness towards oneself and others throughout the process.

- The speaker reflects on the importance of leading with kindness and how it allows for interesting opportunities.
- They miss their 930 AM standups and the sense of purpose it provided.
- They believe that their previous venture, Poppy, was not a failure because it achieved its intended goals for parents and caregivers.
- They could have turned Poppy into a high-end tech-enabled agency, but that wasn't their mission.
- They want to find solutions that work for millions of people and stay true to their mission.
- They believe that as long as they stay true to their mission, they have the flexibility to make difficult decisions.

Avni Patel-Thompson, founder and CEO of Poppy, discusses the challenges and eventual shutdown of her childcare startup. The economics of the childcare industry made scalability difficult, and as the company grew, the dynamics and value proposition changed. Despite some successful experiments, Avni realized that Poppy was not a viable, scalable proposition. After considering options, including seeking acquisition, the decision was made to shut down the company. Avni emphasizes the importance of transparency and communication during difficult times and advises founders to maintain regular communication with investors. They reflect on the emotional impact of shutting down the company and acknowledge the doubts and uncertainties about starting another venture. Despite the challenges, Avni is in a good place and remains passionate about solving problems for working parents. They believe that as long as they stay true to their mission, they have the flexibility to make difficult decisions.

Avni Patel Thompson founded Poppy, which helped parents book the best caregivers. They went through the YC Winter 2016 batch and recently shut down. Avni asked to come on the podcast to talk about what the process of shutting down was like.

http://avnipatelthompson.com/
https://twitter.com/APatelThompson

Kat Manalac is a partner at YC.

https://twitter.com/katmanalac

The YC podcast is hosted by Craig Cannon.

https://twitter.com/craigcannon

***

Topics

00:05 - Kat’s intro

00:45 - Avni’s intro

1:45 - When did it become clear that scaling Poppy wasn’t working?

5:20 - Experiments Avni tried with Poppy

9:25 - The last six months of runway

12:55 - Choosing to shut Poppy down

16:55 - Pivot or shut down?

19:40 - Who did Avni have these hard conversations with?

24:05 - Communicating with investors during the process of shutting down

30:50 - How does Avni feel since shutting down Poppy?

38:00 - Tying self-worth to your accomplishments and how it feels after shutting down

39:00 - “This is what trying looks like.”

43:30 - The effects of having raised money

45:30 - Starting to think about what’s next

48:30 - Struggling with unstructured nothing

49:15 - Kindness

Kat, you haven't been on the podcast in a while.

don't you introduce yourself before we talk about Avni for an hour?

I work a lot on outreach to applicants, so everything we do with an external focus

And I help a lot of companies in the batch with their launches.

I had the pleasure of interviewing Avni at least once.

Yes, and I had to send her the rejection email.

But since then I've gotten to see her go through YC and go through the process that we'll talk about today.

Avni, you've been on the podcast before, but for people who haven't heard of you, what do you do?

I suppose was the founder and CEO of Poppy.

And what we did with Poppy, the mission was to build the modern village.

And so how I envisioned that was to find and vet really amazing childcare providers and then connect them to families when they had gaps in childcare.

so we started that in my neighborhood in Seattle about 3 and a half years ago, grew it and continue to build it out as a kind of a testing ground for something that could help the millions of families across the country.

And recently decided that, looking at all of the things, the economics and everything, that it wasn't a viable, scalable proposition.

And so made the hard decision to shut it down in December and kind of going through the process of all that last month, this month.

And just think that's something interesting to think about.

So, there are a million things to talk about here.

But maybe we can talk about the economics in the beginning and then we can shift towards the emotions, how you felt, how it went down.

So at what point did it become clear to you that this couldn't scale?

Because I think many people would say like, that's a YC, maybe even YC interview question.

how do you grow this thing to a massive scale?

Why did it take 3 years for you to realize that?

So I think it's a multilayered kind of question.

For me, at least in this space, even from the beginning, I knew that parts of it were against the odds.

And so what I mean by that is if you know the category that I'm working within is childcare, it's already an inherently margin challenged kind of category.

So what I mean by that is like, what parents are willing and able to pay for this kind of work?

And then what caregivers need to make, the ones that are like highly skilled and everything like that.

So, and then can you make some kind of margin in between as a company that then facilitates this stuff?

And so even from the beginning, I really kind of built this company and looked at this company as kind of this series of experiments and so kind of like a mad scientist.

And so in that vein I knew that we were up against kind of challenging economics but I always thought about it knowing that.

We then took a look at pricing from like a membership model and transaction revenue and I can certainly go into the details of that.

But it was always understanding that it was going to be a challenging kind of category.

It's not where things like travel, maybe the frequency isn't there but there's high ticket, there's high average value that you can make some good margin.

This 1 had higher frequency, but you had to then believe that you could also make decent margin on that frequency.

