As 2020 wraps up, it’s clear this has been a year full of unexpected challenges and unprecedented opportunities. Millions of businesses pivoted from traditional in-store experiences to ecommerce and offering curbside pickup.
With the basics of ecommerce now firmly in place, many businesses are asking, “What’s next?” and seek to translate those authentic, in-person retail experiences to their online stores. The team at Octane AI, the developers behind the Quiz, Messenger, SMS app, have been thinking about this problem and many others long before the time of COVID-19.
It wasn’t a straight path to success for the team, that much is certain. Making profitable pivots in times of great uncertainty has been a common theme during Octane AI’s journey from startup to Shopify Plus Certified App Partner. Their journey has been a masterclass in antifragility and learning how to succeed in the face of adversity and chaos.
We sat down with Octane AI’s cofounders to learn exactly how they creatively navigated several periods of uncertainty (and, let’s face it, stress) that threatened the very existence of their business, to generate exponential growth and find success on Shopify.
API lockout: the first of many storms
Octane AI has been a leading Facebook Messenger app for ecommerce businesses looking to personalize and improve their marketing with customized ad campaigns and revenue-generating flows since they became a Shopify Partner in 2017.
The first storm to weather wasn’t a global pandemic, rather, it was two years earlier in spring 2018, when Facebook completely shut down its Messenger platform API in response to the Cambridge Analytica data privacy scandal.
Octane AI launched its app just before Facebook shut down its Messenger platform API, meaning there were already customers that had installed the app who were suddenly unable to use Octane AI’s full functionality. All apps using the Messenger platform, including Octane AI’s cornerstone chatbot solution, were completely locked out while Facebook audited all developers using the platform.
Facebook’s unilateral decision put Octane AI’s future in jeopardy.
"We knew that if Facebook didn't reopen its messenger API within a month, we would have to shut the company down. To preserve cash, our team was forced to cut costs in order to survive, " says Matt Schlicht, cofounder and CEO of Octane AI.
The API lockout quickly took a financial toll on Octane AI. The team had to cut costs drastically: they cut back on a variety of tools, several members of the team went part-time, and several people, including the founders, dramatically reduced their salaries. Yet, there was still no clear timeline for when Facebook would re-open its Messenger API to third-party developers. Both business cash flow and securing growth funding became pressing issues.
Octane AI needed a new strategy—and fast.
“Facebook shutting down the Messenger platform due to Cambridge Analytica stopped investor conversations in their tracks,” recalls Ben Parr, cofounder and president of Octane AI. “We were forced to become super scrappy and find investors who truly believed in our vision.”
We were forced to become super scrappy and find investors who truly believed in our vision.
Although it was a difficult decision to make, cutting back costs bought the Octane AI team enough time to survive the API lockdown and get more money in the bank. To achieve this, Parr and Schlicht formulated a plan:
- Step one: They called their existing investors to tell them exactly what was happening
- Step two: They explained the growth plan for if/when Facebook reopened the platform, and explained there was an existing opportunity with Shopify
- Step three: They asked the existing investors to put in more capital, but only if Facebook announced they were going to reopen their messenger API
Luckily for the team, their existing investors believed in them and in the plan to grow on top of Shopify. Many of the existing investors wired new capital right after Facebook announced the Messenger API was reopening. This allowed them to start growing on Shopify and convince new investors to back them based on that growth.
Seeing the potential versus communicating the value of going all-in on Shopify
Even before the Messenger API shutdown, securing those potential investments was far from guaranteed. And, there was another layer of complexity.
On top of convincing investors of their plan to build Octane AI into a multi-billion dollar business, the team of founders also needed to convince them that this business would be built all-in on Shopify.
“Building our business on top of Shopify was an easy decision,” explains Parr. “Our most successful customers back in 2018 were Shopify stores, and we saw the potential if we only focused on their needs.”
So, how did the team eventually convince investors that this pitch was more than a pipedream? Schlicht shares that winning over investors came from Octane AI’s superpower: conviction.
“Even when we were on the brink of running out of money in 2018, we still 100 percent believed that building for Shopify was a multi-billion dollar opportunity,” says Schlicht. “We had firm conviction that merchants and customers needed what we were building—a more conversational, humanized shopping experience online.”
We had firm conviction that merchants and customers needed what we were building—a more conversational, humanized shopping experience online.
By the time Parr and Schlicht pitched to investors, Octane AI had already generated half a million dollars in new revenue for their customers in the private beta, including Cover FX. They pointed to Shopify's growth, and convinced investors that the overall ecommerce market was still in its infancy and was going to grow exponentially larger over the next decade.
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The pandemic pivot: keeping cash flowing
Cut to early 2020 when the Octane AI team was driving forward, putting the past years of successful fundraising and product fit behind them. Their revenue was growing by 20 percent month-over-month in the second half of 2019, lots of stores were seeing success and spreading the word about Octane AI, and they were finishing the build of Octane AI’s Shop Quiz app.
The team was ready for their next phase of growth and were just about ready to launch their quiz app—but no one could have predicted the pandemic pivot.
In early 2020, the team signed a term sheet for four million dollars in investments, but the deal had not yet been finalized. Then, COVID-19 hit, and they saw funding deals at other startups were falling through because investors panicked. The Octane AI team worried that the same could happen to them.
"March 2020 was incredibly stressful," Schlicht says, "we knew it was possible that our investors could decide to pull out due to the pandemic."
Their worries grew when the NBA shut down operations.
According to Schlicht, “It was not a good omen.”
