How Berlin startup Changers went from seed funding to insolvency to bootstrapping – and lived to tell the tale
Today at the Pioneers Festival in Vienna, Berlin based solar startup Changers announced that it put the final piece of its business model online: the so called social energy marketplace, where the Changers community can exchange its solar credits for sustainable products and services offered by Changers partners. The available services range from a few hours of babysitting to driving around in a (car sharing enabled) BMW.
For Changers founders Daniela Schiffer and Markus Schulz, it’s the culmination of a journey that had just a little more twists and turns than they had expected when they hatched the plans for a solar device and community almost two years ago at a kitchen table in Berlin.
How does the marketplace fit into the Changers business model and community?
Daniela Schiffer: “Bascially when you use your Changers solar devices, you get credits. Starting today, you can spend those credits on our marketplace – you can use them to pay for products and services from our partners. They’re sustainable goods and services that we carefully curated, and also crowdsourced among our community.
All our partners are sustainable companies, either because of the way they use resources – like DriveNow, which is a car sharing service with Mini’s and BMW’s, or bike sharing from NextBike, or get free, carbon neutral shipping from DHL. Or they’re ecofriendly, sustainable goods, green lifestyle products like Schindelhauer bikes. It was important for us that our partners offer really cool, well designed products. I think our biggest deal at the m
oment is the rocksresort in Switzerland who offer a one week stay for 4 persons in exchange for Changers credits – it’s a deal that’s worth something like 2000 or 2500 euros.
And how many times do we have to charge our smartphone for that?
Daniela Schiffer: “I think it should take you about nine or ten months (laughs). But it is feasible.
Ironically, by adding this marketplace you make it harder for yourself to expand internationally. Before, you had a hardware solution that you could sell basically anywhere in the w
Daniela Schiffer: “Correct, getting partners on board is a much more a local business than finding distributors for our hardware. I guess that’s just another problem that we’ll have to tackle – how to get partners from all over the world so that our users can profit from their credit.
This local focus is a consequence of not wanting to add just any partners. We’re very careful with the partners we pick – it ‘s a curated shop. You can only do that by going through personal contacts, people recommending other people. We also ask our community what kind of services and products they would like to shop for?
The marketplace was the final piece of the model that you envisioned from the beginning with Changers.
Daniela Schiffer: “Yes. It took us a while, but we finally got there. I think it took us eleven months to launch the marketplace. There was always one or the other barrier to cross.”
Changers: from kitchen table to bootstrapped hardware startup, via insolvency
Like a lot of great ideas, Changers was born at a kitchen table. Before launching Changers, Daniela Schiffer worked with Markus Schulz in Schulz’ communication agency, where he consulted for clients like Lufthansa, Nestlé and several high tech and renewable energy clients. In January 2010, they had a meeting with a renewable energy client of Schulz’.
Daniela Schiffer: “We just came out of a meeting with a solar company who was a client. And Markus said something like: solar should really be available in every supermarket – in Aldi! That’s the best way to make sure that everyone has access to solar, even the people who currently can’t. That was the basic idea. And then we started thinking: how would we motivate people to use solar energy, to change their behavior. From the start, we wanted to focus on people in the western world – we’re the ones who got the world in trouble, so we are the ones who have to change our behavior.
It’s when thinking of how to motivate people to actually use a device like this that we came up with the idea of a community and a marketplace. Our vision was not to build another piece of hardware, but to try and change something in people’s behavior, by showing that it actually matters if you do something about a problem.”
While the idea immediately attracted some attention on tech blogs and even international newspapers, things didn’t exactly go smoothly for Changers. The company went online in the fall of 2011, and nearly went under within the first quarter.
Daniela Schiffer: “We were online for nine weeks when the funding round that we had closed couldn’t go through because our investor had to declare insolvency. And a few days later, we had to declare insolvency. We kept the business going, but we just didn’t have enough resources to put that last element into place. It took us a lot of effort – blood, sweat and quite a few tears (laughs). I think that all told, we plowed 150 000 euros into Changers, of our own money.
But in the end, we did get all this moving without any external funding. We did this all by ourselves, with our own means, and I think that’s something to be proud of.”
You were more or less forced into the bootstrapping game. I guess you can share some insights on that?
Daniela Schiffer: “First: it’s not that there’s no money out there, there is more than enough. The fact that we bootstrapped has little to do with not finding an investor. So if you can’t find funding, something is probably wrong with your product, or your plan or the way you’re presenting. We are just taking our time to find an investor that fits.
But I do think that bootstrapping is very healthy for a business. It forces you to go back to the roots. The danger of having a lot of money in the bank is that you think that you have to spend it on all sorts of things. Having bootstrapped, I can tell you that you probably don’t need it.
Also, having limited resources makes you more inventive, it forces you to go off the beaten path. You’ll be forced to find people who really LOVE what you do and engage with you whether they get paid or not.
Mind you, it is very hard. What you need to be most careful of when bootstrapping, I think, is not to get trapped too much into daily tasks. Things like: I still have to do my administration, and then there’s the packaging and shipping… Before you know it, you’re knee deep in operational tasks, and you don’t have time or patience anymore to look up and see where you want to go in the long run.
Do you have any pointers on how to avoid task creep?
Daniela Schiffer: “Just that it’s a constant struggle for us too (laughs). Also because these tasks do have to get done. It’s a matter of dividing this kind of work between the partners and occasionally just prioritize stuff – even when you know that people will complain, just put the tasks aside for two days and get through the big stuff first.
Can you tell us a bit about Changers as a business today – revenue, projections, profitability?
Hardware is a very resource intensive business: you need quite a bit of working capital. And currently as a company we still need to pay everything in advance, as we don’t even have a credit line yet. So it’s cash on the table in order to get devices. Basically everything we earn, we invest in building the marketplace or in new devices.
I think we are planning to hit the black by the end of 2013, but it depends a bit on the growth – how quickly do we want to fund? How much do we spend to promote this idea – how much of the funds can we spend to achieve growth? We could try to grow organically, but I think that would take too much time. I think we need to spend a bit on marketing and PR.”
Startup: it’s never as bad as it looks. But never as good, either.
When I saw you speak a few months ago, you said something to the effect of: “It’s never as good as it looks from the outside, but also never as bad.”
Daniela Schiffer: “Yes. When you talk to other startups, there’s almost an obligation to say how you have the greatest team, and triple A people, and an awesome product. Everything is great and perfect, you know? It’s almost like a protocol, which is kind of funny.
Because it’s bullshit and everybody knows it. It’s more of a “fake it till you make it” thing. And I think most of the startups do it that way. I think we all deal with the same trouble and unexpected stuff. So many things come up: you start selling something and a company you never heard of accuses you of ripping off their intellectual property. But even when you think: we just parked in the biggest pile of shit imaginable, it’s just something that you’ll need to acknowledge and deal with.
There is no problem that you can’t get out of. In december, when we got into insolvency, it probably seemed like the worst thing ever from the outside. But it never felt like that. It was more like: we’ll have to deal with this. For us it was always clear: we will keep ON with this, put in more effort, more resources, whether money or time, because we just believed in it so hard. That belief drove us the whole way.”
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