Flowtab: The Startup that Never Grew for Pizzas

It all started with pizza and beer, now the Flowtab was born out of it. Founder Mike Townsend came up with the idea of serving up drinks at bars fast. The thought came up at last at 2 in the morning in a Los Angeles office named Coloft. An app was formed. But the name didn’t really catch on: Apptini, a hybrid of the words app and martini.

As an industry, technology only has its eyes set on breakthroughs. The sassier the success of a technological product, the better publicity it gets. Those with little to contribute are left unsaid, almost always, forgotten.

Silicon Valley has not been the haven of most tech-based businesses as hundreds of companies die an early death. Flowtab was no exception, but their popularity was very unusual as they publicly documented their failed attempt to make it big.

The founders of Flowtab released a timeline of the company’s story, from starting up the business, the struggles and the failed association from an Australian mining personality.

In the beginning

Flowtab sells itself as an app designed to order and pay for drinks. It would make service at bars efficient since bartenders would not need to collect payments from customers. Credit cards need not waited to be returned, receipts don’t need to be signed.  An Ipad behind the bar shows the orders queuing and customers get their order when it’s ready. It’s easy and more convenient.

The app’s ideas were drawn out from another app, the online food delivery service Grubhub. Flowtab shows the menu of the bar a customer is in and tips are also allowed to be added directly to the app as its founders Mike Townsend and Kyle Hill would want its users to be conveniently tipsy.

The mockup app was demonstrated on 12 bars in the Santa Monica area and bar owners’ response was good enough for Townsend and Hill to continue with their project even though at that time, the app was barely finished. Flowtab made its development after an offline test in mid-May of 2011.With internet companies closing down, Flowtab was flourishing.  A couple of months after, the completed version of Flowtab was released coded in HTML5.

Staff and in-house development is very low as well as the company’s money at hand. Flowtab needed highly skilled personnel to help in improving the app further. Hill’s friend Alex Kouznetsov could partially fill up in averting Flowtab’s current problem at that time. A Ph.D. holder in computer science, Kouznetsov’s previous work on an app with a developer could largely help in the development of Flowtab. Hill has to fly all the way to San Francisco to convince Kouznetsov for his contributions to Flowtab’s future improvements. Kouznetsov’s work at Oakland possesses a geographical problem so he passes on contributions at night and functions as the company’s CTO during the weekends.

There is not much on the first version of Flowtab. Its capabilities are limited to selecting the bar, ordering a drink, setting the tip and hitting order.

Kouznetsov provided the necessary help to get Flowtab into theAndroid and iOS app store by wrapping the HTML5 code of Flowtab iinto a native shell using Appcelerator.  The release on February of 2012 was too early as Flowtab has no affiliations with any bars and users are left with a useless app though there are some listings on the app itself but it proved to be fake ones.

Flowtab has been on talks to bar owners during this stage. It hasn’t focused on getting more users as geographical density is key for any mobile payments application as narrated by Townsend. Simultaneously, Apple has been featuring Flowtab for a week and this notice is a good sign for Flowtab’s founders to get deals on bars.

Starting out the bar deals

The Copa d’Oro bar in Santa Monica became the venue for Flowtab’s coming out party. 150 orders were placed that night including one order of Coke from the mayor of Santa Monica who was invited perseveringly by Townsend and Hill. It took the founders 20 times to email the mayor for him to show up and their efforts were rewarded when the mayor came to the coming out party. There are around $1200 worth of transactions those evening bringing minor successes for Flowtab.

People had fun using the app as Flowtab provided for getting the bill that got people coming in to the event. The app went on to function smoothly that it was enjoyed by the people in the party.

Flowtab got an invitation to the yearly L.A. Startup competition shortly after the launch party and won over other 14 startups. With the win, Flowtab got an investment offer from VoiVoda Ventures, an investment firm focused on providing funds for technology-based companies.

The offer was turned down due to location issues. Flowtab would not want to move from its Santa Monica base but the win gave the company added confidence.

The business model of Flowtab had a flaw and this was easily recognized when the team went to Las Vegas where the Nightclub and Bar Convention was held. The Point of Sale of these establishments would not match Flowtab’s system and needs a separate sales team for them to distribute its services. That would mean more cost, people and work for an under-capitalized company.

At that moment, Flowtab has partnered itself to three bars in L.A. without seeing any substantial growth that time. Protecting the company at an early stage has Flowtab filing for intellectual property protection.

Wrong move

The move to have intellectual property protection is a financial disaster for the company. It filed for a patent that concerns “ability for merchant sellers and servers in hospitality establishments to use point-of-sale applications to send one-click/one-touch order-status notifications to mobile devices of their customers”. The patent bears no significance and only made the company spend on something that would not make them earn aside as being its only point of conversation to investors according to Townsend and Hill.

How the better faltered

The second version of Flowtab was way better compared to its previous version despite being coded in HTML5 that’s wrapped into native code. The drink orders shown on the bar-facing Ipad are loaded in and not synchronized. This reduces refreshes to the app that are somewhat meaningless. However, it still didn’t provide the user’s needs as the app is focused more on orders made to the bartender.

