The truth about starting a company. And its revisionist history.
I wrote this essay as a reflection of my start-up experience across 3 companies I founded over the last 7 years. The most recent company (vLoop) was sold about 10 months ago and so I had a chance to reflect on the entire, winding sequence of events that led to the moment of writing this. The intended audience is anyone who is in the midst of a start-up saga of their own or anyone curious about what’s really happening under the hood of a start-up without all the bullshit. This is a very abbreviated version…and includes a mix of details about each company and some of the lessons I learned. I tried to be as honest as possible about the hard parts in “Version II” but also included a “revisionist” version of the story because thats usually the story people choose to tell and I want to illustrate how two versions of the same truth can lead to very different perceptions.
“Version I” is the revisionist version aka how one’s startup might be described when they are the verge of an emotional breakdown but want to project an image of control and success or a retrospective analysis that avoids the shame of even modest failure. You can imagine this person in one of two archetypes (just to make it a little more real); in a starched white form fitting button down shirt stuffed into their Brooks Brothers pants with “delicious” leather wingtips, their hair in a rigid side-part cemented into place with a tremendous amount of gel and maybe a helping of HGH depending on their age.
The other persona you should feel free to imagine is the T-shirt wearing schlub with undiagnosed scoliosis, hunched shoulders, a single strap satchel and a robotic walk with their feet hardly leaving the floor as if their goal were to produce static electricity every time they move. They may laugh like a machine gun and talk about how brilliant random new applications of the “share economy” are with too much enthusiasm. This persona likes to imagine he is the embodiment of how Tom Wolfe would satirically describe a tech executive…except lacking the awareness that it was intended to be a sarcastic mockery. Anyway, feel free to picture either of these “people” when reading “Version I” since these are the types I most commonly come across exaggerating their performance.
“Version II” is a more truthful story and while it effectively tells the same story as “Version I” you can see how there is a big difference between “the truth, the whole truth and nothing but the truth” in terms of describing your reality. The reason I did it this way is because of how common it is to hear the “Version I” version of people’s story and this can lead you to believe you are a total failure even though in truth, that’s pretty much how everyone feels.
I hope you can read this and in the midst of your rollercoaster ride not get too discouraged by realizing that no one else really has any fucking clue what they are doing either. A lot of people just like to pretend they do.
(The official version of my startup journey).
(Open the narrative with success, ignore the numerous mental breakdowns behind it).
Our core team recently had an all-cash exit to a publically traded company from an ad technology platform we built and were motivated to do something bigger and disrupt an industry. We developed a strong expertise in marketing and customer acquisition.
(A surgical and un-inspired approach to identifying a business problem and solving it…as if its all so fucking obvious).
I was exploring different markets and saw sports as an opportunity with major customer enthusiasm, but a lag in innovation of both technology and business model over the past 10 years along with a growing market size of greater than $1B.
vLoop was focused on implementing a freemium SAAS model and we were able to optimize our marketing funnel to shake up the industry from both a product usability and business model standpoint. We made it easy and accessible for customers new to the video landscape to use it as an improvement and social tool (ie a “crossing the chasm” hypothesis).
We were really data driven and continued tweaking the business model as a function of feedback from our acquisition, activation and retention metrics. We raised a seed round of funding and worked with some of the largest organizations in sports (oh sorry, I forget to mention that almost all of these big names weren’t paying us) and were laser focused on their needs.
vLoop was acquired in 2017 by an innovative company in the space. They are focused on reducing the barriers to professional quality multi-camera video production and saw vLoop as having very synergistic technology with their core product.
(There aren’t really any lies in this story but it glosses over, well, basically everything hard and some little details that aren’t so little.)
(The real story.)
The idea to start vLoop came in 2015. We had all been working together for the past 4 years on LYFE Mobile which was acquired by RhythmOne in 2014. LYFE Mobile was the first company we all worked on together which was an outgrowth of a previous company I started by accident called Ocean Park Interactive.
(A more honest explanation below of what a “successful all cash exit” looks like behind the scenes with its unexpected origins and without any revisionist history).
Since it is kind of hard to start a by company accident, I will try to explain how that happened. I was working at a Facebook/RTB start up called OptimalSocial at the time and was doing a lot of the internal media buying work in the company. This was during the very early days of real time bidding (Right Media was still a major platform for frame of reference) when not too many companies were really buying ads this way- so I was spending more of my time focusing on lead generation and direct marketing campaigns for OptimalSocial. It was working pretty well. Ironically for someone with $4000 in the bank (me), direct response marketing was one of the few types of companies I could start on my own so I decided to give it a whirl. I managed to lose $2000 of that in about 1 day (the first day) but somehow was able to turn that other $2000 into about $1.5MM of revenue in a year. A few hundred thousand dollars of which was profit all from buying and optimizing ads across the various supply side ad platforms. That was Ocean Park Interactive.
