John Peterson grew up in Silicon Valley. He spent his childhood years admiring titans of the dot-com era and his early adulthood consumed by the charisma of “unicorn” startups. His parents worked for some of the companies he loved, inspiring him to pursue a career in tech himself.
But after a few years, Peterson realized innovation wasn’t improving people’s lives the way he had envisioned. Apps were built to be addictive, rather than serve users’ needs. The turning point came when he read a statistic online that he claimed blew his mind. It said that Americans are no happier today than before the advent of the internet.
“If this stuff isn’t making us happier, what’s the point of what we’re doing?” he wondered. “I realized that doing things made me happy — getting off my bed, and off the internet.”
From that realization came The Nudge, a startup Peterson and his sister Sarah co-founded to encourage people to enjoy their city. They describe The Nudge as taking the place of the “planner friend” or the person in a friend group who always finds the most buzzworthy place to eat, the hiking trail with the most beautiful views or a bustling street fair. Peterson’s company “nudges” users toward getting the most out of life by doing all the planning for them.
Subscribers to The Nudge get free texts from the company about twice a week with full, pre-planned itineraries, or “nudges,” for day trips and activities specific to their region. Premium subscribers also get access to a list of past itineraries on a companion app for $4.99 a month. Right now, the San Francisco company offers nudges for San Francisco, Austin, Chicago, Los Angeles, New York City and Seattle.
Although The Nudge has a companion app, the startup is unique in that it mainly depends on SMS text. While other companies are working on projects that include things like cutting-edge AI, The Nudge has built a company around a nearly three decades-old form of communication that doesn’t require the internet or a smartphone.
Peterson said the reason is simple: “That’s what my planner friend uses,” he said. “My friend doesn’t send me an app notification, or have a personal website that I go to. They text me.”
SMS text is also one of the most effective ways to reach people. That’s why banks, for example, often deliver fraud alerts via SMS instead of an email or push notification. Just over 97% of Americans say they check their texts every day.
Peterson said using SMS allows The Nudge to get a higher follow-through rate, because users are more likely to actually read through the itinerary and consider whether they want to go. This also means they don’t have to bother users too often, reducing the risk of having their communications ignored altogether.
He added that this strategy is all about “aligning incentives.” Not enough of today’s startups are actually focused on the user, he said.
For that same reason, The Nudge also has an unusual approach to data. Since the 1990s, many of the biggest tech companies have made profits by selling ads. “Cookies” track activity so that those ads are personalized to individuals’ needs and desires. Now the digital ad industry is worth $350 billion, and the public remains skeptical about whether tech companies can be trusted to hold so much data about their users.
The Nudge, on the other hand, sacrifices personalization for privacy. Peterson says the only data collected on users is aggregate information about how many actually embark on day trips the tool recommends. The company makes money through its premium subscription service, not ads.
“If we were ad supported, our incentives would immediately misalign with our customers because we would have to start thinking about how to get people to spend as many minutes per day as possible on our platform,” says Peterson.
The no-frills approach has allowed The Nudge to stay nimble and excel in unprecedented situations. When stay-at-home orders had many Americans locked down, it was easy for The Nudge to substitute day trip itineraries for texts offering easy, at-home recipes and online events, for example. When Americans took to the streets to protest the murder of George Floyd, the startup partnered with diversity, equity and inclusion-consultant and executive coach Akilah Cadet to text users with ways to get involved.
The Petersons also discovered that when their users in Austin, Texas, couldn’t use the internet to find out where to buy food or stay warm during a storm and massive power outages, The Nudge was still able to send a text. The texts they sent, containing aggregated lists of warming shelters and food distribution centers, were some of their most successful last year.
According to Crunchbase, The Nudge has raised $2.5 million through a pre-seed and seed round in 2018 and 2020. Peterson estimates they’ll start on a Series A round in 2022.
The company still has room to grow. Only two employees work with the cofounders in San Francisco, with a total workforce of 15. Ten are city directors, distributed across the country to search for fun activities in individual locales.
Peterson isn’t scared, though. He still believes in the startup dream of growing a company from a few employees into something powerful enough to change the world. Taking a page from the startup founder playbook, he quit his job, cashed in his 401k and worked out of his friend’s woodworking shop when he started The Nudge.
“I’ve always been a romantic about San Francisco, and its startup culture in particular,” he says. “People are drawn here because it’s the place to create the future and build our dreams.”