So that was all the, like, what the hypotheses were based on.

1 other thing that I think is important to note is that what it looks like at a certain scale is very different than what it looks like even at the next level.

And so what I mean by that is when you're doing 10 bookings a week, it looks like something with like maybe 3 caregivers and maybe, you know, 50 families or whatever.

It looks very different at the next level when you're starting to do a hundred bookings a week and it looks different yet again when you're doing 500 bookings a week.

And so, you know, why did it take the 3 years or whatever to really understand that is because every single time you kind of go through those kind of step changes, it changes.

And so to dig into that a little bit further, when we started doing something like 500 bookings a week, now you're talking about working with hundreds of caregivers and like thousands of families.

Well that is a very different thing than when I started as like a mom in the neighborhood that knew every caregiver and like by name and had personal conversations with every parent.

You have to look at everything as a variable that you're experimenting with.

But by necessity, when we were smaller, we did feel like that mom and pop shop.

Doesn't matter that we were building the software, but it felt like that.

It felt like, you know, we were an SMS-based kind of platform from the interface.

It felt like people knew who were on the other side.

But again, if you're going to look at scaling, you have to think about that differently, right?

So now you have to have a team that is gonna be behind the SMS.

You have to not necessarily know every single caregiver personally.

Those have implications because that changes the value proposition where that caregiver might have felt like, oh, I have an in with knowing exactly who the team is and all this kind of stuff.

At a bigger scale, it turns into yet another kind of gig economy job, which isn't good or bad, but it just has an implication when we're looking at, Is that what that labor pool wants to do is yet another kind of gig job.

Can you talk a little bit about some of the experiments you tried that made you optimistic about the space and

First of all, there's tremendously talented people that live within our neighborhoods.

And I don't think I should need to say that, but folks who are teachers or students or stay-at-home parents, all these folks, my hypothesis was always they do exist in our communities and it is our job to not only find them, qualify them, kind of say that they've been vetted, and then do the connecting part.

And then anyways, that was a big hypothesis at the beginning that we did prove was in fact true.

Because if it started to become that actually they don't exist, then that would have been a bigger problem earlier on.

But no, they were there and we created a mechanism for folks who are otherwise working at Trader Joe's and just had recently graduated.

We had more than a few who were pursuing like dance careers, but they were working at Trader Joe's to make ends meet.

They then started poppying and then quit their Trader Joe's job because it worked within their construct of like dance was their first career and their first priority.

But then they got to, you know, live their second passion, which is working with kids.

Well, this is supply that isn't on other, like care.com or any other kind of marketplace.

So we were unearthing supply that wasn't otherwise in the category.

I thought that was tremendously powerful because otherwise we were giving access to people that weren't working in the space.

So that was a really positive and encouraging dynamic.

And then other things were, For example, we started running experiments towards the end where we did a thing that was started as a marketing kind of community thing called Bring Back Brunch.

And so we partnered with a really great restaurant that had a kids area and we would have poppies there for a couple of hours in the morning on Sundays, and parents would come and they could enjoy brunch while the kids enjoyed themselves under supervision.

Well, the hypothesis there was just, we're trying to enable this modern village where parents can enable connection and everything, and kids can just still enjoy themselves.

And so some of these things were like really successful kind of experiments.

But again, when it comes down to the core of what we were trying to do, which is connect a large number of caregivers with a large number of kind of families against a number of different dimensions, that started to get complicated.

1 of the other things that started to get complicated was, that has a good and a bad side which is people were very skeptical that parents would be okay with a range of different people for their kids, right?

So, you know, you don't really care who your Uber driver is as long as they get you from point A to point B.

And people were highly skeptical that we would be able to solve that because their thesis was that, you know, you really only want the 1 or 2 people.

Well, we were able to successfully get parents to a great range of people.

I think the average towards the end was like, you know, 6 to 8 folks.

And the reason was because we had, my counter thesis was that, you know, if you have standardization and you have a great range of people, actually it's amazing to have your kids interact with a range of different folks.

This person is a drama teacher and this person is a nurse, and that came to bear.

But in so much as this population also is somewhat transient in the sense that they're doing this for some period of time in between grad school or while they're, you know, in the early days of their dance career, they eventually move on, as most parents kind of know.

That proved to then be a little bit kind of tricky because once you then have them all moving on, and then you have like the number of folks that parents want, you know, eventually, again, over time, you start to see how that gets complicated.

Where in the beginning, it's like, oh no, this is actually working quite well.

Over time, you start to see different economics and dynamics.

And so was that just a growing sense that you had or was there 1 particular moment where you're like, you know what, I think we might have to shut it down?

No, I think I would say probably about a year ago.

It's always something I've tried to be mindful of.

I do, And I can speak to this a little bit later because I think it's really important, but I've always done monthly investor updates.

