Gumdrop Exit: The Story Behind a 21 year-old's Acquisition

Vlogmi acquires Gumdrop, a group chat platform to make friends — Vlogmi
The Vlogmi team has been extremely busy since relocating their headquarters from Metro Manila to Austin, Texas. Since arriving, they identified Gumdrop.ai, another tech startup in Austin…

Yep, we just announced it to the world:

Gumdrop was acquired by Vlogmi today🥳

My tweet right after

It's my first exit! Everyone was hyped to hear this news, even Joshua Baer from Capital Factory. I have so much to say about this experience, I have no idea where to start. It was a very tough year, but now I am too excited. I just turned 21 less than a month ago!

Capital Factory CEO Joshua Baer sent congratulation
Joshua Baer @Capital Factory, Leroy Thorssen @Vlogmi, Kangle Lin @Gumdrop

I have so much to say, so many people to thank. let me start off from the beginning...

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🔖TABLE OF CONTENT:

  • Pre-Gumdrop
  • Gumdrop Pivots
  • Some Lessons I learned
  • Survival Mode
  • The Exit
  • Credits & Thanks

💡Pre-Gumdrop:

My freshmen year in San Francisco was a disaster. I managed to join Boonoob, a private party startup in San Francisco. I complained every single Sunday after attending service at Golden Gate Church of Christ to Gilbert, who later became my co-founder. At the time, the startup that he was working at got acquired three times, and he was working at Angelist. One Sunday, I was complaining to him as usual during our lunch. He pulled out this app that he made, and said:" Maybe we can start something together." So we did.

We started with pubb.at, a community-building tool, because community building was hot. I didn't really know anything about the product. I was so lucky because at the time John Saddington was doing beta for his $4 million venture-backed startup YEN. I joined the beta and learned how to build community and business. It's funny to talk about now, but back then I had no idea who John was. It took me a whole year to figure out that he is one of the best entrepreneurs in San Francisco. But the good thing is that I now can call John a friend and an impactful mentor, he taught me so much.

Long story short, pubb.at made some money through building a community for community builders. But we had a 100% churn rate on the product. Everyone left after 1 or 2 months. I don't blame them, who will wanna pay for a product that's basically Slack but on the web?

So we declared the project failed, move on. Covid hit, Gilbert went back to Texas, I went back to LA. We kept on trying new projects.

💡Gumdrop Pivots:

Version I: Interveiwng/Testing Within Different Niche

At the time I was single, and all the dating apps just weren't working for me. So I proposed a dating app to Gilbert. We figured that it had to be niche, so we thought maybe tried to interview different types of people who are currently using dating apps to figure out if they are happy with the apps they have now. It turned out that most of them weren't happy with the current solution, but there weren't any alternatives. So we tested in different niches, but it was never a clear answer.

I found California boring during covid. I decided to take a road trip to Texas because I have never been to Texas. I went to San Antonio to visit Gilbert.

Version II: Video Clip Dating (Like snapchat video clips)

That was the time when we pivoted to video clip dating. It's kind of like Snapchat videos. We thought the dating apps were too fake and meaningless. So we did that for a while. No one wanted it. I was really frustrated at that point because I slept in my car in San Antonio for 2 months to work on this app. (I was so broke, so I figured that I could save some rent money to work on Gumdrop) I worked on it 14 hours a day, 7 days a week. No one wanted to use it. Our user acquisition cost was $10 per sign-up. Yes, you heard it right. $10 per sign-up for a social app is worse than bad.

Version III: Small Group Matching For University Students (Friendship)

Gilbert went to UT, so one day I asked him to show me around UT. I remember the day we got there, I kept telling myself: if we don't get users, I will go back to California with nothing. So the first day at UT, I managed to get 12 contracts despite the fact that I was scared as hell. The next day, one of those 12 pulled me into a group of 44. I networked for 2 weeks without telling people about Gumdrop. I wanted to get into UT's communities.

The crazy part is that a lot of people downloaded Gumdrop! But they never used it. So I went do more interviews. I realized that people want friends more than a relationship. 1: dating apps have a bad reputation 2: a lot of them were in a relationship 3: but they really wanted to have more friend groups.

So we decided to pivot again. Big group chat and 1-1 matching were already there, so I have to do something different. That's when we decided to pair 4-6 people in a group. Our MVP was a group chat that we coded. People started to use them.

UT was the magical point where people started to use the app. For us, it was the first time that we can improve our app based on user feedback. From here, it was a combination of hardcore networking and regular product building. I met as many people as I could. I hosted and joined many parties at UT. I took all the feedback and improve the product. I interviewed a lot of people.

Soon I found myself inside the UT's communities. I then recruited. At the peak, we had 8 student interns. And it was a lot to manage. It was a bad idea. I spent a lot of time on team processes, infrastructure, and culture. It was the worst thing in the world. Our marketing at UT was really good, for a good two weeks when we first kicked off, we had 10-20 sign-ups a day.

