Why Giftstarter Failed?

Seattle based Giftstarter failed terribly, the founder, Arry Yu shared her experience about why it failed.

Arry Yu was the CEO & Founder of Giftstarter. Previously, Arry was at Logic 20/20 and left her job in June 2014 to go full-time on Giftstarter.

Founded in March 2014 and incorporated in July 2014, Giftstarter “came out of a hackathon,” Arry explains continuing, “I just joined the hackathon to try out an idea that had been brewing in my mind for quite sometime. And we won first place! And I thought if I can convince other people to quit their jobs and join this with me, then we got something going!”

Arry Yu

Arry explained in a previous interview,

“Giftstarter is a destination for consumers. We allow people to take anything that’s sold online and make it into affordable chunks. So a $1k sofa, that’s really hard for 1 person to afford. Well why not break it into $20 affordable pieces or $50 affordable pieces and then your friends and family can come in and buy 1 piece for $20 or 5 pieces for $100. Once it’s funded, we ship you the actual sofa,”

When asked about the revenue model, she explained,

“We make money in a couple of ways; one is a transaction fee to the consumer of 8%,” Arry says continuing that, “think of a $100 item, that’s $8 (transaction fee) and $8 broken into a bunch of pieces, maybe it’s 40 pieces, and no 1 person is paying the fee. Secondly, we also make commission on the products sold because we are actually fulfilling products. We don’t carry any inventory, we drop-ship everything.”

Arry Yu closed the book last week on GiftStarter, her 4-year-old Seattle startup that aimed to personalize and simplify the process of purchasing gifts as a group.

Yu said the biggest problem for GiftStarter was product-market fit. The company went through two accelerators, 9MileLabs and 500 Startups, but struggled to acquire customers and nail down a robust business model.

Yu let go of her employees in April 2016 but kept the company alive, even taking a major personal loan to try and fund it further. But she officially closed up shop last week.

In a blog post, Yu thanked her investors — local angels like Heather Redman, Gary Rubens, Rebecca Norlander, and Rudy Gadre — and other supporters. The entrepreneur also admitted that she should have shut down GiftStarter in 2016 and listed 10 lessons from her startup journey.

“Startups are really hard,” Yu wrote. “Don’t do them light heartedly or just because it’s the trend. Don’t do it because you’re bored at work.  Do it because you cannot exist in life without the big idea going big.”

Among her other lessons for founders: “Find the ‘AJ,’” which is someone by your side “that’ll turn left and pounce 5 feet into the air when you just jump left” — a tip she learned from OfferUp founder Nick Huzar.

She also advises startups to focus on finding a market before building a product; file proper documentation; and watch out for “assholes posing as advisors just for the vanity of it.”

Yu is now COO at StormX, a Seattle startup formerly known as CakeCodes that lets people earn cryptocurrency by performing micro-tasks.