Cerdafied...startups, people & the variety hour

Startup Tales: Cc:Betty/Threadbox

After my Jangl experience, there were several criteria I had for my next venture: 

*Keep funding amount and team small, growing only with validation

*Solve a real consumer problem 

*Make sure it’s both web and mobile day 1

*Make sure there’s an efficient way to acquire customers day 1

*Have a low cost structure

*Use open source technologies

*Hire only the best

*Naturally viral

*Take investment only from people that want to validate the thesis with me

I graciously joined Venrock as an entrepreneur-in-residence in the Fall of 2008. I didn’t mean to time it with the world’s financial crisis, but why not. It’s a good time to start a company when most people aren’t looking right? 

I spent the better part of three months thinking and mapping out over a dozen ideas for new companies. There was Chadr which was a web and mobile topic-based chat room. There was Smash which was free mobile messaging. There was MyBurbs was a neighborhood, trusted Craigslist. There was Swarm which was location-based deals on the go. There was Tkrew which was teens doing online work for brands they love. Then there was Cc:Betty, which was a smart email service. (That links to a demo at DEMO). Disclaimer: The night before I ended up in the hotel bar pre-pitching press until about 3am, so I was in fine shape for my 8:30am demo...

Email hadn’t really improved materially in forever, and there was a particular set of problems with group email. For example, I email a group of people, and someone replies-all. So far so good. But then someone replies only to me, leaving the rest of the group out of the loop. And then someone else forwards the message to others, disconnecting the conversation even more. Then there’s the poor bastard that has 21 messages out of this parked in his inbox. Where to start? Who said what when? What do I really need to know? You get me.

Enter Betty. We came up with a crafty “onramp” to using Cc:Betty. Email. So in a group email, simply add “[email protected]” to the message. We would take that email, it’s contents and recipients, and re-create it in a shared “mail space”, and Betty would email everyone a notification saying “Heya I’m Betty and I’m tracking this conversation for y’all...[link]”. Anyone receiving that message can login and have a very quick glimpse of the entire context of the conversation. Any attachments are in their true form and actionable, i.e. photos, videos, music, calendar dates, etc. It was sort of an awakening of the whole conversation. You could filter on people, content, to-do’s, links, votes, and locations. We took it to market in an open beta and got our first 100,000 users. It was a great sampling size to learn from and nurture. With a seemingly effective onramp in place, a built-in network effect, and an elegant UX (at least for those days), the next box to check was distribution.

We engaged both Yahoo and AOL to see if they’d be willing to let us integrate Cc:Betty into their email platforms as an app. Combined there were a few hundred million people in addressable market. If we could pull off a seamless integration, these could prove to be customer acquisition engines for us. The good news was, they were both planning 3rd party programs, so we inked a deal with both of them to be pilot partners. 

With a couple distribution deals in hand, a strong beta with compelling engagement patterns, and some validating press, we closed seed funding with Venrock leading, Hillsven and Seraph Group following. 

We built the AOL integration into an AOL beta environment, getting lots of good feedback very quickly. AOL seemed to like us too, sort of courting us in seemed. They’d show up with doughnuts and just want to hang out and learn more. In parallel we built a proof of concept integration with Yahoo, but we were awaiting some more evolved APIs to do what we really needed to to. But then the startup gods pumped the brakes... Both AOL and Yahoo were in the midst of management change-overs, and both deals were put on ice so new leadership could evaluate the business and set course for a new strategy. Realizing these were both going nowhere fast, I emailed Brad Garlinghouse, who had just joined AOL, and I killed our deal. And since we didn’t have anything in production at Yahoo, I just let that fizzle. With our distribution outlets dead, we went back to focus on our own property.

The good news, was we had a very small cost structure, and were only 4 employees, so we could experiment and turn on a dime. We kept at it, grew the user base and grew engagement. Over the course of a few months, we grew to several hundred thousand users. We learned that 30% of our users were using Cc:Betty with friends/colleagues/teams, and 70% were using it in the workplace. Of the 70%, the average number of “mail spaces” was 9, the average number of people in them was 7, and the average number of messages posted per mail space was 39. On some level this was a private Facebook, but on other levels it was an email replacement, and at least a Basecamp replacement.

People who grocked Cc:Betty loved it, but others totally missed it. Some thought Betty was a spam bot and others just don’t play nice with group technology tools regardless. It turned out that crafty onramp we had was too clever for its own good. We needed to simplify, and we needed to play to the heat in the workplace user base, and fast. 

