Canada’s online community has taken a major hit this month as two social networking sites with a positive bent had no choice but to shut down after running out of cash.
First Sprouter, a question-and-answer site that sought to help aspiring entrepreneurs by providing them access to seasoned experts, announced plans to shut down on Aug. 2 (but seems to remain online for the time being). Then Akoha, an online game that encouraged its players to enact real-world good deeds in hopes of creating social change, informed its users it would be going offline Aug. 15.
These sites share much in common. Both were run by experienced and celebrated entrepreneurs well known in Canada’s business community – Sarah Prevette is Sprouter’s founder, and Austin Hill is Akoha’s co-founder alongside Alexander Eberts. Prevette was the only Canadian named to Inc. Magazine’s Top 30 Under 30 list in 2010, and Hill was dubbed a technology pioneer of the World Economic Forum in 2002 among other accolades.
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Both also had engaged and enthusiastic communities built around their sites. This was demonstrated by at Sprouter’s Sprout Up events in Toronto, which crammed hundreds entrepreneurial types into a bar to network and watch startup demos. At Akoha, by the constant stream of positive updates coming from users celebrating their personal achievements and reflecting on the good things in life.
In covering these firms for the past three years, I always heard glowing reviews from those who used the sites. Beyond just finding these social sites useful or fun, users seemed to have some real sentiment invested in them – a real emotional bond as part of a meaningful community.
That’s why it’s so unfortunate to see both these sites close their doors due to financial problems. Both were able to build their businesses during a tough recession, and it must have been a painful decision to now have to bow out.
It’s hard to say how things could have worked out differently for the sites that seemed to enjoy success delighting users, while failing to generate revenue. Perhaps if more investment dollars had been available to give these social media startups a longer runway, they could have made it.
When covering Canada’s startup community, it is not unusual to hear about the lack of venture capital available in Canada compared to the U.S. Most agree Canada’s private investment climate is more cautious overall, and therefore perhaps unwilling to take risk on the new and relatively untested business model of social networking sites. Consider the amount of financial backing Facebook and Twitter required to launch and then grow their networks. It took years to build up an enormous user base before finally generating revenue, only very recently.
Even if the social media space is a little less positive at the end of this summer, the user community can take heart at some good news. Both Prevette and the Akoha co-founders plan to eventually take on the challenge of building new startups.
Let’s hope that next time around, they’re able to find money as well as they’ve been able to breed good will.