Luckily, on the same day, in a dramatic down-to-the-wire-movie-moment, their investors reaffirmed their commitment to the funding round and began wiring their investments. Octane AI considers themselves very fortunate that things turned out the way they did.
While Octane AI narrowly avoided a cash crisis thanks to their scrappy pivots and the ability to convey their return on investment to investors worried about the pandemic, there was another problem: merchants were uninstalling their app at an alarming rate.
Spring 2020 was when businesses worldwide started experiencing the severe economic effects of the COVID-19 pandemic. Traditional brick and mortar businesses hadn’t yet pivoted en masse to ecommerce, and regional lockdown restrictions came into effect. Businesses were starting to suffer and looking to cut any costs they could.
So Octane AI was forced to pivot—again.
Finding profit in product pivots
Product revenue began to plummet. Shopify stores were asking to pause Octane AI, to try and cut down on any unnecessary expenses.
“Merchants were clearing their stack—trying to keep costs low, planning to weather the storm, and we understood that,” Schlicht says. “We wanted to figure out a way to make it okay for a merchant to uninstall us and put them in a position of power where they could keep us onboard while staying profitable.”
As a fast pivot to help business owners maintain their Octane AI service, the team launched a new revenue model: a return-on-investment-based plan, where customers only pay for the app if they earn more from the app than what it costs them to use it.
It was a resounding success. Everyone was back in business.
From surviving to thriving in a storm
Throughout the past two years of strategy pivots and crises, Octane AI began work on a new product—something big. Something that would require those several rounds of investment funding. Something they knew would solve a major merchant problem.
In 2019, alongside the hunt for more funding, the Octane AI team noticed Shopify Plus brands trying to create quizzes with the Octane AI Facebook Messenger bot. This is where Schlicht says the idea came for their next product, a quiz app.
“Octane AI didn’t invent the concept of quizzes—but the idea of integrating quizzes into a user-friendly ecommerce product didn’t necessarily exist in the Shopify App Store yet,” Schlicht recalls. “So, we put all of our resources into building the Shop Quiz.”
While so many apps in the Shopify App Store are focused on optimizing commerce for the merchant through tools like loyalty programs, fulfilment, and email marketing, the team says this app improves the customer experience.
Most things are good for the merchant but not for their customers. We built this tool with the customers in mind.
In late August 2020, the team launched Shop Quiz—and the response was no surprise. The quiz results changed the way merchants related to their customers, and the way customers interacted with merchants.
The Octane AI team shared their customers' Shop Quiz success stories. It was an opportunity for others to learn from their journeys and build better commerce experiences through personalization and optimization.
For example, Octane AI customer Doe Lashes participated in a case study sharing their experience, results with the Shop Quiz app, and its compatibility with Klaviyo.
Not only is 24 percent of Doe Lashes’ revenue now directly connected to the Shop Quiz app, but the quiz results revealed that over 35 percent of quiz takers had never worn lashes before. This opened up a huge opportunity to educate potential customers on lashes and build a better customer experience.
In reflecting on their profitable pivots throughout some of their biggest challenges, especially during the early days of the pandemic, three key lessons came to mind:
- Always have a backup plan
- Know where your product is going next even before you’ve built it
- Find the means to keep your funding flowing
That said, the desire for investors or the need for fast cash should never influence product roadmap decisions. Always hold true to your vision and put your customers first—just like Octane AI.
“Octane AI would not be on its current trajectory of rapid growth if we hadn’t built the Shop Quiz. Our existing Facebook Messenger and SMS products are very popular, but the Shop Quiz is different,” Parr says.
“It’s the only product of its kind, and the demand we’ve seen from Shopify merchants is unreal. The Shop Quiz changed the trajectory of our customers and Octane AI completely.”
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Building new possibilities for the future of commerce
The Octane AI team started with a simple formula for success: (innovative product + belief in the mission + listening to the needs of your customers) x community impact = a profitable and resilient business.
(innovative product + belief in the mission + listening to the needs of your customers) x community impact = a profitable and resilient business
The team followed this formula throughout the tumultuous two years, which allowed them to pivot their strategies without losing sight of what matters most.
“We are on a mission to humanize the shopping experience through personalization, and we’re less than one percent of the way there,” says Parr. “Up until now, we have focused on replicating the personalization that’s possible in person at high-end retail brands for the online ecommerce experience.”
We are on a mission to humanize the shopping experience through personalization, and we’re less than one percent of the way there.
The team plans to continue meeting the merchant demand to personalize the customer experience, and build the foundations for the future of commerce through their Shopify app offerings. The impossible problems of today will become product offerings of Octane AI in the future.
So, what’s next for the Octane AI team?
“We spent months and years developing the best quiz, Messenger, SMS, and customer profile marketing product on the market,” Parr says. “And we have some amazing products on our roadmap that we think merchants and customers will love.”
But success doesn’t stop at innovation. The team also recognizes that you’re only as strong as your community. With thousands of merchants and partners who are vested in their success, there is still room to grow.
“We’ve spent just as much time on product development as we have in building relationships with merchants, and co-marketing with other app developers, enabling Shopify agencies to build better commerce experiences,” Parr says. “By creating platforms for our community to engage with us and each other, we’re building an extra layer of resourcefulness and resiliency into our future plans.”
Belief is a powerful tool, and the Octane AI team truly believes in their mission. This conviction has helped them to keep moving forward, no matter what obstacles come their way. They’ve become stronger and more resilient after every challenge and test.
The businesses that will thrive in these challenging times and long beyond them are those that examine the competitive landscape, look up from the daily hustle, and adapt as necessary to profitably pivot to success.
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