Founding Mondus, Truephone, Empora And More

After years of persevering through rejection when he called on customers and investors Alexander Straub funded his company, Mondus, a business to business marketplace, by winning an entrepreneurship contest. A year later, he exited after selling 40.7% of the company.

Alexander went on to invest and launch other businesses, including, most recently, Truphone, which uses VoIP technology to revolutionize mobile communication, Empora, a fashion search engine and Straub Ventures, a venture capital firm.

He sat down with me to talk about how he did it.

Alexander Straub

Alexander Straub

Alexander Straub was co-founder and former CEO of mondus, an Internet b2b marketplace, which he led to one of Europe’s leading exits for technology start-ups in 2000.

 

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Full Interview Transcript

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Here’s the program.

Andrew Warner: Hey, everyone. My name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart. And what that means is I do interviews with entrepreneurs and businesspeople about how they grew their companies for an audience of ambitious people who choose to watch these programs, even though we sometimes have Skype trouble, even though the audio is sometimes a little bit off. But they’re so determined to find out what other people are doing to grow their companies that they’re willing to put up with that kind of nonsense.

So thank you guys for doing it, and thank you to today’s guest, Alexander Straub. He funded his company, Mondus, the business to business marketplace, by winning an entrepreneurship contest. A year later, he exited after selling 40.7% of the company. He went on to invest and launch other businesses, including, most recently, Truphone, which uses voice over IP technology to revolutionize mobile communication, and Empora, whose logo you see behind him on that red background, a fashion search engine. He’s also the founder of Straub Ventures, a venture capital firm whose aim is to make investments ranging from $100,000 to $4 million.

Alexander, welcome to Mixergy.

Alexander: Hi. I’m very, very glad to be here and be part of this program and have the honor to be interviewed from you.

Andrew: Thank you.

Alexander: Andrew, that’s a fantastic opportunity.

Andrew: I appreciate that. So, as you know, I spend a lot of time on the ups and a lot of time on the downs of business, but I thought we’d start out with one of the happy moments. The day that you sold the 40.7% of the business that I talked about, what was that like?

Alexander: It was a happy moment, but it was also a sad moment, because you have to actually part from one of the babies, one of your ideas. And that moment really was an interesting moment, because it was the first company I had built, and therefore it created, I think, somehow the seed of freedom to start more businesses and go beyond. But little I knew at the time, how far we would actually in the next 10 years develop in so many different industries, and how much the Internet would change our environment. And clearly it was a time in which we saw the dot-com crash, and big, big [inaudible 03:54]. So, there were a couple of years when it was less joyful, but equally still very interesting to have online businesses.

Andrew: You used a word that I hear a lot in interviews with entrepreneurs who have sold their companies or have cashed out even a little bit. The word freedom. I sometimes feel that entrepreneurs are the ultimate freedom fighters, because I hear it so much. Freedom to do what? What hit you? What realization? What were you able to suddenly do that you couldn’t do before?

Alexander: Well, I think it’s one thing to continue to believe in innovation as a game changer and invest in innovation and take that to market, which I’m interested in ultimately. I’m always interested in company building, but I’m quite interested in technologies and bringing those technologies to customers. So inventing on behalf of the customers. And I think as an entrepreneur, you often invent way before, and you also have a lot of people which misunderstand what you’re doing. But that doesn’t mean you shouldn’t listen to them. But you should actually stay your course and believe what you’re doing and continue with your inventions and trying to bring them to the customers you had envisioned who could benefit from it.

Andrew: First of all, I said in the beginning of the interview that people who listen to this program have to put up with a lot of Skype pick- ups and a lot of issues, and today we’re, we’ve got a little bit more lag than usual. But I’m curious about that thing that you said. You said even when people don’t agree with you, even when people say no, you have to keep fighting. When did people say no to you at the first company, at Mondus?

Alexander: Well, the first company I think it was very much a European staff. [inaudible 05:42] We started in 1996 out of [inaudible 05:49] was a fellow student of mine. And then what was totally not understood was how the Internet would be able to be utilized for shopping or for marketplace functionality so people could exchange products, ideas, and time and services. When we proposed this in the European marketplace, it was unheard of. So, we were completely misunderstood. We were misunderstood in terms of how we could address the customers from an online perspective. And we were certainly totally misunderstood under the concept of venture capital or findings of the company as venture capital because something like that didn’t really exist in Europe in 1996 when we got started.