With an arsenal of data, we spent late Fall and Winter of 2009 rebuilding Betty into a consumerized enterprise looking product, with all the bells and whistles. We added real-time, presence, threaded messaging, a whole new blue UI and UX structure, nixed the cc’ing part, and rebranded as Threadbox. The 70% workplace users loved it. We grew about fivefold the first month, and engagement grew about threefold. Over the course of a few more months, we were deducing the notion of a premium service. Our data told us companies would pay for hosted versions, for enhanced security, self-branding, and additional storage. 

Unlike my last go around, we had a very supportive and engaging board. We were close enough that I could call them with the best or the worst of news. That makes all the difference in the world. But I’ll never forget the board meeting where we presented the data and the plan for a premium service. We had about six months financial runway, so naturally my concern was - can we build the premium service and grow it fast enough to matter (meaning, fast enough to get enough market data to slam dunk a follow on financing round and keep building)? We would need to add resources and spend against billing, customer service, etc. The news and plan was met with some skepticism.

While the board were pleased with the pivot results and our earnest execution of Threadbox, it kind of felt like that awkward moment when you first realize the girl wants to break up. I really loved Venrock and Hillsven though, and they loved us. So we were all keeping it real. Bobby Lent from Hillsven was the first to speak up...

”You. You guys.. You’ve done some really great work here. But man, you gotta ask yourselves, is this what you really want to do? I think you’re capabilities are better than what this road has cut out for you. Michael, when we first met you I thought you were the best bus dev guy in our portfolio, and now I see you as the best product guy too, and I mean that. Do something bigger, it’s ok.”

Bobby was right. We weren’t enterprise guys. We were consumer guys to the bone. Our thesis, however well thought through, didn’t play out as big and as soon as we needed. 

Brian Ascher from Venrock added, “We liked our bet here and think you guys are great. But if you look around this consumerized enterprise space you have Box.net, Dropbox, Yammer, Xobni, and a whole cast of others. They’re all raising upwards of $40 million in funding, and spending years to build out. And guess what, none of them have exited yet, so we don’t have an obvious proxies to deduce. We got to ask ourselves, do we want to spend the next 3-5 years doing this... Michael, what do you want to do?"

I got the memo. And being honest with ourselves, we all completely agreed.

Over the course of about 3 seconds I recollected having dinner with Aaron Levie four years prior, when Box.net was just a prototype. I recollected a conversation with George Zachary, a Yammer board member two years prior. I recollected various conversations with Matt Brezina from Xobni. I recollected a lunch with Drew Houston from Dropbox at SXSW. All these guys were swinging, raising lots of money, spending lots of time. Is that what we wanted to do? Is that what the investors wanted to do? Could our captable even tolerate the dilution we'd need to go the distance? (Lots of times when you're an EIR and the VC you're an EIR with funds you, there are captable implications that make it just a little more complicated). 

Regardless, the problem we solved wasn’t big enough for enough people to warrant a venture business, but it could be a great addition to a larger SaaS offering or social property. We would spend the next six months improving the KPIs and we’d go on to sell the company. 

We quickly engaged and pitched a leading CRM company and found a really nice product fit with them. At the time they were getting ready to go to market with a social product that we were becoming experts in. We started negotiating and had a seemingly good rhythm, but they started dragging their feet and trying to buy time. Clearly they were hedging their bets with another acquisition candidate, or they weren't really as serious to begin with.

We pitched Facebook on unifying all messaging into one real-time service. Although they didn’t buy us, but they built it - sort of.

Google had launched Google Wave to great hype, but users had a difficult time getting their heads around it. We talked to them about a potential deal, but that discussion involved moving to Australia and spending four years on an earn out. We kept pedaling. 

Then I reached out to Mike Jones, the CEO of an aging Myspace at the time. Mike was a nice guy I had known from his days at Userplane/AOL and my days at Jangl. I gave him the same pitch I’d given Facebook. We would overhaul Myspace mail, instant-messaging, groups, forums, and create a whole new real-time conversation piece: Myspace Threads. Mike was very receptive so we started working on a structure. He got some GMs involved, corp dev, legal, etc, and within a couple months, we would be the last acquisition Myspace ever made. In July 2010, I would become a product and technology head and my team would be a ninja crew that would start chipping away at Myspace Threads, and in hopes of a full stack rebuild of Myspace. But that's all a story for another day.