Gumdrop's first UT crew at Lukcy Lab around UT Austin:

💡Some Lessons I learned

  • Quality Users > More Users. Wrong Users Can Mess Up Your Ecosystem: There were a couple of big problems I had back in those days. Getting the wrong users was one of my biggest mistakes. We kind of have to experiment with it, but we first asked a lot of greek lovers to sign up. They all signed up, but they weren't using it. It upset the users who wanted to chat. We realized that the fratty people weren't our people, so we looked somewhere else. We tried really hard to identify where are our people. Looking back now, I think we could try harder, and spend more time on it. Paced Acquisition > Massive Acquisition.
  • Bad Marketing/Distribution Is Deadly: It's pretty much bullshit when people tell you "just build a good product". I was really new in the building social app space. I was brainwashed by all the YC startup school-like preaching. It doesn't work. After I interviewed a ton of users in the problem space, we had to build an MVP. And the truth is, no one is gonna use your MVP if you just build it, even if it's really great. You have to give it to them. When you are bad at putting a product in front of a user's face, you can't test anything.

    ⚠️ It's a bad cycle: 1. You can't test the product because your marketing and sale are bad, 2. Your dev team is demobilized or building things blindly because your product team can't tell them what to build, 3. Your marketing team keeps marketing a bad product, 4. Team morale goes low because no one feels like things are moving right... The cycle keeps on repeating.
  • Inject Hype At Times: I was always really good at rallying folks, and getting everyone hyped up even when the time was bad. I don't really know how I did it, but I was just really good at it. So whenever this cycle happens, I will always come out with something new to hype everyone up. I was lucky in this aspect.
  • Community Building > Marketing: My biggest stress when I was doing Gumdrop at UT was worrying about not being able to get inside the UT community. I wanted to penetrate the big and small communities that were already at UT. I recruited two guys from MatchUT (7k sign up in a month), I thought I had the secret sause. But I can never seem to find the right connection to get into them. Becasue Gumdrop was a intented to last, and match UT wasn't. Massive Marketing/Spamming Didn't work. You will just get more bad users. I would say we did it in the end, even thought we coulnd't do a 100% penetration. It was mostly through community building.
  • Put Management Below Product and Marketing: Summer and Winter breaks were brutal. According to my perfect plan, we were supposed to get more users during the break since every freshman was looking for UT friends on Instagram and Facebook. It didn't happen that way, instead of building products and getting quality users. I spent most of my time setting up internal processes and infrastructure. I spent too much time on management. I did not clearly define success and failure when people first join Gumdrop. So I had to do that with each person at Gumdrop and wait for the next sprint cycle to see if they have improved. Our sprint was 2 weeks long. By the time we finish the process, the whole break was over. My lesson from here was: 1. you better have a good reason for long sprint cycles, 2. set expectations from day 1, what is Success, what is failure. 3. don't spend time on management if you don't have time for product and distribution.
  • Be In The Circle: This Acquisition would never happen if I didn't come to Capital Factory. Capital Factory attracts the best founders to Austin. I met Vlogmi here, and we closed the deal here. If you just be here, things kind of just start to happen.

💡Survival Mode

The survival mode was real. It lasted way longer than I thought I could. It was honestly pretty bad. We managed to establish our brand at UT eventually. Mostly through community building, inviting micro-influencers, and word of mouth.

The problem with social apps is that you won't see money for a long time. So after almost a year not having much income, we ran out of runway despite our burn was so low. During the summer, Gilbert got a great opportunity to work on another startup. At the time of writing this, Optilistic just raise $3.2 Million on about $25 Million evaluation. I was happy for him (I swear I really did), but I was really scared. Because I don't know how to code. I recruited student devs, but it wasn't really working. I thought it was game over again, but I really thought we were close to having a killer product. I couldn't just let it die.

I didn't know what to do but keep running the sprints and survive...

💡The Exit:

I joined Capital Factory after the summer. It was a game-changer. I was able to meet so many founders. I decided if I can't take Gumdrop to the top, maybe someone else can. So I was trying to find anyone who could keep building Gumdrop or use Gumdrop's current infrastructure. Gumdrop at this time has a team of 7 (devs, marketing, & product), a highly functional app with a growing userbase, a strong brand at UT, 1 year-long experience serving the student population, etc.

I met Vlogmi on the day of Fed Supernova at Capital Factory. When I met Luke, the CEO of Vlogmi, I felt like I met another me. We got along so well. Bob, the chairman of Vlogmi, had 4 IPOs. He was also an Entrepreneur of The Year in Hong Kong back in the 90s. I thought Bob would have a lot of experience in acquisition, so I went to ask for advice.

The next day, we had a meeting together. Vlogmi saw value in Gumdrop that can create huge synergy. So they decided to acquire Gumdrop. The meeting lasts for the whole day (the picture attached below). It went from the morning to the evening. We ended with a win-win deal. I didn't bargain at all during the meeting. Bob was really good at creating win-win situations. That was one huge lesson I learned from him.

Things moved fast, Vlogmi sent over the contract the next day. And we signed it. It was done. The real acquisition happened really fast, it only took about a week! Then it was followed by a ton of congratulations in person and on Twitter.
It was so wild. Just like this. I sold my first company less than a month after I turned 21.

Team Merging Meeting

💡Credits & Thanks:

I am grateful for all the advice and the love from all the amazing people. I want to shout out all of them here:

  • Gilbert B Garza took a bet on me when I did not know anything about building a product or being a founder. He is one of my closest friends in life now. I love this guy to death.

  • Nikhil Vimal put me in his collective in LA. It changed my life. The way he grinds, the way he moves. He made so many connections and provided so much mentoring for me. I won't be knowing what I know today without him.

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