The Former HubSpotter Changing The Game Of Product Development
- May 22, 2018
Key Deal Stats:
Raising platform: Republic
Implied Valuation: $6M
Security: Crowd Safe
Raise completion date: July 31, 2018
At time of publication, May 22, Parlay had raised $57K surpassing its $25K minimum
Keith Frankel, Co-Founder & CEO
Keith Frankel may be a small town farm boy from Alabama that thought, “he’d be a doctor like the son of every physician,” but fortunate for him he picked a much more unpredictable, roller coaster type career, building product at various startups.
And thus far the decision to go the way of starting up has paid off with stops at a language learning software company prior to being, “poached by Hubspot to head creative and design for the two years prior to the IPO.” And most recently he was, “Chief Product Officer at Firecracker, an ed-tech startup play for the medical student realm, that bootstrapped its way to acquisition,” by Wolters Kluwer Health.
Keith is well versed in building software products that have succeeded, and even knows how to build great products on a budget. In fact, it has been his own career building products at various startups that has led him to identify the problem that his latest company looks to solve.
For anyone that works for a tech startup, you will be keenly aware of the fact that rolling out software product developments can be expensive and timely, two things which startups can’t afford to deal with. However, deciding where and what to invest a product teams time in can be hard especially without customer feedback.
During Keith’s time at Firecracker, a bootstrapped startup that never raised any capital prior to acquisition, “the idea and necessity of Parlay came to us because we were totally bootstrapped and committed to that, but we found that trying to build product in a highly competitive market with lots of major publishing companies as competitors was incredibly difficult.”
The problem the team continuously ran into was, “how do we build competitive products without any room for taking risks or gamble's because we didn’t have the budget to do so?” Put simply the team, “couldn't take weeks or months to launch products that were expensive duds.”
As he and the Firecracker team began to explore ways to build product that customers actually wanted efficiently, they came to the vision for Parlay, which is to be able to, “validate the impact of new feature updates and product launches before writing a single line of code.”
Once they had the idea, they had hoped to find something to help them with this issue, but, “when we looked out in the market, we didn't see anything.” Outside of wireframe tools, and product roadmap assistants, the team was unable to find a rapid feedback tool for interacting with customers and determining what to invest time in and what not to invest time in.
With every dollar in a startup mattering, the difference between investing in a product feature customers like and don’t like could be the difference between surviving and going under. After spending, “three years at Firecracker building patchwork feedback solutions that involved lots of third party tools and internal workflow hacks, including pulling down an excel doc every couple weeks to see what features had received more requests,” the team realized they were onto something that could be highly valuable. Something that could optimize product decisioning and minimize development cost
Thus the team came to the decision to build, “Parlay, a customer collaboration platform that enables product teams to engage users efficiently in a product feature dialogue.” Essentially product users will be provided with the ability to enter, “labs mode views, where they can submit feedback, share ideas or propose new features using the same tools we give the product team. Then Parlay analyzes it and offers a single next step to the product team.”
From his days at Firecracker Keith realized that “in app messaging to envision prototypes” can lead to, “quality feedback” from users that, “blew us all away on the product team.” They found that users were providing, “screenshots of our mockups with full annotations and markups on how they wanted the features to work.”
They also realized that participants that provided feedback had, “significantly higher NPS scores than the rest of the user population,” and showed a real appreciation of having had the chance to, “co-create the products they use without paying more to do so.”
The team realized that customers, “felt like collaborators and that was an aha moment for us.” Now, instead of putting together hacked solutions the team is actually building out the first true customer collaboration platform that will provide streamlined out of the box solutions to every startup product team. Imagine a world where Facebook and Twitter are asking you to guide in the future direction of the product.
Keith and his team are focused on serving four customer profiles to start. The first is earlier stage B2B SaaS startups, because the team has seen, “the best engagement with B2B companies, that build software for other companies.”
Parlay will also focus on SMBs with less than 500 employees, “because this cohort represents 99% of the US software market, and they tend to have higher execution risk, thus they are more open to services like Parlay. Additionally, the user bases have not scaled to the point where personal interactions like Parlay are no longer achievable or manageable.”
Additionally the team will look to service, software development shops because, “they often are building products for startups, but they rarely get access to the end customer.”
The final target market is super early stage startups, “think about the 20K startups on Angellist that need to take a product from idea, through validation, to a fully launched product with product market fit.
Why We Like It?
Product Differentiation: The value of Parlay is in providing a solution that not only ensures quality investment of product development spend, but it also acts as a way to, “build customer relationships and loyalty.” Keith and his team think that automation of code and AI will proliferate the product development space making product feature replication incredibly easy.” At that point, “when product teams can no longer rely on product features as their differentiator, the only thing they can rely on is their relationship with users and customer loyalty.” An offering like Parlay can enable a product team to integrate its selves with the customer base in a unique way that will prevent customers from leaving.
Scalable Business: Parlay is building the product in such a way that the sale can be done without ever talking to anyone at the organization. It also does not require, “the VP of Product to get involved in the sale and everyone can get a 14 day free trial.” The low cost of the product presents an offering that is attainable for most startup teams and it can be implemented with just a, “single line of code.” The ease by which this product can be sold and implemented presents an intriguing opportunity for scale.
A Problem Born Out of Need: Perhaps one of the most telling signs of a strong business is when the product is born out of a true frustration or problem. Keith and his team lived through building two very successful product platforms including Hubspot and Firecracker. At both companies Keith was faced with the innate challenges of not being able to effectively communicate with customers in order to make smart product investments. Parlay is the answer to his struggles and thus we think it will have strong product market fit from the start.
The Capital Plan:
Keith and the other founding members of Parlay showed at Firecracker that they could commit to tight budgets and still have huge success. It is that intelligent capital approach which has led them to equity crowdfunding over traditional VC.
As Keith put it, “When I began to consider VC dollars to build Parlay, I found the whole process to be perverse in a lot of different ways. For instance, when I talked to small name VCs they would tell me it was a red flag I was talking to them. And I heard things like big money attracts bigger money. It’s a bizarre stance. I feel like it shouldn't be true. I also knew I could raise from Hubspot Angels because of my background there, but it wouldn’t be very productive.”
The team ultimately decided to raise via Republic, where Keith saw an opportunity to, “raise a small amount of money in the range of $150K to support a year of development and build an army of potential promoters in the process by doing so.” He also looks at the raise as a, “marketing campaign that will help me reach 100 or 200 promoters, that will be customers, and evangelist. For us, it is a clever way to kill more than 2 birds with 1 stone because money alone is not a winning solution.
The plan is to utilize the funds raised to bring on their CTO full time to invest in R&D and onboard the offshore development team. In addition they will begin to roll out some marketing spend as they look to spread the word about Parlay.
Parlay is a smart product with a strong founding team that knows how to build and sell product at scale in an efficient manner. The opportunity to efficiently sell to tens of thousands of startup product teams a customer collaboration platform that doesn’t yet exist is an intriguing opportunity. It’s an intelligent solution to a beckoning problem that will only become more prevalent as coding automation continues to proliferate the product space.
We also like that the team cares about investor dollars more than most. Rather than focusing on thinking they can conquer the whole world the team is comfortable with the idea of a, “strategic partner coming along in a couple of years and can help us reach mass distribution.” That type of tight capital expenditure control and openness to acquisition in order to best benefit all stakeholders is a positive buy signal.
Overall, at a $6M valuation, the product offering and founding team are intriguing enough to garner a BUY rating at this time.