Mostly because I think it's important to have that discipline against myself as a CEO, to have to read out to somebody else the results that we're seeing and all that kind of stuff.

But also to be able to understand like what are the dynamics that are going on and then if other people are seeing is that successful, is it not, is it growing fast enough and that's all a relative kind of thing.

And so throughout, you know, the growth of Poppy we've always been solid.

Like we've always been solid and growing.

But to the point of like, maybe 5 to 10%.

I mean, in fact, like for some of these kind of marketplaces, that's really good.

It wasn't though taking off in the ways of like 15 or 20%.

Like, you know, just like as earmarks on that.

And so it is something that was in the back of my mind, you know, for the last, like, maybe year, you know, I've just like trying to understand what are the dynamics going on.

And that just made made me want to experiment more and more boldly.

Now, the other thing I think is super important is even from the beginning, had the mind towards revenue.

So we certainly weren't profitable, but we're always making revenue.

And I think that's also important, because it was able, I was able to then take the little bit over 2000000 that we raised and have that last over, I think, like 3 years.

And I think that's just important because that bought us the time then if we weren't growing necessarily as fast, that bought us the time for more experiments.

And so that's the way I thought about that.

The writing was starting to be written on the wall.

And for me, I wasn't done with the experiments, right?

So I still thought there was, you know, maybe we could do poppy pool, which is, you know, pair parents or pair kids together and get a little bit of leverage out there and make it cheaper.

I thought we could use stay-at-home parents as another tier because there are people that live within the community, and so maybe you won't see the same amount of churn.

So while I still had kind of these experiments and hypotheses in my head, I wanted to live to fight another day and run those experiments.

And so it wasn't until the last probably 6 to 8 months where we started to experiment a lot more boldly because it was quite, it was becoming quite apparent then with the scale that we were at, that that vehicle wasn't going to necessarily work.

And so we started to experiment with some of these other things.

But at some point, and that's also where runway is necessarily a good forcing factor.

But as we started to dwindle down now to like 6 or 8 months of runway, that's when it really, I will say that that was a forcing function of having to make some important decisions.

But I will say it was always, it had been for some time a consideration.

And we can get into it, but It was at that point that I was like, okay, no, now we have to really look at what's in front of us and what are the different options.

But it's not like it was a 1 day, I'm like, oh, this is completely different.

It's that, you know, as a founder, you can read data in multiple different ways, right?

And it was more as the evidence started to stack itself up in not what it is today, but will it get better or will it improve with even further scale, further investment, all that kind of stuff.

That's the real question that I had to ask myself.

And as it became apparent that it wouldn't, that's when it really was, let's evaluate this.

Like what was the final moment where you decided, this is how I have to move forward?

I don't know that there was a moment, and it was probably sometime in November, where it was more the realization of I don't think this is working the way it is.

And so for me, I looked at it with sort of 3 options.

1 is because we were still burning the money that we were burning, we could pivot.

And I think that's a hugely popular, whatever, like that's a very popular option.

But what that would have necessitated is cutting probably 75% of our team, bringing that burn really down low, and essentially starting again.

To make that happen though, I would have also had to shut down the service.

So not Poppy wouldn't have had to stop, but the service would have had to stop and I would have had to ask like 75% of our team.

Truth be completely told, that was my in-going assumption that that's what we were going to do.

But that was like sort of like option number 1.

Option number 2 was get ourselves acquired.

And as you guys know, like it's a very lofty and a very optimistic kind of view that somebody's going to ride in and like, you know, I don't know, throw us like some money for like the things that we've built and then also our formidable team.

And so I wanted to explore that with folks that I thought would be good partners, that would enable us to continue our mission just in a different way with different resources.

So I thought that was an admirable kind of option to pursue.

And then the last 1 was truly shut it down, call it and do all that.

I had conversations with folks that I thought were interested in acquisition or good partners.

I will say this is an interesting learning through that process is that these CEOs were very willing to get on the phone.

They also showed me a kindness in the fact that they knew what this call was about.

And without having to like play games around it, very quickly in the beginning of the conversation, because you're also like, how do you go into a conversation like this?

Like, I was talking to my team, like, what are you gonna say?

But as you go into these conversations, they kind of know what this conversation is about.

And a lot of them were towards the beginning was like, listen, this is really great to connect.

Let me just get it off, like right off the bat, we're not in a position to acquire.

So if you wanna do like partnerships or think about some of these things.

But that for me was a kindness because if we could just not, you know, beat around the bush and you could really know what it is that I'm kind of looking at and kind of say it, then that definitively removes that option for me.

And that is, I think, the hardest thing for founders is that you're always trying to assess all the information you have in front of you and there are very few paths that get definitively kind of shut down.

And so as much as you're able to kind of do that, that actually helps you to go figure out what the path is.