Andrew: And, so, what did you hear back when you tried . . . did you try to go after investment after you guys came up with the idea?

Alexander: We originally funded the business out of our student loans. We had kind of a Rhodes Scholarship and that was able to fund the business initially. We ran it really out of the dorm on the network connection of the Oxford University. And we, in a way, got only lucky by winning a technology competition which somebody put up for 3i. [inaudible 07:12] really in funding local businesses like on a local level was in the UK, so regional funding.

But they have put this up was people on the judging panel which had technology ideas and had built a company. It was [inaudible 07:28] was one of the first hand-held devices which had a keyboard you could open it, and it was [inaudible 07:35] and he was the person who really awarded us the award and gave us the capability. So, I think the defining moment was not selling the company, but the defining moment was to get the first million pound into the business as venture capital funding.

So, when I received that call from 3i that I had won the technology competition for 25 percent equity investment in the company, that was the defining moment. That was the moment where I knew I now have the capability to change something and build a substantial [inaudible 08:12].

Andrew: I see. So, you launch a company in 1996. Three years you keep doing it on your own, funding it with your own money and student loans. In 1999, you win the competition for a million pounds, $1.7 million dollars at the time, I think is what it was. And that’s what helped grow the business. And a year later, you sell it. You sell almost half of the company, 40.7 percent as I say.

Alexander: Yeah. Between that we went for another round of funding, so we actually [inaudible 08:43] the company about 10 times in the Series B. Then expanded into the United States, where there were already well established company. Some of them were already public, like Onvia in Seattle and Bizbuyer funded by Meg Whitman, the CEO of eBay. And then in a kind of a Series C funding environment, I realized that something was changing. We were going towards the millennium. And I realized that there was the opportunity to take a very, very large investment to go towards IPO, which a lot of companies were still doing or actually find a partner. And a partner was [inaudible 09:25] and then a yellow page company. And that yellow page company realized that it was a fantastic opportunity to team up with a [inaudible 09:33] operator and that we have the same people and customers that we’re going after. And hence, we decided to do this jointly and they acquired kind of a controlling, not a controlling, but a 50 percent steak in the business.

Andrew: And at that point you moved on to do other things?

Alexander: Yeah. I remained actually a chairman of the business. And I moved to become a venture capitalist. I was still involved with the company, but I decided to see the other side of the equation and so to say, became a VC in New York City, Boston, and Washington on the East Coast. [inaudible 10:17] aim to establish a cross-Atlantic fund. So, [inaudible 10:19] That fund was already established. A $100 million fund, and we had, the partners that just raised a $300 million fund.

Andrew: Let’s go back to the beginning and fill in the gaps, starting with the original idea. In 1996, you and your friend from school decide you’re going to launch a company. What was the idea behind that business? What was the thesis? What were you trying to do?

Alexander: Well, clearly the beginning of the idea was completely different from what it turned out at the end, but it was always a marketplace. At the beginning, it was a marketplace for information. So we started out consolidating information about the eastern Soviet countries which had broken away from the Soviet Union and were becoming rich oil countries. So Kazakhstan, Uzbekistan, Azerbaijan, Tajikistan, and Turkmenistan. And we traveled out there to compile information. We sold this information to consulting companies. And out of this, we built a marketplace for services, for products, and for information, which we later called Mondus.

Andrew: What kind of information were you collecting in the early days about the former Soviet Republic members?

Alexander: It was a lot of information which was about oil, which was about access. [inaudible 11:42] information [inaudible 11:45].

Andrew: How were you getting this information back in the days before Wikipedia and before everything was available online?

Alexander: [inaudible 11:55]

Andrew: Sorry? We lost the connection there for a moment, but it is going to come right back. I see that his side of the conversation froze, and of course, if it doesn’t come back, I’ll just have it edited back together. Oh, there we go. Sorry. We lost the connection there for a moment. I was asking, how did you collect all that information back before everything was available online easily?

