When a new Y Combinator-backed private social network is interested acquiring the startup you’ve been bootstrapping for years, your ears tend to perk up. But what happens when you flip the script and end up buying that company instead?
You have a very good day.
One family-focused startup, eFamily.com, is looking to break the social network mold. And with their acquisition of Origami, eFamily.com is well-positioned to do just that.
I got a chance to catch up with eFamily.com founder and CEO David Hosei just hours after TechCrunch broke the story. Check out what Hosei had to say about the deal, why it matters in the private social networking market, and what he has learned from several startup acquisitions.
How eFamily.com Acquired Origami
The CEO of Origami had reached out to Hosei a few months ago. He was interested in acquiring eFamily, and Hosei wasn’t positive what the path forward looked like. eFamily ran on a legacy technology platform and wasn’t capable of winning the mobile battle.
“A month ago, we had been worried about competing on their level. The software they built is absolutely beautiful,” Hosei said.
Fast forward a month, and the picture has changed.
“Combined, over 30,000 families are members of Origami and eFamily,” said Hosei. Several other acquisitions helped propel eFamily.com to where it is today. Now, the software purchase allows eFamily to excel on iPhone and Android.
And as TechCrunch notes, if eFamily can transition to 4,000 paying subscribers, they will achieve stability. That is a target that Hosei is not only happy to aim for, but as he pivots from a freemium model to a more premium paid subscription, he’s confident he’ll reach.
Pivoting Away from Private Social Networking
Midwestern Savvy Meets West Coast Software
Hosei is a bit of a serial entrepreneur. 3gupload.com, Hosei’s first startup, was the leading provider of ringtones in the early 2000s. With over 4m users and .5m paying subscribers, chances are good that if you downloaded ringtones in the early days of mobile growth, you’ve already been one of Hosei’s customers.
After a successful exit event, the co-founder of 3gupload.com went on to start posters2prints.com. It was his mentorship that Hosei credits as a primary reason for his success to date, and that’s why he’s invested in the company.
Founder Lesson learned: if you find truly great mentors, follow them wherever they go. Until you’re ready for your next adventure, that is.
Hosei has a few projects going right now–he also invests in real estate around Indianapolis, and is always learning about other startups as an active member of the Verge Indy organizing committee.
“Growing up in Indiana, I always learned to diversify my risk and create multiple streams of income,” he explained.
And that desire for stability is what propels Hosei to push the social networking world to redefine itself.
Don’t Compete with Facebook. Play a Different Game.
“I’m trying to rebrand us as not being a social network,” Hosei said. He wants to move away from associating with the private social networking space. And social networking in general, for that matter.
“We’re really a destination for families to connect in a secure and private environment.”
“For example,” he said, “customers that own Smithfamily.com could use us to power their website. We want to be the tool for families to connect today. “Social networking is kind of dominated by Facebook, and we don’t really want to compete with Facebook.”
David Hosei’s Advice on Acquisitions and Partnerships
As an entrepreneur who has been on both sides of the acquisition coin, Hosei offered a few key insights to help startups looking to partner or acquire, whether they’re in the private social network space or not.
Find good advisors.
Do your due diligence. Seriously.
Find people that are smarter than you. If they aren’t on your team, ask them for input anyway.
Define how you can add value to the business you’re acquiring. What’s your position? How will you grow the business and create sustainability–for you and for everybody involved?
It’s okay to be lucky sometimes. “Origami called me and told me they were available to be purchased,” said Hosei, “And we moved pretty quickly on that!”
Be ready for the opportunity. Access to capital is extremely important when you’re preparing for an acquisition, but being ready to take a chance is the first step to getting there.
Looking Back: David Hosei Pitching eFamily at Verge in 2010
Funny how things change, isn’t it?
Before Verge was Verge, David was getting after it with eFamily.
Hustle never changes.