How we almost got acquired by Facebook and failed. Here’s what I learned.

This is not a happy ending story.

The beginning

It all started back in 2014. I had a startup whose clients were advertisers. It was a platform for users to review video ads in exchange for online points that could be redeemed for money or coupons. Watch and ad; rate it; be rewarded. Simple.

After 100 campaigns I kept hearing it would be wonderful to connect their offline ads (e.g. TV ads, billboards, magazines, etc) with our platform. Advertisers wanted real insights and analytics from their offline advertising investment.

As dedicated founders we started working hard on this concept: “from offline to online with your phone”. Within 4 months we had our first version. I remember showing it to our friends and constantly hearing “Wow this is brilliant! It’s like Shazam but for videos”. I was ecstatic!

The investment

The revenue was coming in but it wasn’t recurrent. It was difficult to enter the yearly advertising budget. Advertisers assumed our platform as an experiment (mainly to get feedback) and not as a serious distribution channel — despite the fact we picked at 100,000 registered users.

We needed investment to grow and build the new technology’s infrastructure. It wasn’t cheap to maintain a technology that recognized millions of videos within 4s. More on this latter.

In 2015 we raised $ 0.5M from angels and led by a VC. This allowed us to grow our team to 7 members and accelerate product development.

We were ready to storm the world!

The pivot

In retrospect, our product decisions after the investment killed our startup. We shifted our focus from the local videos ads review platform — where we had 100k users and 60 clients — to a global video recognition consumer product.

We created an App — like Shazam — that recognized millions of videos. Our goal was to have advertisers make their offline assets interactive and invite their audience to download our App and use it to unlock “something”. The practical end was the same as the QR code. How cool is that? Scan a video and “magically” show related content on your screen? Exciting, right?

Wrong. Very few people downloaded the App. It turns out the barrier of downloading the App was too much for the reward (whatever the brand wanted to offer). Don’t get me wrong, we did some cool campaigns with Kia, Unilever, or Volkswagen. But again these were one-shot campaigns. Basically an investment in innovation from the brands.

After long days discussing our future, we thought of something. What if our technology was embedded in native apps like Snapchat, Facebook, IMDB, or even in the Operating Systems of mobile devices — Android and iOS? This would mean everyone could easily interact with their offline environment and get something in return. Brilliant!

Interactive The Walking Dead

This is now 2016 and we had a new strategy. White-label our technology and allow anyone to embed it in their platforms. We built SDKs for Web, Android and iOS and off we went searching for customers. One of our main goals was to have TV shows interactive. Allow viewers to point their phone to the TV and delight them with a new experience.

In this quest, I scrapped all my network, cold reach on Linkedin, went to conferences, traveled between London, New York and San Francisco. I ended up talking to all major TV networks — Comcast, BBC, FOX, PRISA, Viacom, CNN — and closed a contract with FOX. This was a pilot experiment where FOX would use Portugal as an assessment market. It took us 9 months (!) to close the contract.

Even so, we started to see the light at the end of the tunnel. The worst part was over, we could take our learnings from our local pilot and catapult it to the world. We will change how people consume TV and will take our place in the TV innovation history.

We were ready to build a $ 1B company.

After several negotiations with FOX we were able to add our technology to three shows: The Walking Dead, MacGyver and Prison Break. What a victory! All the major shows were interactive. FOX will advertise the shows are interactive, people will scan the TV and have an amazing, memorable experience. Win-win-win.

When the first results started to come in… well let’s take a detour first and come back to the results later.

Entering Facebook

During 2016 I was mainly traveling demoing our technology to as many people as I could.

Besides TV networks I’ve met with Google, Amazon, Snapchat, Verizon, Blippar and Facebook. Our goal was to integrate the technology in their existing apps and make their users interact with the world connecting the offline and the online seamlessly.

The main feedback was something like: “amazing technology, great demo! But (there’s always a but) something like this isn’t on our product roadmap”. Except for Facebook… It was late 2016 and I’ve met with a Business Developer Director.

Here’s how it went:

(After I’ve demoed the technology)

Director: Wait, can I try it?

Me: Sure, here’s my phone.

(Director takes the phone and scans the video. The phone showed information about the actor from the exact second Director scanned. Director stays hesitant for a couple of seconds…).

Director: I need this.

Me: Uhh… Ok!(My mind was like: Errr, what, how, can I ask… Wait, what?)