 

 

A startup tale from the crypt

Some of you have been around long enough to remember the web 2.0 movement. That seems like a long time ago. One theme of web 2.0 was "social telephony". This was the notion of using phones for more than talking or texting, and doing so in new or specialized ways. This article in USA Today talked about some of us. Many focused on cheap (or free) long distance, some focused on celebrity voice mail numbers and widgets, some focused on voice-based SMS. My company planned to focus on a platform for phone privacy (make calls or texts without exchanging real phone numbers...for dating, selling stuff online, etc), personalization (personalized IVR, i.e. call me and press 1 to leave a message, press 2 for poker night, and press 3 to hear my favorite song), and convenience (we didn't quite figure this out). We started with privacy in order to focus, and we stayed there for the better part of three years. 

The company I co-founded and ran from 2005 to 2008 was called Jangl, right smack in the middle of web 2.0 and at the origins of phone apps and smart phones. If this company started today, it would surely be an iOS and Android app (and would surely be questioning whether the mobile-first approach made sense), but in those days it was about the web.

For context, it was a time when it was still more expensive to start a company; it was still common to raise a couple million dollar series A with slides and a vague half-working prototype; it was very common for investors to require senior management teams at early stages; it was very common for investors to replace the founding CEOs with professional CEOs to de-risk the investment; and it was certainly a time when startups where an inside baseball thing and not real transparent (I may have, on this very blog been among the first to do so, with a lot of play by play).

The first plan was to launch a web-based beta version of Jangl (which was initially called Buzzage), which would have simple account signup, and you'd get a phone number in any area code. That phone number wasn't your real phone number. It was a Jangl phone number. You could post it on a dating profile, a Craigslist ad, an Ebay auction, a flyer, whatever. When people dial that number (much like Google Voice but before Google Voice), they have to state their name, and while they wait the phone service finds you. You answer the phone and you're connected and talking. All the while, the caller never gets your real number. You could also block that caller to discontinue access. We didn't support text at the beginning, because texting hadn't blown up yet. Plus it wasn't really even possible quite yet. Anyway, the plan was to get this first version to beta for about 1000 users, and then in parallel try to get a pilot to integrate a partner-centric version with a more established web property. Between these two paths, we could get some validation and some indications for how to go forward. 

The beta went well, we got some usage and what felt like the beginnings of a cult user group. But the big question was that of customer acquisition. That's where the parallel plan of a partner came into play. The partner targets were Friendster and Ebay, but the most ideal would be a big dating site like Match.com. Online dating was no longer taboo, and some of these sites had tens of millions of paying users to tap for additional services. And what better place to implant a technology service than in someone's pursuit of sex? And wouldn't ya know it, Match.com agreed to a pilot. We had pre-defined pilot success so the moment we achieved it, we pressed Match.com for a nationwide rollout. They agreed. They sold the service for an additional $9.95 per month and we were going to share in that revenue after our costs. 

So within three months of funding we assembled a team, rolled out a beta, and rolled out a partner pilot - and then six months later had a revenue generating business on our hands. So far so good. We even closed a 2nd round of funding based on the traction and momentum. While the partner-centric approach generated revenue, we knew we couldn't build meaningful value without a direct-to-consumer business. We needed to find a way to get millions of users, because that's where value was attributed at the time. So with every partnership we landed, we tried to find angles to own the user. We found it never worked in premium environments like Match.com, but it did work in the new platforms that were emerging such as Facebook and Open Social. 

In Facebook we created an app called Phonebook, which provided a list of all your Facebook friends, and auto-provisioned Jangl numbers for each of them. By then we'd figured out how to do text over Jangl numbers, so you could either text or call any Facebook friend on Facebook. Even if they didn't have a Jangl account already, your voice mail or text would be emailed to them in Facebook. When they clicked to get your message they'd install the app and get Jangl numbers for all of their friends. It was a good loop. We managed to acquire about 8 million users that way. And millions more in other social networks such as Myspace, Tagged, Bebo, and others.

In parallel, we did a huge deal with FriendFinder Network, which essentially auto-installed us in many tens of millions of user's profiles. Though we were installed, not everyone used the service, but enough did to quadruple our revenue. 

Then we launched an enhanced version of Jangl called "Call Anyone", which was a web service which allowed anyone, anywhere, to enter an email address and get a Jangl number for them. Like in Phonebook, they call or text a message, then we email the other user with that message, and once they receive the message they get a Jangl account too. It wasn't viral, but it did have network effects. As we grew the service, we did a lot of analysis on developing a premium version. We didn't have enough evidence that users would convert to premium quite yet. There's usually a time and a place for that, and we weren't there. So we started piloting audio and text ads in calls and texts. That sounded promising, but we'd need to get well beyond test budget levels to make it happen. We definitely had the inventory for it. 