Now that isn't to say that there couldn't have been someone out there that eventually could have done, but also as I was evaluating that, that would have meant you're having to continue to operate your thing, because if you're trying to go for acquisition, you're trying to go from a position of strength.

And what would it take to actually continue with the team to continue to grow and all that kind of investment as you're ticking down the clock because again, runway.

And did I believe that we were going to be in that ultimate position of strength to be able to negotiate from.

And again, take off the rose-colored glasses and truly, truly, what is the probability of that thing actually coming through when the most likely acquirers had already kind of said, bowed out.

It was at that point where I was like, if that chance is going to be like less than like 2 or 3%, then let me understand that but keep it over here.

But that's not going to be my go to I'm not going to be unduly optimistic and run my company into the ground.

So then I'm going to have to go from a position of like, I don't have very many options.

Then it was the option of like, are we going to pivot?

And I think that's a much harder question.

Because I don't think that there's a right answer.

I think it was just the what was the right answer for us.

I think the truth of the matter is, is if we had wanted to pivot, we probably should have done that, you know, 6 months prior.

If I was going to cut the team and leave a good chunk of money in the in the in the bank to be able to do that, I probably needed more time.

And so as I started to evaluate that, like which part of the team would I be cutting and like what would it be enabling?

And then more importantly, pivots as a lot of people know aren't these magical things that just happen, right?

You actually have to have a compelling idea that you're going to then be putting forth almost again from the beginning.

You have to be pivoting from something, right?

And as I was looking at the probability of success to do that successfully with the team and with the amount of money that I had left, it was interesting.

Fred Wilson actually wrote a post, I want to say like maybe the same week after I decided.

I think it's called something like pivot or die.

And in his point, there was you know, a lot of people want the pivot to work with pivots.

Sometimes, If they do work, they're still painful because investors more likely than not didn't invest in that idea.

Sometimes consumer companies turn into like B2B companies and things like that.

It's certainly not what the employees came on to sign up for and it just gets messy.

And it isn't to say that it isn't a compelling kind of option and it can work for a lot of folks.

But as I was thinking about that before even having read that, a pivot was unlikely.

It also didn't do, if it didn't do right by the mission of what we set out to do, what we raised that sum of money, what we got this team assembled for, then for me, that's ultimately when I started to consider is a better to cleanly call it and not I'm not saying that any part of that was easy.

But that's when it wasn't like a morning that I said, I think we need to call it.

It was more that it started to I started to live with the idea of, Oh, actually, what if we called it because even through this whole process, I still assume poppy would kind of continue even if we shut down this business line or kind of product.

Most of me was like, Okay, no, it's gonna be okay, because I'm still gonna be CEO of poppy.

There was a day though, right around Thanksgiving that it became clear that actually, I think the right thing to do is call it because we set out with a hypothesis and we raised money on it and we built a team on it.

And if that hypothesis wasn't going to pan out the way that we thought it was, then let's shut it down as well as we could and start afresh.

So were you communicating this all with your team or were you talking to your partner, your investors?

Because I think leadership, a lot of it is being optimistic and excited about the future and you talked about it in your article about founders living in the present and the future, right?

But then when you're facing this reality of like maybe running out of money or it's not gonna work out, how do you go about having those conversations and who did you talk to?

Yeah, I think that's a really great question.

So for me, even towards the later months, I think it's a hard thing when you have, when you start to have a team that has striations and like, you know, some folks are juniors, some folks are like your lead team.

I generally as a leader try to be as transparent as possible.

Even towards the end, our investor update went to everybody.

From the most junior folks to my COO, I believe in transparency.

I believe in educating people on what do the numbers mean.

So even that very last investor update, every single person saw exactly how much we had in the bank balance and the default deadline.

It isn't comfortable, but I don't think we're not in the business of being afraid of uncomfortable, right?

I wanted everyone to understand the place that we're at.

The difference though was I had to have a lot of these conversations with just a couple of the folks that I, on my lead team, that I deeply trusted with, not only the hard conversation, but I think in the beginning when we were only like 3 or 4 people, we would have conversations in the open with everything.

What I soon realized as we started to grow towards 08:10 people, is that I can talk about these super ambiguous things, but I also have the power to do something about it.

Folks, you have to be, you know, what's the kinder thing?

Because you can certainly talk about transparency and kind of tell everyone everything, but if they don't have the power or the tools to do anything about that, that is just, that's anxiety provoking, right?

Like that, you're not giving them the tools to do anything about it, You're just giving them information and then there's nothing else there.

And so I tried to toe the line also to keep in mind like if I made the decision maybe the Wednesday before Thanksgiving

we made the final announcement on December 3rd, there wasn't a lot of time.

And I can certainly go through that because I also thought that that was important.

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What Shutting Down Your Startup Feels Like - Avni Patel Thompson of Poppy with Kat Manalac