Director: Here’s the deal. We have a huge problem right now. We launched Facebook Watch recently and are having a lot of copyright infringements on the platform. We need to build something like YouTube’s ContentID. More info here.

Me: Ok, we can definitely help.

Director: I’ll put you in contact with the product team responsible for this and they’ll take it from there. We are evaluating acquisitions in this space to speed up our go-to-market.

After exiting the meeting I vividly remember the next five minutes. As I went through the lobby I decided to seat on a couch to recover from the excitement. There I was, all alone, in one of the most incredible buildings in Menlo Park after a meeting in one of the biggest tech companies in the world. I found myself looking at the ceiling and smiling for no apparent reason.

The M&A process

After the Facebook meeting, we discovered we had a potential new market to unveil: copyright infringements detection. Users uploaded copyrighted content with small changes (e.g. by tempering with the audio pitch, by slightly rotating the video and by changing the original video with many different techniques) to bypass Facebook’s algorithms.

Because our technology was designed from scratch to recognize videos from low-resolution images, we were pretty effective in recognizing tempered videos. We recognized videos that were rotated, mirrored or cropped. Our algorithm didn’t use audio. We even recognized a bunch of different videos inside one. Here’s a demo with a) 10 trailers in the same video and b) a rotating video.

We arrived in 2017 with our FOX partnership generating mediocre results. No relevant revenue was coming in and the user interaction data wasn’t exciting. We learned that people need a huge reward expectation to take the effort of scanning the TV. Without undisputed usage from viewers, FOX was gradually losing interest in pushing the technology and the opportunity faded during the rest of 2017.

In February we started talking with the Facebook team. They wanted to test our technology at scale. We thought it was a fair request and agreed to be tested without any compensation. We signed NDA’s and were comfortable enough discussing the internals of how our technology works.

After a couple of meetings to discuss the technology, Facebook started to test us with hundreds of hours at a scale we were never able to test before. It was scary as hell! We were all extremely nervous to see if the servers’ architecture wouldn’t crash.

When the first results started to come in we were shocked… 95% accuracy and 0.13% false positives. This was incredible for us! This was paired with the audio industry leader: Shazam. My eyes started to tear up.

We were tremendously proud and happy about this achievement.

Facebook wasn’t…

Thanks for following up with us. It was a great experience working with your team and we think there is a great potential for your company and service.

We want to provide an update about the evaluation result. From the result, overall we see a good coverage and recall, and your team solved the problems real fast. However, due to low precision and high false positive rate, we decided not to moving forward to the next stage of the evaluation.

Thanks for your time and effort. I am sure our career will get crossed in the future

Caption: Facebook’s engineer email rejecting us

Did you feel that punch in the stomach? I surely felt it. It was so unfair to have amazing results on our side and receive this email. When we asked about the differences — to understand what went wrong on our side — we got this:

Facebook has our own metrics and process to evaluate the product value of the algorithm. But due to the policy, we are not allowed to share with you. My colleague’s point is the final result. Look forward to getting chance to work with you guys in the future.

Caption: Facebook’s lead engineer email really rejecting us

We felt kind of used and disrespected to be honest. Remember this was a two months process with several emails and calls between us. It was one of the most difficult moments of my professional life mainly because of the expectations I’ve built.

We were devastated. I was immature enough and almost took it personally. At the end of the day, it was business as usual for a big company like Facebook — they ended up acquiring Source3 to help them solve the problem. For us, it was a Technical Knock Out.

If someone from a big company is reading this and it sounds familiar, please take a moment to rethink the way you say no to a startup. Especially if you’ve been interacting daily or weekly for the past months. Invite them for a meeting or call and explain them the general decision process. It will take you half an hour and it will make a huge difference for the startup. Believe me on this…

Unfortunately, after this, we weren’t having solid revenue from our FOX partnership. After discussing with our lead investor we decided to close our doors in an unfortunate ending to what could have been a tremendous success.

Lessons Learned

So many lessons learned! We could have done so much differently. It was a rollercoaster ride with so much emotional commitment. It’s a challenging exercise but I’ll try to generally sum up the main learnings from the whole journey.

Here’s what I learned:

  • The line that defines success and failure is extremely thin.
  • If you are being evaluated (by customers, partners or possible acquirers) define success KPIs beforehand. That way everyone will have the same common ground.
  • Don’t put all your eggs (expectations) into one basket.
  • Stick to what is working, i.e., work on what people want and measure it with data; not words nor promises.
  • Be kind to everyone. If you feel disrespected or hurt, take a step back. Take some time to breathe and don’t reply right away. Time heals everything and gives your perspective.
  • Don’t take life too seriously. Be patient but persistent.