At this point we had a growing branded business with a potential ad business and a profitable white label business. Three years in and I felt we were just warming up and had a lot of foundation to build from. Then a handful of companies started sniffing around with potential acquisition interest. We spent a good deal of time and had some close call wins, but we were happy to keep building. Facebook was working well for us, and iOS was getting hot too so we began building an iPhone app. There was lots to look forward to.

So far so good right? Sound about right? Ok, let me tell you how it all unwinds. But I have to rewind a bit. This is kind of like when you're watching Lost, and then they go back to another place in time... Sorry. 

When we first began to fund raise, we got a $5 million series A term sheet, and it was within like the first 10 days. The lead investor committed to funding half and we were required to bring a 2nd investor to the table with the other half. We spent nearly four months trying to find a syndicate, and finally found one. But since so much time had gone by, both investors lost confidence in the big raise and presented new terms. The new terms were $2 million series A, half from the lead and half from the follow on investor. However, of that $2 million, they were only willing to invest a portion up front, until such time that we reach beta with at least a few thousand users, obtain a pilot as a partner integration, and hire an experienced VP of marketing the board approves of. We did all that, and got the rest of the money. They wanted us to have a VP of finance too, so we made that hire. Then they wanted an more experienced VP of engineering, so we made that hire. We did all of it. 

Unfortunately, none of those hires worked out. They were later stage folks, with higher income requirements, and larger team and budget requirements. So what seemed like "de-risking an investment" to our investors, was in fact poison to our company. It slowed momentum, reduced team morale, and our financial runway. I ultimately had to fire them all.

We in fact burned through a handful of VPs of Engineering actually. It wasn't because we were bad at hiring necessarily, but rather that we had to have investor buy in on the hires, and they had things they were looking for that we weren't. I finally pushed back with investors on the issue and took it over myself, and hired a mid level entrepreneurial guy that did a perfectly fine job. (Ironically, running product development groups emerged one of my core competencies).

Later, and at the right time, I hired a solid, startup-oriented, entrepreneurial VP of marketing. He was great. He had all kinds of great customer acquisition methodologies and tactics. One thing he did was buy Facebook app installs for $.25 each, through Zynga (before they were called Zynga). We'd never heard of a lower cost per customer add before. He was helping us move the needle. Unfortunately that experienced VP of Finance I had to hire... he thought it was bad business practices, and had never heard of such things, and ran behind my back to tell the investors he was beholden to. That led to a lot of unnecessary scrutiny and bloodshed, because the investors themselves weren't hip to emerging customer acquisition practices either. I had to earn back investor confidence and fire their boy at the same time! But the snowball was just getting started.

The investors always had it in mind to replace me as CEO. I was considered too young and inexperienced at the time. A board meeting never went by without that topic surfacing. If we had a shitty quarter, "let's start recruiting a CEO", if we had a terrific quarter, "let's start recruiting a CEO". Even when I closed the Match.com deal and got us to revenue within 9 months, "now's a good time to start thinking about a CEO". The "team issue" they perceived wasn't real. It was completely manufactured by their requirement and perception that an older, experienced team was needed to break this new kind of business through. My argument then, as is my argument now, was that no one had done what we were doing before, such that there was no better team than the team that was making it all happen, to make it happen! And yes, of course, when we achieved some particular level of validation and scale, it would obviously make sense to bring in more help to reach new inflections. But we weren't there yet. Of course, nowadays investors in startups tend to favor the founding teams and younger ones in particular more, and for longer - and that's a great trend. 

When we raised our 2nd round of funding, we got a new lead investor that believed in us, in what we were doing, and how we were doing it. The original investors followed and maintained their level of ownership. So by then the board make up was each investor and myself, and we had a plan to get an external 5th board member. The new lead investor spent more time with us, really enjoyed us, and really enjoyed building. This was a complete night and day difference compared to the other investors, and it rang true in board meetings. Before too long, each board meeting became a pissing contest. It was the new investor and I against the other two original investors. It felt like we were trying to build and the others were trying to kill it. But that's what it feels like where there's a misalignment of interests and broken glass all over the place.

We fought the good fight for as long as we could, but when it came time for us to raise yet another round, it was hard to push forward. The early investors wanted to sell, the newer investor wanted to invest. But it would be hard to take on new investment without the cooperation of the original investors. The newer investor and I talked about doing a recap and moving the older ones out, but we didn't necessarily want an ugly situation to become uglier. Life was too short for that. The only way the original investors would continue to invest was if the new funding round came with a new CEO. So then we were on a multiple path plan - which if you ever find yourself on, it's a spiral... We kicked off a fund raise for a series C, an expensive recruiting search for a CEO, and a banker engagement to sell the company. Every good investor and every good CEO candidate smelled blood. In fact, one very prominent investor loved the team, loved the traction and the trajectory, and was ready to invest, until he got to the stage where he met with the insider investors. When he found out they were trying to replace me as part of the round, he ran - and he told me why. He advised me on the side to just focus on the sale and move onto my next venture. He even suggested I maybe come work with he and his firm, which was a nice gesture and piece of well needed validation at the time.

