To celebrate the six month birthday of my second startup, Buoy Holdings, I’d like to share something a little different. This article is going to be all about why Buoy, in it’s current form, is an unsustainable business model.
Why am I writing about this? Because I’m under the impression that while it is clear that most early-stage startups fail, it is less clear why all those awesome companies fall apart. I believe that very few founders are keen to share the gruesome details of their perceived failure. Fortunately, I don’t view the end of a startup journey as an outright failure.
I founded Buoy in December 2021 to accomplish two goals:
- Prove my business model by successfully brokering a deal between an employer and a lender offering Employer-Sponsored Loans
- Scale the business and reach profitability
I accomplished Step 1 in March, which felt tremendous. I’ve decided that Step 2 is impossible for Buoy in its current form after reflecting on three miscalculations I made this year.
Miscalculation #1: NIMBY. One issue I did not prepare for was the not in my backyard, or NIMBY, response from HR teams at my target companies. I was targeting American, SME manufacturers with employees living paycheck-to-paycheck who reside in communities serviced by predatory lenders. On top of being hard to reach — I was below a 2% response rate to cold outreach — I’d often encounter a response like “I’ve never been to a check cashing store, why would someone ever take out a predatory loan?” It became clear after a few months that even in areas like Bexar County, with close to 50% of the population below the ALICE threshold, the decision makers in HR groups were typically unaware of their own employees’ need for affordable credit.
Miscalculation #2: DoD. There are thousands of individuals in America that wake up with the mission of improving financial inclusion, financial literacy, and access to affordable credit. It was incredible to have the opportunity, through Buoy, to meet these heroes and hear their stories. One downside I saw time and again was that these individuals and their organizations were always stretched. The lack of resources was universal across across the private, public, and not-for-profit organizations— and this systemic lack of resources led to several deals becoming DoD, or dead-on-desk. Countless conversations ended with “great, let’s talk about next steps in a few weeks” only to go silent for months. I know that everyone is busy fighting the good fight, but it was frustrating to watch great deals fall apart.
Your product is not for 99% of people, and the 1% it is for are 100% too busy to engage!
Miscalculation #3: Scaling a Passive Model. The business model I had set up for Buoy consisted of a passive income strategy: I did the up-front work of getting an employer to sign up for the Employer-Sponsored Loan benefit and received a portion of interest income on every loan taken out by an employee of that company. What this required was a high up-front investment of time and financial resources before the revenue flywheel started spinning…which unfortunately didn’t happen. Due in part to my first two miscalculations, I was unable to recruit more than a one-off employer here and there, which drained my resources. The investment of time and financial resources to acquire customers for Buoy, in it’s current form, is unsustainable.
So what’s next? I’m just getting started trying to fix the global problem of predatory lending. In the last 18 months I’ve met hundreds of incredible folks working on innovative solutions to systemic inequality, the racial wealth gap, financial inclusion, and universal access to affordable credit. Buoy has brought me one step closer to building a sustainable social entrepreneurship business. If you are on the same journey, or thinking about taking the leap and starting a business, I hope that this article serves as encouragement. No doubt you will make mistakes, but you will learn, grow, and inspire others in the process.