Despite all learnings, the cold reality is that this was a failed startup… but I’m trying it again. This time I’m doing things differently.

Hope you guys had a good read and learned a thing or two 🙂 Let me know if you have any questions.

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Startups – Rapid Growth and Innovation is in Our Very Nature!

Plaid CEO touts new ‘clarity’ after failed Visa acquisition

Yesterday, we spoke with Plaid CEO and co-founder Zach Perret after news broke that Visa no longer plans to buy his company for $ 5.3 billion.

The deal was heralded in early 2020 as a sign of the growing importance of fintech startups. Then it failed to close, eventually running into a lawsuit from the U.S. Department of Justice. A few months later, the acquisition was dropped.

Sentiment in the market changed since the transaction was announced. As TechCrunch reported yesterday, there’s a good deal of optimism to be found amongst investors and others that Plaid will eventually be worth more than the price at which the Visa deal valued it.

What follows is a summary of our conversation with Perret, digging into a number of topics we felt most were pressing in the wake of Plaid’s unshackling.

Now what?

First and upfront: it does not appear that Plaid is racing to the public markets via a blank-check company, or SPAC, a question several readers asked on Twitter. Our impression from our chat regarding near-term liquidity via the public markets is that those with their hopes up have them up a few years too early.

TechCrunch asked Perret how it feels to be free from his erstwhile corporate boss.

He said that the last few years have been a “rollercoaster,” adding that when they made the choice to sell, it made sense at the time from mission, and delivery perspectives — Visa wanted to accomplish similar things and could give his company access to a wide network of potential customers.

Startups – TechCrunch

The No Asshole Rule – How We Failed to Follow It

Hi, it's Alex again! After my last post on Reddit, many people asked me how I managed to recruit a team and how I hired employees. I will share my life hacks for hiring with you. But in this article, I’d like to tell a story showing you that even if a candidate has an excellent resume and work experience, it will not guarantee the absence of problems:) Let's go!

A company is looking for an iOS programmer

Last year, we were concerned about finding an iOS developer for one of our products. After several interviews, we met Joe (name has been changed). Joe was a young specialist. At the same time, he already had a certain work experience. He lived in another city, but for us, this is not a problem. We have always supported remote work if our employee expressed such a desire. As it turned out, not everyone can organize their working day at home, even if they say they had such an experience. But first things first.

We noticed that trivial tasks, which usually took no more than 2-3 hours in an office environment, dragged on for weeks. At the same time, Joe was quite convincingly telling us that he was about to finish the task, and just in two days, he would hand over the project. But “tomorrow” never came.

His reaction to our questions and comments was disruptive, even a little theatrics. Joe was blaming himself and telling us this would never happen again. After his speech, he usually sighed thoughtfully – “It seems to me that I am pulling your project down … I guess I failed to make the cut …”. With these words, Joe had gone offline.

As a result, later Joe told us that for personal reasons he did not have enough time to complete several tasks. He asked for a month's leave to put the matter to the rest. Surely, we let him go. When it had been a month, we found out that he had blocked us on all communication channels. At the same time, we managed to send him a generous fee:)

It turned out that in three months of work, he managed to create only a pale imitation of an app. It didn’t work at all. So we not only screwed up the app launch but also lost a considerable sum of money.

My findings

I admit that this incident is purely our fault. At that time, I hardly could imagine how to hire employees and manage a team properly. Thus, the conclusions from this story are as follows:

  • Don’t believe big words in a resume – test candidate’s skills in practice. Being a startup, we primarily focus on the fact that a person is a team player and knows how to do business. “Knows how to do business" means complete tasks without any excuses.
  • Our perfect candidates understand business processes and why the decisions are made.
  • They do not strive for excellence. For example, a candidate can write an imperfect code to test hypotheses quickly. To notice these qualities, observe the way the person thinks – you’ll notice that even in a normal conversation.
  • You need to set a certain trial period, after which you will discuss the results. Or, if you don’t have enough time, take a brief test. Sit down and try to solve a problem that you have recently solved in the product. You’ll understand the way a person thinks and builds logical chains.
  • Don't be afraid to criticize and point out mistakes. This is another problem of mine – I was afraid of offending a person with criticism. You just need to choose the proper words so that they sound not like a personal insult, but like a small note;
  • If you see that an employee is unproductive and does the job poorly, then it's time to say goodbye.

