Could this happen to my company?
That was surely one of the questions running through the minds of the assembled tech leaders and founders attending the tell-all fireside chat between Sampler founder and former CEO Marie Chevrier Schwartz and BetaKit editor-in-chief Douglas Soltys at SAAS NORTH 2024 on Nov. 13.
“In hindsight, [the pandemic] made me, as a leader, ultimately ignore some of the fundamentals of the business that were very difficult.”
Marie Chevrier Schwartz
Sampler founder
On The BetaKit Keynote Stage at SAAS NORTH, an “extremely nervous” Schwartz unpacked the factors that led to her decade-old business folding after filing for bankruptcy earlier this year.
Schwartz, who had not spoken publicly on Sampler’s shuttering until after BetaKit’s story in August, told the SAAS NORTH audience she had decided to tackle the stigma surrounding failure. She hoped to let everyone in attendance know that they’ll likely fail at some point too—and that’s OK.
RELATED: Sampler files for bankruptcy
“In my reflection, I realized that if I was feeling lonely, and 80 to 90 percent of businesses fail, then there’s a lot of people who have felt lonely, and a lot of people who will feel lonely,” she said. “If I could be an example of someone who survived through that failure, perhaps we as a community of founders could rebound faster [in the future.]”
“I’m using failure with intent today, because I don’t want to be ashamed of saying failure,” Schwartz added. “In many ways, it’s not a failure. But people might label it as that, and I think that’s OK.”
Product-market fallout
Founded in 2014 and based in Toronto, Sampler created a digital platform for product samples of consumer packaged goods (CPGs). Working with clients like Unilever and L’Oreal, and retailers like Kroger, Sampler reached 4.5 million users across Canada and the United States, with 1,000 CPG brands and agencies as customers and $10 million in annual recurring revenue. At the date of its bankruptcy filing, Sampler had total liabilities of $12.9 million and total assets of more than $300,000.
Addressing the attentive crowd, Schwartz detailed what went wrong at the company. From her perspective, Sampler suffered from a series of market shifts from which it could not recover.
“In summary, Sampler lost product-market fit 10 years into running its business.”
Schwartz noted the COVID-19 pandemic “significantly accelerated” Sampler’s business initially as consumers moved away from brick-and-mortar stores and squarely into its domain of online retail. The former CEO said she took this as a signal to significantly invest in the business and gear up for international expansion, but acknowledged it likely wasn’t the right move.
“In hindsight, [the pandemic] made me, as a leader, ultimately ignore some of the fundamentals of the business that were very difficult,” Schwartz said. She added that, while Sampler positioned itself as a Software-as-a-Service (SaaS) company for the sake of fundraising, the company was ultimately beholden to the constraints of the physical, not digital world—namely, shipping and logistics.
“At the end of the day, we had something like a 35 to 40 percent margin. We had very difficult unit economics,” she confessed.
In the midst of a pandemic-fuelled surge in demand, the low margins didn’t matter as much. But when the global supply chain crisis impacted Sampler’s CPG customers, the reality was laid bare. As boats full of goods sat in ports, CPG brands were missing key ingredients for their products, Schwartz explained. If a potato chip manufacturer couldn’t stock shelves with product, they weren’t going to provide samples.
Sampler continued to see growth until it was hit with the higher shipping costs that followed in the pandemic’s wake. The United States Postal Service increased Sampler’s delivery costs by 200 percent, according to Schwartz, eating further into the company’s margins. As the world began to open back up Sampler’s customers were then very eager to return to in-person shopping.
“All of us wanted to go pick our veggies again, so that was bad for the business,” Schwartz said. “In summary, Sampler lost product-market fit 10 years into running its business.”
No runway
Amid these troubles, and one year before declaring bankruptcy, Sampler became a buyer to try and expand its business while courting a Series B funding round to extend its runway.
Sampler acquired beauty industry digital sampling agency Abeo in April 2023 to strengthen its underperforming beauty category and accelerate its expansion into Europe and the United States. The company’s second acquisition, AdMass, came three months later. The artificial intelligence-powered software was meant to help brands and their agencies create data-driven, user-generated content promotions. Sampler hoped it could start leveraging its large dataset to monetize new features following a more conventional SaaS business model that Schwartz hoped would provide the company higher margins.
“We were very confident that the strategy would hit traction fast enough for us to raise our next round,” Schwartz said before taking a short beat. “We were unable to raise the next round.”
Schwartz said her investors were with her “in the trenches,” sending her meals and offering to hire a nanny as she tried to juggle her company’s woes while expecting a baby. The CEO also made clear to the audience that it was her responsibility to find new investors who would get her company to the Series B level. But the market demand wasn’t there, and Schwartz claimed she was fundraising while a “huge exit” of venture capital from the CPG space was taking place. Ultimately, all those factors together signalled that her business was no longer viable.
“The next day there’s nothing.”
Toward the end of the conversation, Schwartz acknowledged that she wasn’t the only one affected by Sampler’s failure, noting its impact on investors, partners, and employees. She detailed how it felt to lose everything she built her professional identity around, while navigating the confusing process of bankruptcy.
“What happens in bankruptcy is that, one day, you have everybody working together, and then the next day there’s nothing,” she recalled. “Your email gets shut down. You have to return your laptop, it’s gone.”
“You don’t have any funds left, right?” Schwartz later added. “So you can’t pay the lawyer, you can’t pay the accountant, your investors are in a conflict and so, frankly, there’s just nothing for you to find.”
Schwartz noted that being open about Sampler’s failure has helped create a support network as rediscovers her passions. Now the CEO of tech community organization TechTO, she’s dedicating her time to supporting those taking on “the extreme sport of building technology companies.”
Schwartz currently has at least one person per week asking for her help navigating the unspoken parts of the bankruptcy process, reinforcing that Sampler’s struggles are not an isolated incident in Canadian tech. She is working with “a few folks” on a project to help make that process easier to understand, and made a pitch to accounting or law firms in attendance at SAAS NORTH for their support.
Soltys concluded the conversation with one more prompt for introspection, asking Sampler’s former CEO what she would say to the Marie Chevrier Schwartz of 2013.
“You are going to come out of this the wealthiest person ever,” Schwartz concluded, taking another beat. “In experience.”
Images courtesy SaaS North.