Alexander: There were certain sources already online, but they were not easily accessible. So they were only accessible through, I think, [inaudible 12:28] and Mosaic. It was the time or just before Mosaic browser launched. So these information sources were available, but they were also available only in libraries within the Oxford University Library. But that transition was just happening in that zone of time, and we realized that that transition would enable us to be an interesting source of information, but an information source which would only be online. So, that was a defining moment where we realized that the web was able to help us in the distribution of that information in a different way than other companies who had been doing that before, like the Economist Intelligence Unit for example or a company in Oxford called Oxford Analytica.

Andrew: Okay. So you were collecting all this information. You were selling it to consulting companies. What kind of revenue were you generating from that?

Alexander: It was revenue sufficient to fund a four or five employees of the company.

Andrew: To fund what, I’m sorry?

Alexander: It was sufficient revenue to fund four to five employees which we had in the company. Clearly we were growing, but we couldn’t grow as far as the investment, which [inaudible 13:45] after 1 million pounds was able to grow us into products and services and consolidating the marketplace and aiming for smaller or medium size enterprises. So the initial customers were really companies like Booz Allen and Hamilton, some of the larger consulting outfits, which were willing to pay large package prices for that information.

Andrew: How did you get them as customers?

Alexander: We spent the summer, actually, while we were away calling them from Canada. So my business partner and I spent the summer picking up telephone numbers, calling friends, which had recently joined some of these consulting businesses. And we called them one by one every day.

Andrew: [laughs] Do you remember the first sale that you made?

Alexander: Yeah, absolutely.

Andrew: Who was it to, and how did it feel?

Alexander: It felt great. It was a friend of us who bought this piece of information. It was a friend of us who had later started to work for us, and he bought a package of information for one of the countries which we covered. And that felt really great. It was fantastic, because there were hundreds of calls where people just didn’t want to buy anything and didn’t have any need for that piece of information which we offered.

Andrew: What size sale was it?

Alexander: It was a couple of thousand pounds.

Andrew: Okay. And so, all these people are saying no to you over and over. No, no, no, no, no. And you’re sticking with it. Why? Why aren’t you saying to yourself we probably collected data that nobody wants. Let’s move on to another idea.

Alexander: We knew this data was needed. But I think what we felt was that we were just calling the wrong people. So, we have to continue calling to find the right ones. And clearly in the process we got to know a lot of people which later in the buyout of the company helped us. So, we called on investment banks. Some of these people which later became investment bankers where we sold all the business, knew when we actually initially called and at that time a lot of the investment banks, for example, had data centers in the basement where they had CD resources and access those information libraries. Clearly our idea was that this information library was not necessary anymore because you could actually just draw it down from our online resources.

Andrew: I see. Do you have an example of a specific investor who first turned you down when you were calling him and then later on became an investor in the business?

Alexander: Oh, yes, the famous Lehman Brothers.

Andrew: Okay. Tell me about that? What was it like when you called them?

Alexander: So, we called them and luckily they said well there was not a need for that piece of information because they had like a CD database in their basement where this information was already available. We explained to them that our information would be much fresher because it resides on the Internet and it’s daily newly prepared. In the later stage, there were actually the investment bankers that were on the acquiring side. And one of the people which we called on was a friend of ours and he after having an internship with the company took a full time job with the company.

Andrew: So, if I understand you right, Lehman Brothers ended up helping you sell to the Italian yellow page giant?

Alexander: Yeah, they advised the buyer. But absolutely there was a great relationship between us and Lehman Brothers all along.

Andrew: So, is the same person who you called up who ended up being on the other side of the sale, or was it a different person at the same company?

Alexander: No, no. He called me up and said, “Look I remember when you called in the first instance. I have this company down in Italy which is looking to buy an online and I think you totally fit.”

Andrew: Oh, wow. So the reason he knew of you to introduce you to them is because you called on him.

Alexander: Yeah. There was one more little incidence when I think he was with his grandfather and his grandfather said like, “I don’t know what you’re really doing there in London at this investment bank, but I read this article in this newspaper about this German guy in New York having a company which is doing an online marketplace. I think this is what you should be doing.” And so he picked it up and he said, “Oh, I know this guy. He called me actually and I met him in London.” And that’s how he remembered that we had started this business. So, when it came to one of his clients calling and saying what company should we purchase, he remembered u. And then I very quickly took a plane down to Italy and explained to the CEO of the yellow page company how important it was to acquire us.