So we met with all those companies that we'd met with earlier on who had expressed M&A interest, and others too. Google had already bought Grand Central so they were off the table. Match.com weren't acquisitive. Ebay didn't think people buying and selling really wanted to talk to each other. Nevertheless, with what had now become a distressed situation, we managed to get a deal on the table with a buyer. The buyer would need to spend 21 days in diligence, but terms were decent. They were going to buy us, keep half the team, and let the other half go with 90 day packages. During diligence they saw how close to being insolvent we were, and smelled blood. They dragged their feet, and then offered lower and lower prices. They also found some potential legal risk because there had been a lawsuit with a Match.com user who claimed our technology led to stalker threats to her. We disproved her claim and it wasn't material, but the fact that it had happened didn't help matters. The buyer wanted indemnification and the board wouldn't honor it. Our board decided to walk. And then two days later decided to come back to the table. Then walk, then come back, etc. The investor board members were holding out on deal points so I was just winding and unwinding the situation, over and over. (It's as if they thought we had some leverage here. I think I always thought, the leverage they should have is that if the deal doesn't work for them, they would just continue to fund it forward). We ended up back at the table one last time. With a less optimal deal (but a deal nonetheless) on the table, we were marching toward a close. But with 5 days left of cash, the buying CEO called me and said, "I'm sorry Michael, there's just too much bad blood now. We liked you and the team, but we just aren't comfortable enough to move forward anymore."

When I got that call, it was the Saturday before a Cinco de Mayo, and I had people over the house for a well needed bender with a side of tacos. So I had to carry on the party as if everything was fine. But it wasn't. Later that night I called an emergency board meeting. I was hoping we could do an inside round or do an extended bridge to buy more time for a better landing, but everyone was done by then. I had five days to sell the company and find people jobs, or fire them and close the doors. 

I managed to get to deals on the table...both of which we'd take in favor of a wind down. But rather than choosing one, we chose both. I worked out a company and partial team deal with Live Universe, which was started by one of the original Myspace founders. They wanted to take the technology and roll it up into a super company he was forming. They wanted me to run it, but the prior CEOs that had rolled up into the venture were all disgruntled or gone. I chose not to go with the deal personally, but made the company/team deal happen. In parallel, I did a team-based deal with Jajah. They were interested in the DNA and the business deals we had in place, since they were getting deeper into managed services. So at the end of the day some people went to Live Universe, some (including me) went to Jajah, and some lost their jobs. 

The ends certainly didn't reflect the means of Jangl. There was real traction and real hard blocking and tackling going on. But there wasn't an opportunity to continue nurturing and building. The were sets of circumstances, that when combined yield failure.

There were lots of mistakes made by me and by the investors, so in no way is this a story about the good guys and bad guys. It's a story of circumstances that lead to outcomes, and the lessons along the way. I would make bullet points and write those lessons here, but I feel I've actually listed these out ad nauseam on this blog over the years. So poke around between 2005 and 2008 and you'll see what I mean. I'm sure you'll be able to correlate various posts to this story. 

---

About two months later, I was in Mexico on an annual trip with my family. I got a voice mail from a top tier investor. It said, "Hey Michael, I heard what happened, I'm really sorry, I hope you're not hanging your head to much on this. Shit happens like this everyday. What do you think about building your next company with us?"

Inside a tech startup (Internal Jangl email from 2007)

A buddy of mine who ran corp comm for Jangl for me back when, forwarded me an email I had sent to our entire company (Jangl) back in mid 2007. Reading it was a lens into web 2.0. It was basically me trying to rally a tired team through a product launch into the social graph, in the face of a fund raising process. Enough time has gone by that I thought I'd post it up.

---

We made a decision this past Friday to commence the pursuit of a 3rd round of funding. The plan was to originally to have "Call Anyone in the market place 60 days before the fund raise, so we could get some better adoption indications. But given that we need to budget 6 months for this process, it's best to get started now, selling on what we've accomplished thus far, on whatever hype we can muster around "Call Anyone", as well as pending launches with Yahoo, FriendFinder and most notably facebook. 

I've met with 3 venture firms this week already, on short notice. They’ve all been watching us, and they were all very eager to take the meeting. This alone is huge. Even better, each meeting went very well. These firms as well as any others we excite, will start looking at our user adoption as they dig into their diligence on the company.

