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Adopting a Startup Baby: Interview with the New Owner of 37Signals’s Sortfolio

May 9, 2013

10:11 am

After creating Sortfolio, a site for finding web designers, Jason Fried and his team at 37signals spent months searching for new parents for their baby. They knew it could grow up to have a good, successful life, but they were unable to provide for it themselves.

Finally, they chose Krishna Gupta and Eric Marthinsen. The pair had all the qualities of good parent-founders: both serial entrepreneurs, and one a Ruby on Rails connoisseur.

“They wanted it to go to the right people,” says Gupta. “I’d like to think they had faith in us.”

Sortfolio 37signals

Part of their charge is to keep Sortfolio full of high-quality designers. The site has grown up that way because it charges money for a Pro account (weeding out the non-serious) and doesn’t take a transaction fee (reducing the company’s incentive to recruit tons of mediocre designers).

Below, Gupta talks more about what it’s like to take over someone else’s product.

Tech Cocktail: How does it feel to take over a product created by someone else? 

Krishna Gupta: It’s totally different. . . . When you’re taking over somebody else’s baby, especially taking over something from 37signals, there’s a sense of responsibility. There’s this high-profile transaction; it’s coming out of a well-known tech company. And even more importantly, there’s already a user base and a community. . . . Sortfolio is this loved product that actually means something to the people that use it. So you’re going in and taking over a product that has an existing customer base, already has a certain expectation, and you have this sense of respect and responsibility to those pre-existing parties – both 37signals and, even more importantly, those existing customers. . . .

When you have your own startup, when you’re the visionary and the founder of it, you have a license to be a bit of a recluse. You get to steer the ship wherever you feel like taking it. And obviously you want to get customers and generate revenue, but it’s yours – you can do whatever you want with it. And I suppose we could still do that with Sortfolio, but immediately there’s just this sense of responsibility. . . .

I was a little concerned, too, that we might not have felt like founders or that same sense of ownership, but that goes away completely when you’re passionate about the product and you see the potential. I feel like 37signals planted the seed, and there’s just so much potential and so much value-add that we can bring to Sortfolio that it still feels like our baby. It’s like adopting a kid when it’s really young, when it’s still an infant.

Tech Cocktail: Have you heard of a lot of other cases like this? 

Gupta: Off the top of my head, I haven’t. I don’t know if it’s a trend. I think everybody’s always trying to get bigger and bigger and do a big exit.

I think what Sortfolio did is really commendable. They recognized they weren’t servicing the customers as well as they felt they could be. It’s cash-flow positive from day one, and it would have been really easy for them to hang onto it and keep the revenue coming in, but they felt like they weren’t being fair – and that speaks a lot to them. They just asked a fair price, and decided to let it move forward with another team. And I don’t think that’s something that happens as often as maybe it should. They could have easily just let it die or fester, but it just wasn’t on brand for them or fair to those customers.

Tech Cocktail: Would it be beneficial if this kind of thing happened more often? 

Gupta: I absolutely think so. Doing a startup, it’s tough and it’s a lot of work. Not to say this isn’t. But I did really learn the value of having an existing customer base. As anybody doing a startup knows, getting those first customers is just killer. . . . While having a startup obviously has its own value – there’s nothing like it – when you’re a founder, it’s blood, sweat, and tears, and you’re not always successful. Doing it this way, you’ve gotten over that first MVP, you’ve got a proven product, and there’s a lot to be said about that. A lot of those early growing pains are out of the way.

We didn’t take over the reins until mid- to end of October, so we’re just about six months in now, and I already don’t feel like it’s not our baby anymore. I’m aware we didn’t found it, persay, but I wake up every day feeling like we did. It’s a great opportunity. It’s a great way to kickstart a startup. We have customers, we have revenue, we have a brand.

Tech Cocktail: Do you need a different set of skills to do this? 

Gupta: I think you have to have some experience. If this was Eric’s first go of it or my first go of it, we would have had a hard time, because you’re up and running straight away. And you’ve got all the problems of an operating site, and there’s no learning curve. We took over a fully operating business. We didn’t get time to ease in, learn the customer. When you’re starting from square one, you’re growing with the business and you learn all the nuances. We just jumped in the deep end straight away, and if you don’t have that sort of business and tech experience, it could probably be a lot easier to drown.

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Kira M. Newman is a Tech Cocktail writer interested in the harsh reality of entrepreneurship, work-life balance, and psychology. She is the founder of The Year of Happy and has been traveling around the world interviewing entrepreneurs in Asia, Europe, and North America since 2011. Follow her @kiramnewman or contact kira@tech.co.

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