Flowtab wanted to increase its popularity to attract more users. In order to obtain this, another party is needed this time with more locations. The plan was highly publicize, but the event went on to become a mess.

The grand event would be held at the three bars where Flowtab is installed. Uber and Thrillist would help in inviting guests and selling tickets respectively. Flowtab’s responsibility would be making the drinks flow throughout the night.

With 300 invited guests, the event turned against the company’s expectations.

The event failed miserably as guests were made to wait for their orders as bars went understaffed with a load of orders coming in. It was a very long wait that at one point, there are 35 orders lined up.

The night proved to get worst when the servers went down that stalled the whole operation. Hill and the Flowtab team had to hand out margaritas to everyone to keep the party going. After the event, 1-star reviews flooded the app as a result of the breakdown from the event.

Hill and Townsend took the event as a lesson. It sparked them to continue even though they had been bashed with what happened that night.

Flowtab improved its queuing system limiting orders placed at a time so bartenders wouldn’t be as confused to what orders go first. Customers have to wait before they can order if the queue is full. This and other improvements were brought about by the incident. The founders learned not to go full blast into a new venture, sometimes it takes baby steps to make something work out.

Money and Guidance

Flowtab is having a hard time finding an entity to help resolve the problem the company faces. They are always turned down, finding it unusual for a CTO working part time for them and is notably based in the Bay area which is far from Flowtab’s office in Santa Monica. Aside from that, the company’s size and approachable trait were also major concerns for incubators in the L.A. area.

Technology studio Science helped out Flowtab get linked to the advertising company DexOne thanks to Science’s CEO Mike Jones. DexOne, a public firm with over $100 million in capitalization sells advertisement on Yellow Pages. Flowtab would get the necessary help that DexOne could provide with its experimental arm that could be the potential solution to their problem.

Hill and Townsend got involved in the reality TV series Shark Tank during this phase of the company hoping to land free advertising. They didn't win. 

With the disastrous event and the Shark Tank loss, Flowtab moved from L.A. to San Francisco with hopes of getting more funds for the company. This move also cut ties with the L.A. bars where the catastrophic event happened. The bars were not amused with the failed servers of Flowtab. On its first month in the Bay Area, the company raised $50,000.

A much needed friend

DexOne proved to be what Flowtab needed. The resources that Flowtab lacks could be found in DexOne. Money, manpower and a shot at distribution, DexOne just made around $2 billion from sales of advertisement in Yellow Pages in 2012. Flowtab seemed to be going to the right direction. DexOne has a 12-man team that teams itself with small tech companies to experiment on new things.

DexOne’s first move to sell Flowtab is setting up a team of 6 people that is focused on promoting the product in Colorado. The program led to landing a deal with Shotgun Willies, the largest strip club in Denver. Flowtab’s system worked just fine in the establishment but customers of the strip club just would not use their phone to order their drinks. The project landed other bars but growth was slow just like in L.A. Meanwhile at the Flowtab headquarters in San Francisco, the team is finding ways to get more users and bars to use their app.

Home base

Flowtab went on to hiring a call center in the Philippines to boost its deals with bar owners in San Francisco. The move didn’t work and learned a valuable lesson; they have to be the salespeople of their own product.

That failed attempt to reach more bars in San Francisco led to the signing of Trevor Bisset as the company’s sales director. His first order was to ditch the call center. A few weeks on the job, he had Flowtab used on its first bar in San Francisco, McTeague’s.

Located at Polk Street, McTeague’s seemed to be the bar that Flowtab should focus on developing their product’s improvement. Though its quiet during weekdays, it’s a total party house starting Friday towards the weekends. It may not be known as sports-bar but orders pile up when the crowd from four counties come in to join the weekend party. But with a crowd this big, use of certain substances such as coke is a big concern for Mc’Teague’s. Its restrooms are filled with signs of prohibiting use of such substances in their establishment and the staff would make sure of McTeague’s house rule.

Flowtab has some bigger plans aside from landing a deal with McTeague’s It plans on getting a deal with the San Francisco Marriot Marquis. Landing a deal in this huge establishment which houses three bars and 1500 rooms would mark the biggest achievement of Flowtab. However, they cannot fit their system to Marquis’ point of sale system Micros. The deal didn’t push through.

Though the huge deal didn’t went on to be closed, Brandon Zacharie has helped Flowtab to improve from being an FTP to a Git which integrated web socket connection between the user’s app and the iPad application of the bar. Zacharie is a software engineer who is a friend of the company.

All is not that well

The Colorado project of DexOne for Flowtab proved to be a strong one, but Flowtab is not ready for the proposition of DexOne to expand. This meant like putting more wood on a small flame.

With its performance from L.A. and San Francisco, Flowtab wasn't very optimistic with the idea of DexOne. Money is one concern as they cannot support more locations with the current development and business model of Flowtab. They charge $1 per order and the deals from the DexOne project isn’t profiting as much as they wanted. The $1200 payment from the bars in Denver is being used to fund the necessary equipment to run their service.

