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Wednesday, June 29, 2022

What Did Hammerkit Pivot To And What You Can Learn From It

When ArcticStartup was on tour to the UK thanks to UK Trade & Investment, we had the chance to meet innovative and exciting companies that were based in the Liverpool Science Park. One of these companies happened to be the Finnish Hammerkit, a company that have seen it all and was forced to change directions, adapt to the environment and fight to survive. As opposed to overnight success stories, Hammerkit is an example of all the hard work that startups need to go through in order to make it out there.

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At the meeting, we had the chance to speak to the brand new CEO of the company, Simon Bartolo, who replaced Mark Sorsa-Leslie in February 2013. Bartolo shared his insight and plans for the future.

Hammerkit has a very long history that dates back to 2002, as they created the worlds first component-based web application builder. In 2006, the team of develpers: Jani Vähäsöyrinki, Heikki Luhtala, Ari Tenhunen and later joined by Robin Lindroos founded the company in order to commercialize the product.

The first idea was to create a toolkit which would allow designers and developers to build full-blown websites without any programming. It was based on a SaaS model and the WYSIWYG visual editor. 

As as Bartolo tells us, this did not work quite as expected: “The idea was to commercially apply it and allow other developers to build websites for clients and take a profit share. That did not actually work. At that stage the developers thought that it might be worthwhile to bring a professional CEO and my predecessor, Mark Sorsa-Leslie, was brought in.”

Sorsa-Leslie looked at the business and recognized that they have been building very similar website parts and functionalities over and over again. So his idea was to build website parts once and then resell them at a fraction of the cost and time. This was the basis for what Hammerkit now calls their Cloudstore.

Originally the product was going to be distributed through a channel of developers, hoping they would drive demand. However this did not work out quite as expected either.

Bartolo commented that “The next thing we looked at was the [different] channel for Cloudstore and our most obvious market was the PR industry. PR agencies often have clients who need these things.”

Additionally the PR agencies can resell Hammerkit products to their clients, which creates a very powerful distribution network.

Once the product found its market, distribution channel and was validated, the company set out to expand and this is where Simon Bartolo was put in. 

“My job as CEO, coming in, was to make sure that the business was broken up into the right sort of units that will be functional and profitable independent of each other. Everyone knows what they are doing and now we are just trying to build up our channel through generating more interest.” Bartolo told ArcticStartup.

The product itself is a store where PR agencies can easily buy website parts that can be for instance sliders, Facebook applications, one-time websites, etc. The cost of using a store is comprised of a yearly licensing fee that is around €1000, maintenance cost and app costs that can be anywhere between €1500 to €8000. 

This might sounds a little steep to you, but bear in mind that the type of applications in the store would cost at least two times more to develop from scratch. At least that is what Hammerkit told us and what they base their business model on. They aim to make the Cloudstore products be at least 50% cheaper than what it would cost to build it, which helps the end customers budget and also allows the PR agencies to put a mark-up on the products

They already have very large PR players such as Edelman and Hill+Knowlton Strategies as their customers.

Looking forward, one of the options that Hammerkit is considering is opening the Cloudstore to other developers, so that others will be able to resell their web-parts and web-apps through their platform.

So what can we learn from their story? Simon Bartolo summed it up quite nicely: 

“I’ve seen a pattern emerge in many companies. Initially you have an idea and concept, and it seems like the greatest thing in the world. So you go full steam ahead and probably take a little bit of a battering. because between the conception of the idea and realization, you need some adjustment.

What subsequently happens is that with the disappointment comes introspection, and then you take the product that you thought was really fantastic and you start to criticize it.

And there is a really fine balance between being constructive and destructive. So we looked at Hammerkit as a fantastic thing but when it was applied in the wrong place, it did not shine the way we thought it would. Once we could take back the disappointment and look again and try and direct it to a place where it would have a better focus and therefore a better chance. Then we could really start to measure our success.

So if you think you’ve got a good idea, when you get disappointed, when you get pushed back, when you get anguish and heartache. Its part of the process. The darkest hour is just before the dawn. You must never lose sight of the fact that you have something good, but putting it in the right place is the most important thing.

You’ve got to identify where your market is. Just because it is in the wrong place, it does not mean it is not a great idea. “

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