How One Start-up Caught the Attention of VCs, Gained 25,000 Daily Users, and Still Failed
Draw Quest was launched in February 2013 by Christopher Poole. It was a pivot—an earlier version of the product was called Canvas. Draw Quest was an app built for the iPad, iPhone, and iPad Touch. The idea was to encourage creativity through a daily drawing challenge. here’s how it worked. Each day, a drawing challenge was posted. The Draw Quest screen would display part of a picture and challenge the user to complete it. For example, the screen might show a picture of a child looking out into the water, and the challenge would be “What’s in the water?” The user would then complete the picture. Other examples include a screen with a hat at the top, and the challenge would be “Who’s wearing the hat?” Similarly the screen might include a person standing on a balcony, and the challenge would be “What can you see from the balcony?” The DrawQuest app provided a basic kit of online drawing tools to complete the picture. The point wasn’t to create an elegant drawing. In fact, the tools resulted in the drawings being somewhat cartoonish in nature. The point was to force people to be creative by deciding what to put in the water or what could be seen from the balcony. The app and the basic set of drawing tools were free. DrawQuest made money be selling upgrades to the kit of drawing tools, like better brushes, additional palettes of paint, more vivid colors, and so forth. The app itself did well. In the short year it was in existence it reached 1.4 million downloads, 550,000 registered users, 400,000 monthly users, and 25,000 daily users. One of the draws was becoming part of the Draw Quest community. You could follow friends and view the drawings that they drew. One of the coolest features was instant replay. You could watch a replay of a friend drawing his or her picture. To fund the venture, Draw Quest raised money from marquee investors. A $625,000 seed fund was raised in 2010 (when the founders were working on a different app), and $3 million was raised in two subsequent venture rounds from Union Square ventures, Andreessen horowitz, Lerer ventures, Chris Dixon, and several others. Despite all of this, Draw Quest failed. What went wrong? In a heartfelt bog post titled “Today my startup failed” and in an interview with Tech Crunch, Poole outlined the reasons that led to Draw Quest’s demise. In short, the company never figured out the business side of the venture. The in-app upgrades, such as better paintbrushes and enhanced palettes of paint, didn’t sell as well as anticipated, leaving Draw Quest with insufficient income. Part of the problem was that users didn’t feel a sense of urgency to upgrade. A large portion of Candy Crush’s success, for example, is that people buy extra lives. Draw Quest didn’t have the same emotional “I can’t play if I don’t pay” urgency. Another problem was that the app was expensive to develop and maintain. In a sobering note to Draw Quest users, explaining that the app would be shut down, Poole wrote: “While the app and community have come together in a spectacular fashion, the business side of things hasn’t gone as well as we had hoped. You may not realize it, but Draw Quest represents of work hours from a very talented seven-person team, who all need to put food on the table and a roof over their heads—not to mention a small army of servers to keep the app running smoothly and Questbot happy.” Another issue DrawQuest encountered was the pivot that Poole and his team executed. Prior to Draw Quest, the team built an app named Canvas that didn’t work out. They pivoted to Draw Quest, which resonated better with users and drew a larger audience. The problem is that they spent half their investors’ money on Canvas. Referring to that challenge, Poole wrote, “We built this app (Draw Quest) with less than half of our runway remaining. You have to do twice as much with half as much money. It’s really freaking hard.” Ultimately, Poole and his team decided to pull the plug. They investigated selling Draw Quest to another company, but no one bit. In the blog post titled “Today my startup failed,” Poole provided insight into the human side of business failure. he wrote: “I’m disappointed that I couldn’t produce a better outcome for those who supported me the most— my investors and employees. Few in business will know the pain of what it means to fail as a venturebacked CEO. not only do you fail your employees, your customers, and yourself, but you fail your investors—partners who helped you bring your idea to life.”
Questions for Critical Thinking
1. Examine the problems that Draw Quest encountered. how could the company have avoided or navigated around each problem?
2. What alternatives did Draw Quest have for generating income for its app? Why do you think the company didn’t try any of these alternatives before shutting down?
3. Based on what you learned in Chapter 4, complete a Barringer/Ireland Business Model template for Draw Quest. Is there anything that is noticeable in the business model template that may have forecast that Draw Quest would have a hard time surviving?
4. The opening features for Chapters 6, 7, and 8 feature student start-ups that have launched smartphone apps. What lessons can these start-ups learn from Draw Quest’s experience?