At this point, we need an absolute all hands on deck to maximizing our growth rate. 

Engineering: the best way to help is to nail down the hot fixes coming up, get international fully working, get SMS working, and most importantly get facebook off the ground. Since we're coming from behind we need to get this launched as soon as humanly possible. facebook has this social graph concept that works beautifully when getting injected early on into context. iLike for example already has over a million users since facebook opened up a couple weeks back. That's what we need. Soon there will be 100s more applications on facebook, so we don't want to get lost in the noise. So the sooner the better, for many reasons. 

Marketing: launch every marketing initiative in the plan possible to maximize user acquisition potential. I know you need promo codes working in order to learn what's working and what's not, but we must sprint - even if it means we can't 100% attribute the growth. This sounds crazy, but the #s trump the learnings in the next month or so. 

Finance: looking for your support during VC diligence processes and eventually thru closing a round. We'll also need any support marketing or engineering may need from an administrative or purchasing stand point. 

If you all can help in your areas, then in addition to lining up investors at good valuations, I'm focused on getting a launch date committed for FriendFinder and Yahoo.

We all have what might sometimes seem as impossible tasks at hand. And it can feel particularly hard when we’ve just finished a long, tiring stretch. But let me step back and keep you thinking about the big picture.

Professionally, you may never enjoy as much control over your own destiny as you do right at this moment. You are one of less than 25 people chosen to help build this thing. Your voice, your talent, your late nights hard work – they all make the difference, and will continue to. Each of us, as professionals, may never get the chance to get so close again. So we must push this over the top.

Please keep everything confidential, because until we close the round, there's no sense in the outside knowing what we're up to.

Let's make history. 

 

 

Well, with so many people blogging about startups and the how-to's, this blog isn't as necessary anymore. (Although thousands of people still seem to come by here so who knows). I feel like telling my Myspace story next, but I'm still deciding if that's worthwhile;) For now, my honeymoon with NYC has ended, and it's game on for the next quarter. Meantime, while on the train the other day I began to think of things that make up a good product guy, and began to tweet them (attached).

Announcing VEVO's new product head

When I was 9 years old commercials started airing about a new TV channel for music videos. The commercials were clips of rock stars saying "I Want My MTV.”  And so a music revolution was born.

Over the years, music videos would take on lives of their own and would bring about an unprecedented sentiment for music. Music became more visceral and cerebral at the same time. And for artists, music videos became a standard; a must-do in conjunction with any new release or live concert. It became a deeper means of expression and promotion at the same time. 

By the mid 90s, while making music in my spare time, my day job focused on building out network elements that make up the Internet - focusing on Internet access devices, remote access servers, and routers that enabled high speed Internet service. Shifting gears, in the 2000s, I was building various communications services, most recently launching Cc:Betty/Threadbox, - which I sold to MySpace last year.  As part of the sales transition, I stayed on at Threadbox as the company was converted over to a product called Myspace Threads and to work on other products, including Events and Artist Tools. It was really fun applying my work to an environment so focused on the artist/fan connection. 

As my tenure was drawing to a close with MySpace I started thinking about what my next move would be. Most people who know me assumed I would start another company and I almost did, but something else was cooking that captured my attention and ultimately my focus… 

I have always loved music videos and, while the world itself has evolved music videos are still here and being watched online by gazillions of people each day - on computers, phones, tablets, and other connected devices. The access layer is amazing!  But, what the world of music video still needs is a service layer yielding a modern day version of that special sentiment MTV gave us in the early 80s. I'm extremely focused on establishing that service layer and sentiment, which is why I'm jumping out of my own skin to announce that I am joining VEVO!

At VEVO, I'll be heading up Product and plan to build more depth of functionality onto more platforms, ultimately providing the most delightful, compelling, automated, customized and social music video experience ever. It’s my goal not only to usher today's generation into the sentiment I felt in the early 80s, but also rekindle that sentiment among older generations. And I hope to do so in a very contextual way, per platform, per device, per video, per human.

I’m excited to join the VEVO team. Stay tuned for some great new products coming to you from VEVO soon.

 

 

Big Co or Startup...which is right for you?

I graduated Cal Poly San Luis Obispo in December '94 with a four month old daughter (ok she didn't actually graduate with me, but you know what I mean), was married to her mother a month later and left my college job at KFC for good (they gave me a check for $500 as a 'thank-you' for my service) to join a startup doing inside sales. They gave me a Mac with a 9" black and white monitor, a gyne colored cubicle, a yellow pad of paper with a Papermate pen and a Nortel desk phone. Nine months later the CFO of the company pulled me aside told me the lead investor (who was a 'strategic' and major brand for decades) wasn't going to see the company through much longer. He gave me a sticky note with the name of a woman called Rita and a phone number. He said, "Call her, she's be expecting your call. She's looking for a guy like you."