Being extremely worried that this was some short-term aberration (worrying comes pretty naturally for me) and I would eventually become a pauper again (while my dad was living on my couch) I really wanted to build something a lot more sustainable with that money and conveniently my brother was graduating from college around that time. This is when we started LYFE Mobile. Our original idea was to help brands create augmented reality games for people so that “advertising” could become fun. We went ahead and dispensed with the usual questions of market size, technical challenges, customer interest, hardware constraints and general strategy since we had no idea what we were doing (just to be clear, when I say we “dispensed” with those questions, I mean we completely ignored them or more accurately were so stupid we didn’t even know they existed so technically we couldn’t have even consciously chosen to ignore them). Initially, our company was 5 people…3 of whom graduated college a few months ago. Tony L (my brother), Ryan, Alex, Tony G and me. Needless to say, we weren’t very successful at first. We barely made any revenue for about a year and couldn’t get an investor if our “lyfe” depended on it. This is when we “learned” that its better to pivot than drive off a ledge. By “learned” I mean we struggled to sleep for a while and had to go to the gym 3 times a day or drink 500 bud lights to calm down until we thought of a better path. Because of our background in the desktop real time bidding space…we thought to ourselves, “what if we combine our augmented reality campaigns with location based mobile ads so people can be guided to these cool experiences” (I know…its embarrassing to say that out loud). This is a video I dug up of what that product looked like: https://www.youtube.com/watch?v=Y0qMtf6YGuU (its actually kind of cool, but completely unrealistic). One day we went to Denny’s at 4 am to discuss what to do since we had 18 days of runway left. Fortunately, this happened right before Jeff joined the company and invested $50k (which seemed like $5MM at the time).
It turned out that by dropping most of the words in that last sentence and just focusing on making it easy for people to buy real time mobile ads we were finally onto something. The first version of our bidder was written using Django and our QPS was about 100 (yes I know Django is a python framework and not a language..so you may ask “why use a front-end web development framework when making an ad bidder?”…hahaha, yea exactly). QPS is the adtech equivalent of “How much can you bench?” and 100 roughly means we couldn’t bench press the bar in outer space with no gravity. In any case, we had a really simple user interface which gave advertisers a ton of flexibility to optimize their campaigns and gradually we were able to increase our scalability (and keep the associated costs under control). Turns out, usability matters a lot more than technologically complex features most of the time except in dick measuring contests between guys with mediocre dicks. I guess that should be pretty obvious, but sometimes it not. In any case, this helped us grow the company and our revenue to about $2.5MM/year while raising less than $200k. It’s not necessarily that we didn’t want to raise money, but we just happened to suck at it. We turned out to have gotten a lot better at actually operating the company by learning from our own mistakes than raising money where we hadn’t even had a chance to talk to enough people since in a Tinder metaphor, we got swiped left on before we could even get rejected after the first date. Eventually we grew the team to 12 people and it was pretty awesome in 2014 when RhythmOne bought our company because we had a good platform and fast revenue growth. We all finally got to take a big sigh of relief and get a lot more money than any of us had before.
(This is how vLoop actually started and without that LYFE Mobile story there would definitely never be a vLoop since we would probably all just be working at regular jobs nor would we have had the money or chutzpah to start something new).
We all worked at RhythmOne for a little over a year on a mobile video product but ended up getting really antsy to work on something new. Gluttons for pain, I guess.
The LYFE Mobile crew had all played sports at a pretty high level growing up and another friend of mine, former roommate and vLoop co-Founder (Michael Stephens) whose brother I played soccer with in college was currently playing on the LA Galaxy. He was showing me the video software they were using and it looked sort of like Windows 3.1. I was shocked to see that a professional team was using such poorly designed and clunky tools so I called my college soccer coach. It turned out he was using the same high cost software as back in 2006.
The more research we did, the more we realized that sports software hasn’t evolved nearly as fast as so many other areas with all the new web development tools and business models that are common today. Ironically, during this time period I was also trying to learn to code and was using CodeSchool.com. For a while I was pretty diligent about following along with the videos and doing the interactive exercises after the videos but I eventually got a bit lazy and stopped doing the exercises. Once I did that, I completely stopped learning anything. Even though that seems kind of intuitive in hindsight, it wasn’t so obvious to me initially. I sort of realized what the problem was and did some research to see if there was a more “scientific” explanation for this. It turns out there is a whole body of research on “Active Learning” which pretty much says that if you do something yourself, you retain knowledge a lot more effectively than by just watching, listening or being shown. In any case, I thought about all of the sports coaches I had been talking to and when they described how they used video, there were pretty much two stories. The progressive (and in my opinion, better) coaches would cut up clips of video and then have players come to their office where they could ask a set of questions and have the players answer and analyze for themselves. The “old school” coaches would just create a set of clips and send them to the players. In the first situation, the results tended to be really great, but the process was really time consuming and logistics intensive. In the second situation, the results were garbage because players didn’t have to actually do anything. At this point, our mission was pretty clear. As a disclaimer- there is a pretty big company called HUDL that has been successful in HS football but did not address the questions of business model, UX or learning/feedback in ways that we thought would be truly valuable to the most people.
