Important: Before continuing, read SRTX‘s CEO Katherine Homuth’s posts first (here and here).

Hi Katherine,

I read your blog posts about your current challenges and future plans. Originally, I planned to reply to you privately, but in the end, I decided to share my response as an open letter on my blog.

First of all, if you think I’m going to give you any advice, you’d be mistaken.

Why? Because I don’t think I’m qualified. I have never built a company that reinvented the textile industry. Unless I have “been there, done that,” you shouldn’t listen to me — even though TSF has been an investor in SRTX since the early days.

That said, there are numerous similarities between SRTX and Wattpad. One lesson I learned might be useful to you.

Both SRTX and Wattpad set out to reinvent industries that had remained largely unchanged for the past century. Wattpad raised over $100M USD and lost millions per year to build the business’s foundation — overcoming the chicken-and-egg problem — before we could monetize profitably. That had been our strategy from day one, and it was hard to explain on a spreadsheet. From the outside, it looks like it’s all wins. From the inside, we don’t know if the next leap forward will be our last.

Sound familiar? Like you mentioned, SRTX also raised well over $100M USD and lost millions of dollars to build the foundation of the business — overcoming the chicken-and-egg problem — before you could monetize profitably. That’s been your strategy from day one, and it was hard to explain on a spreadsheet. From the outside, it looks like it’s all wins. From the inside, you don’t know if the next leap forward will be your last.

When an entrepreneur is building a transformative company in an unconventional way, they will inevitably attract a lot of naysayers. These naysayers are usually missing key context (which is fine, as you don’t have to convince everyone), give unsolicited bad advice (which is uncool but typical of armchair coaches trying to look smart), and fail to recognize that there’s more than one way to build a massively successful company.

Here’s an example.

A few months after Wattpad was acquired, someone said to me:

“Congrats on your acquisition. But you could have been more capital-efficient. Compared to most B2B SaaS companies, your exit value relative to capital raised was not as high as it could be.”

WTF? He might as well have said McDonald’s generates more revenue than you.

Of course, we all know the proper benchmark is to compare Wattpad to other consumer companies like Snap, Twitter, or Facebook. In fact, Wattpad was massively more capital efficient — both on a per-user basis and an exit-value basis — than most other consumer companies at similar or larger scales. In some cases, we were ahead by an order of magnitude.

I wasn’t angry, upset, or offended by this ignorance, naivety, or arrogance because, over the years, I’ve had to deal with many naysayers — even after Wattpad’s successful exit.

Here’s the important lesson I learned:

Naysayers will always naysay.

They want to make themselves look smart.

They want to feel superior to you.

They don’t want to admit they were wrong, so they continue to naysay.

Most people don’t believe in moonshots because they can’t do what you do.

If you can use them to fire yourself up, that’s great. If not, don’t even spend a millisecond on them. Your time and energy are better spent focusing on finding a handful of new investors who believe in your vision, growing a fanbase that loves your product, and scaling your company. These are what you have been doing. The results will speak for themselves.

If anything, SRTX has de-risked so much over the years. Millions of people are already buying your unbreakable tights. It’s the best-selling tight in North America — unbreakable or not. A lot of capital has been raised, enabling your mega factory to become a reality. Major B2B partnerships have been formed to scale. New products, beyond tights, are soon to launch.

You’re very close to the top of Mount Everest. Who cares about those people who don’t dare to leave base camp?

Best,

Allen

P.S. This blog is licensed under a Creative Commons Attribution 4.0 International License. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.