Fundraising efforts were faltering. The product needed a revamp. And, most frighteningly, the bank account had dwindled to just $16,000. It was the end of September — just one month ago — and Blok24 appeared to be heading rapidly to the startup trash heap.
Just 12 months after the Seattle-area startup launched a new mobile app to connect people with events and experiences in their neighborhoods, the founders of Blok24 were facing one of the most stressful entrepreneurial questions: Do we toss in the towel?
They didn’t. And what has transpired over the past 30 days is nothing short of remarkable.
Just rattling off the recent changes is a bit mind-numbing:
A $50,000 bridge financing on Oct. 1.
The departure of a co-founder.
The appointment of a new CEO on Oct. 16.
A move to new offices in Bellevue’s WeWork space.
A complete rethinking of the product.
And, most recently, an oversubscribed $825,000 financing round from some of the top angel investors and venture capitalists in Seattle.
“It’s been a little crazy, that’s for sure. And a little weird in some ways, too,” said co-founder Troy Frever, a startup vet who remains at the company as chief technology officer.
One of the hardest parts for Frever was saying goodbye to co-founder Yuval Hamudot, who helped conceive the concept and served as the CEO until earlier this month.
Frever called that management change “bittersweet” — saying farewell to a trusted colleague in Hamudot, but knowing that the company had received a new lease on life.
Reached via emaiI, Hamudot said he had a great experience leading Blok24, but it was time for a “new adventure.”
“I know Blok24 will have nothing but success going forward,” he said.
An angel takes over
Part of the reason why Blok24 is still standing is Andrew Wright.
The longtime Seattle technology executive, angel investor and entrepreneur was one of Blok24’s original backers, and he provided the critical $50,000 bridge financing earlier this month that kept the lights on at the company and allowed it to regroup.
Wright assumed CEO duties two weeks ago, taking the helm of the startup when funds were low, co-founder friction high and prospects quickly dwindling.
It was a tough decision for Wright to jump in, and the entrepreneur-turned-angel investor wanted to make sure he was once again mentally ready for the full-throttle experience of running a startup company.
Wright previously started RealNetworks’ RealArcade business and sold Seattle startup Smilebox for $40 million in 2011. He wanted to make sure his wife was on board with the Blok24 plan, in part because she’s in the midst of her own entrepreneurial endeavor and because she supported him in a “big way” on past startups.
Beyond that, Wright — who led Blok24’s first $825,000 financing round last year — was still trying to get a handle on whether the startup had enough special sauce in a very crowded market.
Earlier this month, Wright remembers asking himself: “Do I let it go or not?”
When startups are hitting the ball out of the park or regularly striking out, Wright said it’s an easy decision to continue supporting them or not.
But those startups that fall in between the two camps — hovering between success and failure — are the ones that offer the biggest challenges. And that’s where Blok24 found itself.
Wright said those situations are “tricky,” in part because investors don’t want to get stuck bankrolling a loser.
Rethinking the app
In order to minimize that risk — and just prior to taking the CEO reins — Wright pored over research related to the Blok24 product, diving into how the company could help people better connect with experiences in their city. The team realized that Blok24 would have a tough path ahead if it just continued to focus on special events, things like local farmers markets or art gallery openings.
The problem: People were not using the app frequently enough.
To address that concern, Wright and the team came up with a new idea to bring more restaurants and bars onto the platform, and to do so in a way that would be differentiated from big competitors like Google and Yelp.
“We figured it out. We have a plan for how to become relevant in that area,” said Wright, adding that he was blown away by the positive findings when they researched the new concept. “It completely validated what we thought.”
Even with a new CEO at the helm and a new product focus, Blok24 was still running out of money.
A wild ride
With a burn rate of about $35,000 per month, Wright’s initial $50,000 bridge financing from early October was not going to last very long, so the company faced the daunting task of raising fresh capital.
Wright immediately went to work. After all, he says, “you move quickly when you are running out of cash.”
The first thing he did was communicate the new vision. “I had conviction … and I had a strategy of what we needed to do,” said Wright, who also traded on his successful track record of raising money in the past.
“When it’s taking off, it’s very easy to raise money,” said Wright. But when it’s in between — and the path to success is not quite as clear — some investors tend to close their wallets.
However, Wright, whose spent the past five years investing in startup companies such as Ripl, Leanplum and OfferUp, said his most successful investments have been the startups that have fluttered in that uncomfortable in-between stage that Blok24 found itself in.
Wright used that narrative with other angel investors, and it worked. In less than 10 days, he reeled in $825,000 in cash in an oversubscribed financing round. Nearly a quarter of that money was from Wright himself, a sign to other investors that the entrepreneur was serious about his next venture.
The investor syndicate includes some heavyweights, including angel investors Pioneer Square Labs co-founder Geoff Entress, entrepreneur Shirish Nadkarni and Adobe board member Rob Burgess. Trilogy Equity Partners also participated, along with real estate developer Liz Dunn and OfferUp co-founder Arean Van Veelan, both of whom joined the board.
Some of those investors made their decisions to invest in less than 72 hours, near record speed in the venture capital world.
Looking back over the past 30 days, Wright and Frever admit that it has been a “wild ride,” not to mention somewhat stressful for the half a dozen team members at Blok24.
But meeting over Thai cuisine in Seattle’s Fremont neighborhood, Wright could barely hold back his excitement.
“I love this,” he said. “It’s like adrenaline for me.”
Blok24 still has a long, long way to go.
The company still must convince urban dwellers that the app will be a trusted companion — not an easy task in an era when millennials change allegiances so quickly when it comes to new technologies. The company also is many months away from proving that it can generate revenue and profits, the ultimate test for any upstart.
But Wright is confident as he takes the helm of Blok24, emboldened by a new product direction, strong team and fresh cash.
“We are moving really fast,” said Wright. “It’s exciting because we have a very clear idea about what we want to do. And there is a lot of energy.”
And what about the big rivals like Yelp and Google that already play in the space?
That fires up Wright, too.
“I love competition,” he said. “It’s a big market opportunity, and there are lots of big players. And I love that.”