Was Rita an A&R exec ready to sign my band? A scout looking for a half Mexican with a perfectly receding hairline? A call girl? A meter maid? Ok I'll stop now. She was an HR director at another startup with reputable investors with revenues ramping but at a strategic crossroads. I joined Rita's company and ultimately participated in the company's IPO a year later. Then a year after that joined another startup which a year later was acquired by a 20,000 person company. I did about a year at the 20,000 person company and learned I was becoming just a cog, just a social security number in the rank and file. So naturally I joined another pre IPO startup, who like clock work did an IPO about a year later. What sounded so risky [startups] on the outset had paid off. And so went the 90s and the build out of the Internet... 

Not too far into this century came what would become a long, cold, nuclear winter. I joined my boss at a new startup he would take over, and finally - after three great runs in a row, I landed a dud. Granted, had the markets continued to flourish, it had all the makings of a blockbuster hit. When that didn't work out I thought it was about time I take what I'd learned and found my own startup. If nothing else I'd get some great experience and find myself a better place on the cap table for when the markets got back to normal. What I didn't admit to myself at the time, was the great run I had experienced was probably a once-in-a-lifetime thing. After all the odds are typically stacked way against startup success. 

I learned that the hard way when I tried my hand at founding three startups inside of six years. Although a lot was accomplished in those startups as far as innovation and execution, none of them yielded the level of returns I'd experienced in the 90s era startups. Some of it was me, some of it was hiring mistakes, some was the feasibility of the companies, some was market dynamics. On more than one occasion I thought about what would have been, had I gone the route of many of my early colleagues, and work my way up the ranks in a big company. I most certainly would have earned better compensation during the 2000s. But I wouldn't have had nearly the level of breadth, creativity and scrap that I have now. 

I got a call from a recruiter the other day who was sniffing around. (It's always good to keep recruiters up to date on yourself because no one else will). I talked her through the triumphs, trials and tribulations of the last 15 years. And her question to me was "You're a startup guy, what are you doing at a big company?"

That's when I explained to her, like I've explained to my own team, that there are merits to both paths, and your best bet is to diversify your career path based on the opportunities both that present themselves and that you can create within them. For example, my last startup was in a seed stage and in its short term we built a useful product and had 100,000 users. That's notable in its own right because that's really hard to do without spending money to do it. But I sold that company to a bigger company, and now rather than fret about how to grow from 100,000 to 500,000 people using it, I got to refactor and rethink it as it relates to big co, and ultimately launch something into over 100 million users. It's not everyday you get to do that, so you have to do it when you can.

Whether it's a big co or startup, It all comes down to the opportunity you have and can exploit, i.e. the market timing, the funding and/or exit climate, the earning potential, and the risk/reward.

If you're young and getting started and have roommates and so forth, you can play a high risk profile and bounce around from startup to startup and learn a bunch in a short amount of time. On the other hand if you can ride the ranks in a big co you can establish the credibility and scale that could perhaps make you a better in the long run.

If you're an old timer with a family you might prefer the stability and comp of a big co, but perhaps you can find your sweet spot in a later stage startup that is less risky. There are a handful of those companies that have already created significant value but are still pre IPO. 

A lot of people in the industry like to characterize people as startup people or big company people. While you can find success in either, there's no reason you can't be great for either stage or in between. In any case, it's all a matter of your individual situation, dynamic, ambition and risk profile. 

 

 

startups and partnerships may break my bones, but names will...

Anyway, back to regularly scheduled programming...

I haven't blogged on startup stuff in a long while (or about anything for that matter), but I was talking to a startup kid in South Park yesterday about this, then I saw Owen Thomas tweet about some panel on the topic yesterday, so I thought I'd throw down some key strokes on the topic.

Startups (and investors) often times weigh partnerships with a bigger companies much too heavily. 

"If I can only get a deal signed with company X, I'll get all the distribution I need."

"If I get company X pregnant, they'll have no choice but to buy me."

"We're going to get to critical mass with partnerships with x,y and z."

"We're going to launch a stand alone product, but monetize it with partnership distribution."

"We want company x to buy us so we're going to partner with their biggest competitor."

Wrong.