Tell me about your experience in hiring workers. Share your stories – it's very interesting to read them!

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Startups – Rapid Growth and Innovation is in Our Very Nature!

How Zoox turned a failed Series C into the future

I often begin calls with founders by asking why they’re willing to bet their livelihoods on an idea that will most likely fail. It’s a small hack that lets me see how vulnerable a founder is, and how much conviction they have behind their ideas. Sometimes, if they answer, it’s the lede of my story. And sometimes, if they don’t answer, it’s the reason I don’t write the story.

As blunt as the question sounds, it can spark the best answers — especially when the founder is working on an idea that is a moonshot in and of itself.

Speaking of wild bets, our own Kirsten Korosec caught up with Zoox co-founder and CTO Jesse Levinson about his electric robotaxi, a six-year effort that was unveiled this week, outpacing competitors. Levinson was heads-down on an idea that wasn’t just likely to fail, it almost did: Zoox’s Series C fell apart in March due to the pandemic:

Korosec: What was your trick or how did you remain focused for six years on something that is futuristic, expensive and possibly could fail? What did you personally do to keep that focus?

Levinson: Well, doing something like this is definitely challenging and it requires patience. I think the advice I would give is first to convince yourself that what you’re doing makes sense and is important and worth doing. If you’re starting a company because your goal is to make as much money as possible, if it turns out to be hard it’s going to be really difficult to convince yourself and your team and investors to stick with the idea.

One of the great things about Zoox is that the idea itself just makes a lot of sense. From first principles, there’s really a compelling reason to solve the problem the way we’ve been solving it and the market opportunity is unquestionably enormous. So armed with those facts and a team of wonderful employees and investors who strongly believed in that, we were able to weather some of the ups and downs of the industry, even though it’s not always been an easy ride.

It didn’t hurt that Amazon saved Zoox after its failed Series C, considering deep pockets and futuristic technology go well together. Still, Zoox’s ability to turn failure into focus is impressive, and part of what makes startups successful.

Before we jump into the rest of the newsletter, I want to formally introduce myself as your new Startups Weekly author. Thanks in advance for reading along and trusting me to bring you startup-relevant news each week. This should be fun, and the absolute expected dose of existential. Want it in your inbox every Saturday morning? Sign up here.

And from now on, you are invited to send me tips and thoughts to natasha.mascarenhas@techcrunch.com or tweet me @Nmasc_. TechCrunch also launched a secure and anonymous way to submit tips to our staff, where you can submit information using SecureDrop.

The Palantir ‘Diaspora’

Everyone wants to invest in the next big tech mafia. This year, given the number of successful IPOs on the market, newly minted and cash-rich thinkers are entering the startup landscape, including legendary companies Snowflake, Airbnb and Palantir. Stripe engineers, even pre-IPO, seem to be the hottest commodity out there.

So, investors are hoping to bet on exiting talent — and one has had the upper edge for a while now. Ross Fubin of XYZ Ventures introduced Palantir’s first business hire to its first engineer, which he describes as “the highest-value thing” he’s ever done. Now, after helping Palantir scale up its senior talent (and pocketing some advisor shares for himself) he invests in the Palantir diaspora out of his fund.

Connie Loizos, TechCrunch’s Silicon Valley editor, has the story, including where XYZ is looking for startups outside of the once-secretive public company’s staff.

Loizos also profiled Lux Capital’s Deena Shakir, who sees space and frontier tech going mainstream right now. Anyone else feel a moonshot theme arising in 2021?

Further reading:

Image Credits: Bryce Durbin

Why Singapore might become Asia’s Silicon Valley

In this Extra Crunch story, Catherine Shu argues that Singapore might become Asia’s next Silicon Valley. The long-time global financial hub will expect hundreds of new jobs in the next few years as ByteDance and Alibaba reportedly plan regional offices in the city-state. The interest comes as Google, Facebook and Twilio already have operations in Singapore.

The spotlight comes with pressure on companies to find the best tech talent in Singapore, which has a population of 5.6 million.

Kuo-Yi Lim, co-founder and managing partner at early-stage investment firm Monk’s Hill Ventures, detailed the talent dynamics:

“My view is that there will always be the need to bring in folks who are not from Singapore because we’re just not big enough,” he said.

