Why Plum Failed: Lessons Learned from a Startup Collapse

Great creative still requires great execution

I joined Plum about a year ago believing that it could help transform the awful process of buying flooring for your home. However, Plum didn’t survive. It has been shuttered. When a startup fails, the team still gains value from the lessons learned by the experience. So I tried to think through the experience and break out the lessons I’ve learned.

What Plum did right

Plum stacked innovations in an industry that still operates like it’s 1982. Flooring is a more complex version of the bedding industry. It’s designed to confuse customers so they can’t compare pricing. The industry is dominated by a few big players. Those big players have no incentive to upset the finely tuned industry relationships that enable their sales model. It will take an outsider to transform this into a consumer-first industry. And it will take investment dollars.

Plum did a few things right. It acted as a DTC player, creating a very specific flooring that was designed to perform well in residential homes. We designed an intelligent algorithm that could accurately predict the size of your rooms; we used your address to pull publicly available data like age of the home, location, total square footage, number of bedrooms and then ran a regression model to accurately know room sizes. This model was working.

We also were able to sell installed flooring on marketplaces like Amazon where our competitors could not (they all worked off of measurements). And we created a consumer-friendly website that captured over 20% of our visitors information. Then we used a nurturing strategy to convert them over time.

But, we still failed. How? Lessons learned

Plum was shuttered at a very odd time. Our run rate had increased to about $2 million a year. We had just confirmed deals with two large players in the industry who expected to send us approximately $5 million in sales in 2022. And we were very close to a deal that was even bigger with a critical player in the industry. What happened? Here are the lessons I’m taking away from this:

1) Never found Product/Market fit. One miss is around product/market fit. This is always fatal for a startup. You either find it or you fail, period. We were selling high end carpeting to a market that, I believe, wanted a deal. I think we had over engineered our product for the wrong buying group. Most million dollar homes don’t have carpet in them. But our average order was much too high for a hundred thousand dollar home.

I think this is one of the critical misses. Because we had invested in samples (another lesson below), it was difficult for us to iterate on the actual product without a substantial hit to our cash position. We iterated a ton on our mathematical models and consumer interface. But we needed to test less expensive versions of our core product.

2) Sample expenses were killer. We started at the beginning by offering free samples of our products. This was expensive and we never really solved the issue. We had a 3PL that would take carpeting, cut it to sample size and send it out for us. But it cost us around $40 per sample shipped to a consumer (outside of customer acquisition costs). This worked well to gain traffic early on and set us apart from others. But the costs of this program quickly devoured cash on hand that the company had available. Because of the 3PL’s investment in carpeting for us, it was difficult to change this arrangement.

We should have started by utilizing digital samples or shipping them out of our garage. This was not sustainable and never solved.

3) Wrong investment group. Investors in your startup are actual partners in the business. It’s important to have the right investors and make sure they are aligned with your team. Our investment group was not familiar with the flooring industry and did not really understand DTC or ecommerce startups. So they were continually perplexed by the decisions made. The executive team spent a ton of time trying to educate them on the business and why we were making changes. This was both a time suck and a problem since they had voting control of our direction.

The ultimate problem with Plum is that the investment group decided not to continue investing even though we had nailed down those contracts mentioned above. They didn’t understand our business, so they didn’t understand how close we were to succeeding. When they pulled the plug on their investment, it killed the business instantly.

4) Didn’t say ‘No’ enough. We tried a lot of things. Sometimes an insane number of tests at the same time, which meant we never fully committed to any of the tests. We got things up quick and dirty and kept doing it over and over. I think Plum could have been more effective by slowing the initial focus on rapid growth and testing a little slower.

Until a business clearly hits product/market fit, it should conserve cash in every way possible. Slow your building. Slow your marketing. Keep everything slow until you see a magic jump that tells you that product/market fit has arrived. We added on too much staff and agencies and ideas to try and grow fast while looking for product/market fit. This is always a mistake. Control everything until you know exactly where to apply gas. We thought we had the financial backing to go back for investment dollars, so we did not worry enough about cash burn. Bad assumption.

And so it goes

This is my first take at thinking through how Plum could have survived. I strongly believe over time that a company like Plum will completely disrupt the flooring space. Software is eating the world and there is absolutely no reason why it won’t eat the flooring business (which *needs* to be eaten).

Flooring is a tough market because you must build out installation capabilities to fit demand. And installers only want to join when you have the demand to support them. A chicken-and-egg problem. Plum had a contract with the two largest players in the market saying they would install for any other online-only competitors. Great start, but we needed a few other things to go our way. What do you get from a failed startup? Experience. Make the most of it.

Jay Allen
Digital believer. Started an ecommerce website in 1997 and been focusing on digital marketing ever since. B2C, DTC, B2B, I've done it all from building campaigns and up.
Atlanta, GA