Here are the top 5 reasons why you shouldn't rely/bank on partnerships with incumbents:

1. They operate on a different timeline than you. You're probably trying to create value inflections on a weekly or monthly basis. They're on a quarterly basis, and there are a lot of other fish waiting in line to fry before your thing gets into that timeline. 

2. They operate on a different strategy than you. You are trying to carve out a niche to survive as a company and only have a few months cash runway to do it. They have key objectives to create larger value in an existing marketplace so that next quarter's numbers are better than the prior. 

3. They operate on a different volume than you. You have a beta user base of 50,000 and would be a feature in a tab in a hidden section of their site. They have gazillions of users on numerous pages, tabs, sections, etc. 

4. They view a deal with you as an experiment. They don't want to invest in building what you've already built, not because they can't, but because they don't want to take the time to make it a core part of their strategy just yet; so they'll test a thesis or idea out, using you more or less. 

5. They won't nurture nor iterate like you can. You might iterate a few times per day because you have an agile team, likely of folks that work the whole stack. They have different functional teams at all points in the stack, and they each have priorities of their own, so they simply can't see eye to eye with you on frequency, urgency, etc. 

 

This isn't to say that partnerships between startups and incumbents are useless, rather, you startup types should align your lenses with theirs and deduce an alignment of interests - and work from there as a basis. And don't bank a fund raise or an exit on it whatsoever. Look at it as a step along the way of proving out your thesis.  

 

Threadbox sale final

Dear Threadbox Beta Users,

I owe you an apology.

I sent you a 7-day notice to clean out your Threadboxes as we were terminating the beta program, but I did so with no explanation. Believe me, I wanted to say more, but I couldn’t at the time. We were in the midst of selling assets of Threadbox and the transaction wasn’t complete yet so I couldn’t talk about it. Yet, I knew we weren’t going to be able to continue servicing Threadbox post the sale, so the timing was just funky.

Now that the transaction is complete, I can talk more openly. We sold certain Threadbox assets to MySpace and key members of the Threadbox team moved over to MySpace and are now excited to be part of that team.Myspace and We plan to apply our technology there in a variety of ways! Those of you that were using Threadbox socially may even find what we are building at Myspace interesting!

Thanks for your feedback over the past few months, and thanks for believing in a better way to communicate.  

Signing off on behalf of Threadbox,
Michael  

"So...is this a reeeeeelaunch?"

First off, there's been some confusion about the whole Cc:Betty/Threadbox thing. Cc:Betty was something we began to build on Rails in November 2008 on a hypothesis that a smart email assistant could make email discussions better. It was clever; in some cases too clever for it's own good, however we learned a lot about who cared and why. That led to a forthcoming product called Threadbox, which is a completely, newly built product, using XMPP and jQuery. Threadbox aims to change the way people communicate in workgroups. We want to move people from the fragmented inbox to the harnessed Threadbox. Cc:Betty, Inc is the legal name of the company, but that's changing to Threadbox, Inc to avoid confusion.

I was talking to an industry media/events person the other day who challenged me, "Is this a relaunch?" (said with a negative connotation).

I said, "Well, one man's relaunch is another man's iteration!".

She laughed. But she knew I meant it.

Seriously, the way we should all be building startups is by investing as little as possible to prove a thesis out, and by following the heat. If you can't find any heat, you start over. But if you DO find heat, you optimize/iterate, and yes, in some cases that means rebuilding and relaunching! Afterall, Twitter wasn't a relaunch of Odeo, although it was born there. Yammer wasn't a relaunch of Geni, althought it was born there.

You SHOULD rebuild for scale if your prototype was built with duct tape and you have customers willing to pay you for your product to scale.

You SHOULD rebuild on a better performing architecture if it allows you to better deliver the service your customers you want.

You SHOULD relaunch if there are enough positive differences in the new product.

You SHOULD relaunch if you've found a better way to articulate, message, and deliver your product.

And you SHOULD be proud to rebuild/relaunch for the right reasons. And I am.

The plan is to conduct a private preview of Threadbox to existing Cc:Betty users very soon as well as some folks that have signed up on our Threadbox waiting list. We'll also open the preview up to South By Southwest attendees - I'll be there on a panel called "Email, the next frontier," along with Cisco, Gist, Xobni, Yahoo, and Buzz Outloud and CNET's Molly Wood moderating.

-MC

Technorati Tags: Cc:Betty, cisco, customer development, gist, lean startups, buzzoutloud, South by Southwest, threadbox, xobni, yahoo

Cc:Betty -> Threadbox launch en route (check)
SXSW Details (check)
Demo Details (check)
Social Business Edge (check)
Under the Radar (check)
Microphone (check)
Guitar (check)