“The competition is more on a global basis, because even local startups will always be looking at global talent, from the region, Australia, India, China or beyond,” he added. “I think it actually cultivates the instinct for startups to really compete for talent in a thoughtful way. I think startups will have to become more creative and sharper in terms of how they position themselves as an attractive employer to spend time with, as opposed to the big companies.”

Singapore Skyline Business District Panorama at Night

Singapore Skyline Business District Panorama at Night. Image Credits: Mlenny / Getty Images

Quick IPO update

After Roblox and Affirm pushed their IPOs because market conditions were too hot, the delay proved to be an opportunity for others. Bumble, UiPath and Coinbase filed to go public confidentially, meaning that the intent is now known but there are no numbers for us to go through. Finally, Poshmark filed its S-1 and StockX raised a round that Alex Wilhelm thinks could be pre-IPO money.

Image Credits: Bumble

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@EquityPod

There have to be some users that want to use Bitcoin for their OnlyFans, right?

In this week’s rare Danny-less Equity episode, Alex and I teamed up to chat about Public’s latest raise, Substack’s newest tool and Bitcoin’s busiest week. The conversation devolved, as it usually does, into books, snow and startups that prepare you for life before and after death.

Take a listen here, and leave us a review on Apple Podcasts if you’d like to support the show!

Equity drops every Friday at 6:00 am PT, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts.

 

 

 

Startups – TechCrunch

Startup failed, feeling terrible, not sure what to do next.

Background:

I launched my startup in August 2019, officially shut down October, 2020.

  • 9,700 MRR when we shut down but we had a ton of churn that we couldn't solve, COVID set us back months but it is what it is and not a unique situation for us.
  • Bootstrapped

One Co-Founder basically quit on us because she didn't believe in the product and she was the glue that held the product together. She is an exceptional talent and hard to replace in the short term. This left myself and another Co-Founder in a tough position. Third co-founder got cold feet and took a high paying job, understandably so. We were unable to sell because our product was hacked together, it was an overly complicated product, and not something anyone could just take over. Plus a ton of churn and a well known company recently entered our space.

The failure is less important (I did learn a lot) but now I'm not sure what to do.

I've only worked at startups for the past 15+ years and had a mild success early on. I'm financially comfortable in the short term. I could be in a rough financial position/broke if the next startup fails.

Sorry for the ramble. I'll get to the point.

Right now I feel completely lost and extremely stressed. More stressed than at any point running the company. I feel enormous pressure that what I pick next to work on, works out. I'm no longer a "young guy" and the prospect of being in my mid to late 40's with nothing to show for it is stressing me out. It's causing me to hesitate and second guess anything I start which is terrible because nothing good happens kicking around ideas and analyzing them to death.

From a personal perspective and I know this is going to sound ridiculous, I have friends who are doing well, raising money, have had exits, etc. and that makes things worse. It's less about their perceived success and more about my objective failing. The Bay Area is tough place to live sometimes. I also have nobody to talk to about this. It's the ultimate first world problem and I feel extreme guilt complaining that I'm being a huge nervous baby about my next "startup" which is such a fucking luxury to be able to do. Given the unemployment rate and how many businesses got destroyed through no fault of their own, I keep my mouth shut and I'm thankful for what I have.

If anyone has had a similar experience of failing and figuring out the process of moving on to the next thing, I'd love to hear your story. Any advice is appreciated.

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Startups – Rapid Growth and Innovation is in Our Very Nature!

Founders who have failed, convince me why I should still try?

I'm looking into problems to solve now but the likelihood of success certainly seems grim. For those of you who failed but STILL would go back at it again, or feel like it was still totally worth it – why should I feel the same way?

For background, I'm a recent graduate specialized in IoT and industrial automation

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Startups – Rapid Growth and Innovation is in Our Very Nature!

Failed Startup, Where To Sell IP?

Our startup has failed as the co-founder with the necessary business development skills and contacts had a major change in his life. I believe this happened right as we were finding our market fit. I believe our market fit was in licensing the IP to established companies that would include it into their product/solution.

Is there a place I can sell the intellectual property? The IP was developed inside and extracted from a Fortune 100 company. We have treated the IP as an trade secret, haven't patented it.

A platform to sell startups wasn't interested since we don't have customers/revenue. This would be a pure IP play, and we can offer technical support.

Not looking to replace the business development co-founder.

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Startups – Rapid Growth and Innovation is in Our Very Nature!