The term "failing fast" is often thrown around as a catchy term describing how entrepreneurs are supposed to embrace experimentation, learn from failure, and iterate quickly. When they do fail, they're then supposed to immediately "pivot" — that is, change their business model to better respond to what the market is telling them. The "fail fast" meme has quickly extended to the world of social entrepreneurship and civic startups, where innovators in the social space are being encouraged to take risks and tweak their business models without remaining emotionally attached to their original business plans.
Earlier this month, I had the pleasure of speaking on a panel here in Washington, D.C. alongside Oscar Salazar, an entrepreneur I deeply admire who was part of the team that created the wildly successful on-demand private car service Uber. Oscar's next gig (with co-founder Jorge Soto) was the creation of Citivox, a hot civic software startup that aimed to provide governments with software for distilling down the cacophony of complaints and feedback coming in from their constituents (via email, Facebook, Twitter, and SMS) into coherent, actionable items that government departments could respond to. Within months of Citivox's launch in 2010, I began routinely hearing pundits invoke the company alongside Ushahidi and mySociety as one of the next great civic software platforms that would change the way government worked.
So sitting on stage next to Oscar, I was shocked when he casually mentioned to the audience that a) Citivox in its original form was being abandoned for lack of success, and b) he and Jorge were pivoting quickly to make Citivox more of a community-organizing tool than a government enterprise software suite. Oscar's comfort in publicly embracing failure was both genuine and unique: it's one of the few times I've heard an entrepreneur in the civic startup space publicly acknowledge that their model doesn't work.
I wanted to find out more about Citivox's pivot — and about Oscar's attitude towards the civic startup space in general — so he graciously agreed to a Skype conversation, the highlights of which I've transcribed here.
Nathaniel Heller (NH): So tell me what happened with Citivox.
Oscar Salazar (OS): We were solid as a business; we were making sales. But most users [governments] weren't actually using the software. We weren't having an impact. Then we started looking around at other SaaS (software-as-a-service). We learned that many SaaS users buy but never use the product. For Citivox, only about 10% of users ever really used the software regularly and/or in the right way. Our value creation proposition was not good.
NH: What was the original long-term plan? How did you want to exit?
OS: One plan had been to exit via an acquisition. But we haven't yet created enough value to accomplish that.
NH: So you were generating revenue but not in a scalable way. Why?
OS: It was much easier to sell Citivox to governments during an election/campaign season. When voters are paying attention, governments want to show that they care about listening to the public, and Citivox was a way of doing that. But in non-election cycles, the sales process was tougher.
It was also extremely difficult selling to governments. The sales cycle is incredibly long — maybe 18 months — and the decision making is extremely arbitrary. Our price points were too low to support that length of a sales cycle; we didn't have the kind of organic growth we wanted. Most governments like to buy from established technology providers and not civic startups, and they typically have no staff budgeted to actually use what they buy.
NH: What lessons did you learn that apply to the broader civic startup space?
OS: "Engagement" is a red flag. Everyone is talking about user "engagement" and no one knows what it means. What we learned is that user engagement in the civic space is not about your platform or your product but about the issue or the cause that users care about. There are more reports about potholes on Twitter than all other incident reports submitted through every other civic platform combined!
Also, you can't be 100% civic if you are a civic start-up. This is what most civic start-ups are getting very wrong by focusing on a single issue area. New civic startups should focus more on the user experience than on building a killer enterprise platform for governments.
I've also yet to identify a civic startup that is sustainable for the medium- and long-term.
NH: So what's next for Citivox?
OS: Our new focus is on what makes your city or your community alive. What's positive about the place where you live? We want to focus on those positive aspects than on simply building another incident reporting platform to complain about what's not working right. Think of the new Citivox as a community board where neighbors can share what they love about where the live.
What we're focused most on right now is building a product that people love to use.