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4 minute read

When You Know It's Time To Pull The Plug On A Startup

Storehouse is shutting down after three years. As cofounder Mark Kawano moves to Square, he shares lessons on calling it quits.

Photo: Eugenio Marongiu via Shutterstock

As far as startups go, Storehouse seemed poised to be a hit. It had $7 million in Series A funding and a cofounder named Mark Kawano who had been Apple's first User Experience Evangelist. Storehouse also had a pretty good idea through the lens of 2013—to allow anyone to publish beautiful, photo-forward stories.

But on Monday, Kawano announced that Storehouse would be shutting down. Square is hiring Kawano and three members of his team, and Storehouse as a service will be shut down in a month.

"I’m not one of those people to try to spin something like, 'We're looking to build a symbiotic relationship with Square,'" says Kawano with a laugh. "No. We tried to do something very different. We got a lot of initial traction, but it wasn't enough to keep going."

Having covered Kawano extensively over the past few years, we caught up with him this week to talk about the story few people want to talk about: when entrepreneurs are forced to close up shop, rather than open it. Here’s what he says about life at the end of the startup dream—when to call it quits and how to do it with grace.

Storehouse

When To Close Up Shop

1. You're Missing Your Targets No Matter What You Do
Shutting down Storehouse was a long time coming, Kawano says. The company started as an iPad-exclusive app, before expanding to Android and iPhones. Never more than a dozen people, they launched with an editorial staff but quickly pooled those resources toward more engineering.

There was no sudden realization that Storehouse wouldn’t work, nor did they burn through all their cash reserves. "I’ve always been one to be on the early side rather than the late side," Kawano says. Over time, Storehouse was tracking one key metric—how many stories were being created—and that metric wasn’t growing to necessary projections, no matter what the company did—most notably, shifting Storehouse to be less of a social network than a private publishing platform.

In this regard, his decision to shut things down was based upon ongoing talks rather than a sudden devastating plot twist worthy of the HBO show Silicon Valley. "I don’t know if there was an [inflection point]," he says. "It’s much more of a process, a longer conversation to be pretty honest, with the team, the founders, the investors."

Storehouse

2. You Have Critical Accolades, But Few Users
Compared to the 2 billion other apps in the App Store, Storehouse had a lot of positive press. Aside from coverage on sites like our own, it was featured in the App Store, and even won an Apple Design Award in 2014. These things were all good, Kawano says, but none of them alone made the product succeed.

"I think it’s one of these things where, there were many successes, and with each one, the bar gets moved higher," Kawano says. "So you want to have a bigger and bigger impact, and you’re looking at these different milestones that helped in different areas. Whether it made recruiting easier, or it’s something that leads to growth in interesting ways, they aren’t direct paths you see all the time."

The problem is that positive press and awards aren’t a replacement for the bottom line: users. "I’m not sure if there’s any direct causation or correlation with some of the acclaim, or anything like that, and growth," he says. "I think that ultimately, it’s very hard to get growth on consumer products. It always has been. It’s not a new thing, or a thing we learned along the way. It’s something we knew when we built it. And I think it's something that’s continuing to get more challenging as apps have matured, and there’s been more saturation."

3. You're Sticking To Your Values, Even When The Market Shifts
Storehouse was built first and foremost for the iPad, which made Storehouse elegant and unique—something that was important to the team. But it also meant that the company missed out on the explosion of photography on mobile phones, pioneered by Instagram and Snapchat. "Could we have gotten to the iPhone earlier, Android faster, realized what was going on in the media and photography? And still put our personal spin on these things?" he asks, rhetorically. "It could have affected thousands of decisions we made along the way."

Snapchatvia Snapchat

The takeaway: Market trends matter. Does that mean following every single one? Of course not. But sticking to your principles won't matter if you don't have users (see No. 2).

So What's The Right Way To Close Up Shop?

1. Shut Down Your Platform Gradually
In the last few days, Kawano has received countless emails from users across the globe. One thing that helps is that Storehouse didn’t just pull the plug like Nest did with Revolv. The company spent time coding an export tool. Users will have a month to download their stories before they shut down completely.

"We tried to sunset the service as gracefully as we did every other feature. For the team, it was important to respect the users, the time they put in," Kawano says. "So we put forth the extra effort, and same with our investors, who supported the decision to continue the service for over a month and build a tool so people could archive their stories and keep them forever." It’s just good karma.

2. Know That Failing Really Isn’t So Bad
Maybe all of this talk of failure is enough to scare you off from your own big idea. It shouldn’t be.

Because when I ask Kawano if he’s glad he started Storehouse even though it’s closing, he doesn’t hesitate before saying, "Absolutely."

"I mean, it’s a part of building, and creating something new and different," he says. "For me, personally, it’s a continuum . . . This is not going to be my last failure, and doesn't take away any successes we’ll have along the way. We learned a ton from this."

Correction: An earlier version of this article stated that Storehouse had been acquired by Square when in fact it has not been.

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