Flowtab rejected the expansion plan of DexOne due to money and user concerns as well as the product itself.

The Lyft connection

Flowtab got more users when it partnered with Lyft, a San Francisco based company whose app facilitates ridesharing to promote a sense of community among its users.

Unfortunately, it didn’t earn them much with a system that needed 6 sign ups before breaking even. The system ran on Lyft drivers giving free drink coupons to riders. Drivers who get to sign up a rider get $5 and the rider gets to have a free drink. Over a thousand drinks were given away with 30 drivers participating on the joint project.

Flowtab got more users but it didn’t work out as expected and Lyft pulled out of the partnership on a polite manner. But with more users, Flowtab is enthusiastic about the growth of the company.

There are twelve bars in three cities that are using Flowtab by the start of 2013 thanks to a $25,000 grant from a technology investor in Palo Alto but the problem remains for the company that has an inconsistent usage despite the number of bars they have partnered with. Flowtab initiated a small target to be achieved by March 1. They planned to have a minimum of 50 active users to use their app for several times every month. With this target, they had set to contrast the low volume of orders from their app so that they would not need to show up in bars just to get more customers and at the same time promote its usage.

The 12 bars that uses Flowtab is a large enough presence to get more users and to make the app their choice when ordering drinks. Hill and Townsend made efforts in 12 different ways to attract more users to use their app to no avail. It still did not make any growth despite the effort of its founders.

Flowtab once again set up a party in order to gain more users as a final resort. The party was smaller unlike the one in L.A. and just cost them $500. The party was held at McTeagues and Mayes with around a hundred people coming in between the two bars in the Super Bowl-themed party.

Flowtab acquired 92 new users for $5.50 each that is still cheaper than the deal they had with Lyft. But it still is not working out profit-wise for the company as they users were not ordering enough drinks to make Flowtab break even on the cost of acquiring new users. It must take more than 5 orders per user to make them past break even figures.

A new business model

Flowtab’s partnership with DexOne proved that the product can be marketed well. DexOne landed on deals with bars that are willing to use the system but at $1200 per bar, it would not make Flowtab go along with its business. It needed a bigger capital. A sum of $300,000 is needed to be exact. But they are pressed into finding such a huge amount.

The business model that Flowtab has isn’t earning them much. With a new business model in mind they planned on getting the necessary funds to keep the business afloat. The company plans to advertise to alcohol companies within the app instead of charging users for a dollar every order of a drink. This made sense since alcohol companies are not allowed to promote their brand inside bars and it does not cover ads inside a mobile device.

But it didn’t pan out with meetings to six small and large liquor and beer companies. Flowtab isn’t big enough to land such a lucrative deal.

Alcohol Meltdown

Other companies with similar functions as Flowtab experienced brutal endings on February of 2013. BarTab closed down despite raising more than $1.5 million and Coaster’s deal with bars had been cut off.

This meant disaster for Flowtab as competitors with an even larger capitalization were closing down. Their chance of surviving had just become slim.

With virtually no growth since its inception Flowtab thought of rethinking their plan of profiting from the product. They halted fund raising efforts and moved on to making another move of getting more profit with their idea.

2nd Pivot

Flowtab has fewer than 2000 users by March of 2013 and has spent $110,000 over the course of their run. The product didn’t just have a market to fit in. The company realizes that unlike GrubHub, they are not bringing drinks in to consumers. Instead, it wastes the consumer’s time and it wasn’t a great experience for users.

The team decided to find other uses for the app that they had. From hotels to golf courses, they find it fitting to have their service set up at stadiums serving beers to fans watching live games.

Starting up all over again, Townsend and Hill called all 114 stadiums in California to promote uses with their software. But with too many strict guidelines and regulations, they didn’t close deals with stadiums. Instead, a company named Bypass gets to raise $3.5 million for a deal with the stadiums with the help of AEG and eBay owned StubHub.

Mike Jones helped once again

Flowtab as a company is broke. Mike Jones, the CEO of Science once again offered to help this time in counseling the team. The team explained the company’s plans to get the stadiums use their software and both Jones and the team agreed that it was not the right track for the company.

Flowtab closed down on April 17, a week after the Bypass announced its raise. Brandon Zacharie went on to another startup on a full-time basis as well as Trevor Bisset who went to Portland on another start up while CTO Alex Kouznetsov kept his day job in the Bay Area.

Hill and Townsend were offered jobs by Jones and worked on launching HomeHero, a senior home care’s marketplace.

Hill and Townsend are back in Los Angeles as part of the Science deal.

The Australian connection

An Australian mining magnate loved Flowtab. His email which was read last February of 2013 almost got deleted. He planned on talking to the team in acquiring the whole of Flowtab.

The offer to acquire Flowtab came in after the company has closed out. With no one to talk to, the acquisition never materialized.

To Townsend and Hall, the experience was great. Learning lessons along the way. They shared their journey with a timeline. They would not want anyone to repeat their mistakes.

 

 

 

Posted by Diane Araga, on September 6, 2013 at 10:00 AM