Highway 12 Ventures recently invested in an exciting new company called GutCheck. Anyone who has worked in product development, or any area of marketing knows how important it is to be able to capture and understand the “voice of the customer”. Big companies have traditionally used things like Focus Groups to capture this information. GutCheck provides a do-it-yourself, online market research tool that lets you lead one-on-one, real-time chat sessions with people in your target market whenever you want. As you will hear from Matt Warta, the CEO, Gutcheck has the ingredients to disrupt the qualitative research market. Gutcheck provides answers in minutes and at a fraction of the cost of alternative tools/approaches. It is a big opportunity, with the WW market for qualitative research estimated to be $4.5B, and the fastest growing portion of that being online, growing from $200M in 2009 to over $450M by 2013. (source: ESOMAR).
The co-founder and CEO of GutCheck is Matt Warta. Matt has been an operator and worked in start-ups before, but his role just prior to starting GutCheck was as a venture capitalist with Village Ventures. We thought a Q&A with Matt would be interesting because having sat in both chairs, Matt has a unique perspective on founding and financing a start-up.
Q. There are a lot of companies offering online market research capability. What makes GutCheck unique compared to others on the market?
A. Like most interesting and large markets, there are a number of companies playing in the online market research industry. There are a couple of different ways to look at this market. The first, which is a pretty easy cut, is whether they are quantitative or qualitative. GutCheck is focused on the qualitative research market, which if you look at the traditional methodologies like focus groups is a $4.5B plus market. The other part of the market is represented by quantitative tools such as SurveyMonkey and SurveyGizmo. SurveyMonkey is the leader in this market, and is large a quite profitable, but firms like SurveyGizmo are finding attractive niches within the overall quant market.
Since the qual market is where we play, I’ll spend more time on it. There are some big differentiators between ourselves and others in our market. The first is in how we address the market. Most of the players in this market are putting traditional methodologies like focus groups online along with a lot of their inherent hassles. They didn’t do much to optimize the the existing process which is where you look for disruptive value. We approached things with a clean sheet of paper and asked what was missing in the market. The big trends we saw suggested that having data in a near real-time way was important; that it had to be budget friendly; and it had to be easy enough to use so that a non-researcher could use it and be successful. We’ve addressed immediacy by providing our respondents in a matter of minutes through a patent-pending recruitment methodology. This, versus weeks for traditional methods. We’ve stripped out a lot of the costs of the full-service options and created a model where agencies and marketers can interview a respondent for as low as $34 per interview versus several $100s per interview in traditional methods. What is compelling about this to our user is that these are the SAME respondents are paying 100’s of dollars for in a focus group setting. And finally, we created a very user-friendly tool where the user can get on and do everything themselves versus having an army of folks set it up and do all the work. We’ve also created a user-friendly business model where users can pay as they go versus being tied into paying $1000s of dollars before knowing if their research objectives have a chance of being met. To boil it down, we are near instantaneous with the data we can provide versus the alternative; we are an order of magnitude more affordable; and the flexibility of our tool and model are unmatched in the market.
Q. During your career you have been both an operator and a VC and recently left Village Ventures to found Gutcheck. What was it about the Gutcheck opportunity that enticed you back in to the operator role?
A. There were a number of things which appealed to me about the GutCheck opportunity. The first was the partnership with iModerate Research Technologies (GutCheck has licensed both technology and know-how from iModerate). Without them, this wouldn’t have happened. As you know, starting a company is incredibly difficult. However, starting with the backing of a company with 60+ people which is willing to lay all their resources at your feet is clearly another. GutCheck is a 6 person organization, but we have the resources of a much larger and much more mature organization. The second thing which was compelling, were the major trends which I spoke about related to competition. This combined with the size of the market, and the limited competition made this pretty compelling. The last driver was the geeky side of me. I really enjoy research. As a VC for the last 15 or so years, I think I developed some solid research skills and this was one part of the VC business I really enjoyed.
Q. Did your experience as a VC change how you evaluated the opportunity and launched Gutcheck?
A. If there is one thing you learn in VC (or should learn) is that it is all about the people. I spent a ton of time with the folks at iModerate before I decided to do this. I had convinced myself early on that this was a good opportunity, but I spent most of my time figuring out if there was going to be good chemistry between me and the management team at iModerate. Like any start up, there will be ups and downs. Having partners you can count on in the down times is invaluable and hard to measure upfront. The investment of time with those folks is the best way I know of getting comfortable with that facet. It has worked out brilliantly so far.
Q. You have been at this for close to a year now. What has been the most rewarding part of starting your own company?
A. As a VC, I remember landing a $15mm Limited Partner for our second partnership which was not a trivial process. The elation I felt booking my first $1k order at GutCheck makes that event pale in comparison. To have built something from scratch with a close knit team and see the fruits of that labor not only from the money going into the company’s bank account but also the wonderful feedback we’ve gotten from early customers is a drug which is hard to communicate the feel of.
Q. Were there any unanticipated challenges that you have had to overcome, so far?
A. Whenever you launch a new way of doing something, there is a ton of education to be done to convince folks who have been using a gold standard for decades to switch. It wasn’t unanticipated, but it is certainly a challenge. One, I will add, that we are well-equipped and resourced to address.
Q. You recently announced the formation of the company and are in beta with your solution. How has the reception been? Any key learnings you would care to share?
A. I have been very pleased with the reception. It has been amazing to see the willingness of potential customers to help us out, and provide us feedback.
From a key learning standpoint, I would just say it is hard work. There is this mantra out there to get stuff out early, and let customers tell you what is wrong. I get that. However, when you are putting together B2B applications which rely on the interoperability of systems and complex algorithms to work well, it pays to take some time to do it right. I’ve been fortunate to have partners, including Highway 12 Ventures, who understand that and who have supported a more deliberate approach.
Q. Any advice for other founders just starting out?
A. My key piece of advice is something one our board members, Dave Toth, told me a long time ago when we were on the board of another company together. And that is the importance of having a partner to start a company with. Someone you have good chemistry with, someone you respect, someone you have fun with, and someone who compliments your skills. I am blessed to have that in spades with my co-founder, Carl Rossow from iModerate.
At Highway 12 Ventures, we couldn’t agree more with Matt when he says ‘it’s all about the people’. We know Matt well, and are excited to have the opportunity to work with such an experienced and capable leader. Like all great leaders, Matt has assembled a tremendous team and set of partners that have created a powerful start to what we all hope will be a very successful company. We hope to be able to contribute in some small way to that success.