(As you can see the actual origin story is a lot more convoluted than a systematic market analysis process across various industries).
We wanted to build a really easy to use video platform for sports teams that allowed for two-way communication, teaching and powerful tools to drive improvement at a price that wasn’t prohibitive to any level of player. The market size and enthusiasm for youth, high school and college sports (not to mention the rest of the world) was pretty huge and our hypothesis was that we could leverage our experience in online advertising to drive customer acquisition without a sales team and keep the price of the product low enough for everyone.
This was our initial approach to vLoop and we built a product that users really loved and allowed us to drive (free) user growth. However, it became painfully clear that in spite of our ability to drive leads online, the process to convert people to paying customers took far too long and too much human contact for our current price point. We also needed to improve at user activation from online leads because our initial product was far too tailored for college sports coaches. Additionally, switching costs are “a bitch” in sports because most users aren’t particularly tech savvy or early adopters so if they are already using something else…forget about it. So we had to focus on market segments that weren’t already using a different video product.
One of the biggest things we learned from LYFE Mobile was that our best chance of success was to focus on maintaining an iterative process to test lots of new ideas and always talk to customers. Through the course of doing that we learned that in youth sports, people are far more willing to pay for services than software (even if the software is a key selling point of the service) and also that the network effect at tournaments and other in-person gatherings is far more powerful than the value of ad spend on social media. The other part of this is that sometimes the constraint to using video software in certain sports is the challenge of producing good quality film. We constantly worked on simplifying the platform to make it accessible to a wider segment of this audience and dedicated more of our energy to removing some of these other friction points by actually filming events ourselves or investing in more robust transcoding and video merging tools so we could solve the most irritating parts of the user experience with video.
Then a wrench in our plans. As with starting any company, we were prepared for an emotional rollercoaster. We certainly made our share of mistakes and incorrect assumptions in the sports market and had not scaled at a rate that indicated we were on track to be sustainable. We always had confidence in the value of our product to many different audiences, we happened to choose sports because we liked sports, the application was immediately clear through personal experience and the market size appeared large (but unfortunately also extremely fragmented with scattered pockets of money). At a certain point in the company lifecycle, other people organically started using vLoop as a tool for feedback on public speaking and other types of performances where video can be a great tool for analysis.
This begged the question- was vLoop more valuable as a sports platform or a user feedback product that is agnostic to the activity? We had data indicating our sports product was valuable but our business model flawed and we had experience that our non-sports feedback product was valuable. Conventional wisdom suggested that corporations and other groups have a lot more money relative to their sales cycle times than non-professional sports…so what to do? Change course and “lose focus” or stay the course in spite of major and glaring hurdles. These are the types of questions that will emerge all the time during your journey and the tough part is there is no one to tell you the right answer, only a bunch of people to tell you their opinion (often phrased as a fact with very little actual knowledge about your situation). Sounds fun, right?
We decided to stick with sports and overcame some of those major hurdles, but not others. In the end, we had thousands of happy customers but weren’t able to conquer and scale the elusive freemium business model…so more of our revenue ended up being “hands-on”. In the end, vLoop was sold to another company in what I’d consider an “acquihire”. Was it the best exit in the world? No. Was it even a decent exit? No, it sucked. Could it have been worse? Yes.
I suppose what I am trying to say is when you start a company, one of the hardest things can be managing the ambiguity related to all of your choices. My assumption is that a lot of people who start companies have been really successful in other facets of of life with more well defined “scoreboards” which makes this even harder. Its not like school where you complete an assignment or like a job where you complete a task and afterwards you get clear feedback on your performance and a pat on the back. Everything is a shade of grey. How your choices will impact the future, whether you made the correct decisions in hindsight and most confusingly listening to everyone else pretend how successful their own efforts are. What to believe? What to ignore? And most frustratingly the fact that most answers will not become clear for a very long time.
Creating the illusion of unbridled success can be a safety blanket that makes you feel better about all of these things being incredibly difficult, but trust me…the more honest you are, the more you will gain even if some of your efforts are more financially rewarding than others. LYFE Mobile made me a lot of money. vLoop is still a work in progress as part of a larger company, but it hasn’t made me a lot of money. In fact, it has lost me (and other people) money.
There is an impulse in most of us to think about how we can spin a narrative to build a “personal brand” for ourselves that will open up better future opportunities. The hard part about start-ups is that there isn’t really an easy way to tell your story since its a lot more complicated than just “I was a product manager at Facebook” so there is tendency to create a revisionist history that suits your needs more than the (sometimes harsh) truth. The more this happens, the more other people will do the same and fear telling the unedited story about their journey. Its a shame because the most valuable parts of the process (aside from possibly making a lot of money) are all the really hard things and nitty gritty details that so many people try to edit out of their history.