In January 2011, Yahoo!7 acquired Australian group-buying site Spreets in a $40 million deal.
Just 12 months has passed since the startup was founded, but it had already racked up over a million members, with more than 1.3 million vouchers purchased.
The sale was one of the biggest in Australian tech startup history at the time, causing huge waves in the industry. The story of how Spreets made it that far is even more interesting.
Spreets was founded by Dean McEvoy, a Sydney entrepreneur who had been dabbling in startups world for some time. His previous baby was Booking Angel, a pay-per-booking system for local search directories, founded in 2004. It saw some initial success before raising a small amount of money and moving to the US in 2007 to try and expand, but struggled for nearly two years to get any traction before closing in 2010.
“I had been working on this deal for like a year-and-half with City Search, they would never answer my calls, I would be bugging them a million times a week just for some type of response,” McEvoy said. “But I was trying to close this deal and no matter what I was doing, it just didn’t get closed.”
The deal itself was crucial for his business, it wasn’t a funding deal, but rather to incorporate Booking Angel into City Search’s directories.
Just as he was giving up hope, in 2008 Dean received a phone call from his father that changed his life.
“My grandfather had passed away. This was incredibly sad in itself, he was someone who taught me magic tricks and would read me lovely poetry, but one of the saddest parts was the fact that I had $957 left in my bank account,” he recalls.
“I knew that wasn’t enough to get a return flight back, I knew that as soon as I stepped on that plane it was the end of Booking Angel and I knew it would mean the end of my entrepreneurial dream.
“I thought I had wasted years of my life, I’ve spent all this time being an entrepreneur and what did I have to show for myself? All I had was $957 in my bank account.
“And maybe it was my grandfather looking down on me when I did it, but I booked my flight home, then the next day the guy from City Search rang and said ‘let’s do this deal, come down and we’ll sign this contract.'”
Luckily, his flight from San Francisco had a stopover in LA, where City Search’s offices were located. He literally sprinted to a cab to get to the offices, signed the contract and ran back for his connecting flight.
“Once I got home, it was a weird mix of excited and sadness. But after my grandfathers funeral, the reality hit me: I had no money and no developers still working with me. How the hell am I going to implement this deal?
“That was actually a pretty depressing part of my life to be honest — to be 32 and moving back home with your parents, that kinda f***ing sucked.”
Another turning point came when a mate told McEvoy about Mick Liubinskas and Phil Morle at Pollenizer, who agreed to hear his pitch.
“I knew I couldn’t go in desperate so I had to go and get myself psyched up and act like I wasn’t absolutely desperate. I used every trick in the book to not act like the desperate prick I was.
“But thankfully they agreed to implement this [City Search] deal for me, and that was one of the biggest turning points in my life.”
Pollenizer allowed Booking Angel to continue, giving McEvoy the resources he needed for it to operate with City Search. Up until it closed in February 2010, Booking Angel delivered $3.5 million worth of business in the US.
Working with the Pollenizer crew put him with like-minded people and offered many more opportunities to grow Booking Angel and start new projects.
“In that environment my life changed. I got some more opportunities in contract roles with a few other Pollenizer startups and eventually had some money to pay rent and move out from my parents,” he said.
“Finally at Christmas drinks in 2009, I worked up the courage to pitch another idea to Phil.
“I was filling up his wine as much as I could before I was like: I saw this pretty cool thing in Silicon Valley, it’s this group buying thing, we should have a look at it you know. I know there are these devs you have not doing much, with not many projects lined up, what are you going to do with them any?'”
“Thankfully I got them drunk enough and they agreed,” he joked.
The guys then went through many “shit names” such as Mates Rates before finally settling on Spreets for the service. And 32 days working days later, Spreets was launched on Dean’s birthday, 4 February, 2010. Within the first day, $4000 went through the service and the store took off from there.
“We then realised that we really needed to raise some money,” he said.
“Mick and Phil helped me work on my pitch before we pitched in front of Innovation Bay and thought we had canned a really good investor.”
“He agreed at the dinner to put some money in, we met him afterwards and all seemed good. But then the next week he wouldn’t take a phone call or an email”
“That was super frustrating – you think you’ve landed that big fish and then it jumps out of the boat.”
If that investor didn’t pull out, he would have made $11 million from a $250,000 investment.
Luckily for Spreets and Dean, a group of German investors was looking to launch a group buying site in Australia and they were eventually introduced.
“I ended up flying to Switzerland in April and met them there to sort out a deal, and again, I had to fake my best persona of not being bloody desperate when we were.”
Despite Scoopon launching that same day with a record number of sales, the German investors were still keen on Spreets and signed a deal to invest $1.2 million. Nine months later, Yahoo!7 handed over its $40 million for the business.
Since selling Spreets, Dean McEvoy has co-founded another startup called IconPark and acted as an investor/advisor for new startups across the country through Startmate.
He is currently working with a group of successful entrepreneurs on some initiatives that will grow the ecosystem in Sydney.