Andrew: [laughs] That’s great. What about this? One other sale.

Alexander: In life, it always comes back. You help somebody, they help you.

Andrew: Wow. What about one other sale? The biggest sale that you made in the early days, back before you adjusted and changed your business, before you got funding, do you remember that big sale?

Alexander: Yeah, I think there were not big sales, but there were a lot of small sales. I think it was a company with little steps, you know, and clearly we tried something really, really difficult. We tried to consolidate a small means enterprise mark, and when we sold, we had about 160,000 customers which had registered, but it was still a very much subject of debate, how you would monetize those customers. I think if you look at the companies today which do what we’re interested in these days, like the Alibaba, the Elands of this world, it’s still the subject of debate, how you monetize long-term relationship. For example, on the service side, once the introduction has started between two parties, between the corporation and the service provider.

Andrew: Tell me about . . . I’m getting a little bit of echo but there it went away. Tell me about some of the attempts that you made at new businesses before you hit on the one that you ended up getting funded? Were there a few ideas that you thought you were going to hit with that didn’t work out?

Alexander: Oh, no. I think yeah, absolutely. I think the few ideas that I was really sure about was marketplace, but I helped several friends around Europe which had started eBay copycats. So I think we knew very well about eBay, and we’re all still entrepreneurs. But I remember I flew down to southern France and helped a friend of mine to build an eBay clone. He called me and said, “Well, I have this venture capitalist from Los Angeles flying in. I need to appear a bit bigger than I really are.” Because he was just in a Pitzer place in the back of his father’s hotel with one more person. And so we did due diligence. It was this guy from DLH from L.A. He ended up not investing, but at this day, I was down in France. I got the call from 3i that my business was chosen to be one of the last 10 companies in this business plan competition.

So, interesting. The friend of mine, he ended up having several investments over the time. And then one was at a large firm, but he lost control of this business and ended up not selling, even though eBay came knocking on the door and wanted to buy the business. But another company in France was sold to eBay, and his company called Aucland, I think, I’m not sure what happened to it, but he went into New York in a second business, and became hugely successful in his second business. But these stories are very much the kind of war stories of Europe.

I think we all today know each other as entrepreneurs, but we all tried to do something very similar. But we said we would not to a consumer marketplace. We would do a business to business marketplace, so that was the difference. And that innovation came very much on a lot of reading around Commerce One, Ariba, and the very high profile cases in the United States of marketplaces for businesses.

Andrew: I see. So you saw the marketplaces in the United States were full of promise, getting lots of attention, and you said, “Why don’t we do one over here in Europe?”

Alexander: Absolutely.

Andrew: And that’s the idea that you took into the business competition that I talked about earlier?

Alexander: The business competition was still a lot on the service and actually information angle side. But after we got the funding, we were only able to introduce products into the marketplace.

Andrew: What kind of products did you introduce?

Alexander: Printers. Everything a small business needed. Printers, screens, computers, laptops, chairs, desk. Everything you required for.

Andrew: I see, okay. And so by then you were already a marketplace, but you were a marketplace for information?

Alexander: Equally. And services.

Andrew: I see. Services, but it was a marketplace. So you went from creating your own data that you were selling to Booz Allen and a bunch of other companies to suddenly becoming a marketplace where anyone could sell their data and services? Did I understand that right?

Alexander: That’s right, yes.

Andrew: Tell me about how you made the transition. There were a lot of people who didn’t realized that the marketplaces were where the full potential were, and they were just going to create their own content. How did you make that transition?

Alexander: I don’t know. I think there was one defining phone call. I think we called one of the Harvard professors, and we had a two hour discussion with him. Somehow we learned, we adapted, and listened to what the environment was saying. We say what ideas we had and what mistakes we were making and what had traction and not traction, and what was really catching fire. So I think we adapted along the way and were quite flexible. We were relatively young. We were 24. And so it was a fantastic learn, realize what we had done, learn, realize what we had done, adapt. So it’s always day one. I think this is still the same since then for me. I think in an enterprise or startup, every day is day one. So you have to start from scratch every day.

Andrew: But it was a professor who really helped you see your business from outside the business and help you find the opportunity?

Alexander: I think he opened our eyes a bit. Absolutely. We had a call with him, and I think we put his recommendations into action afterwards. And I think then, later, I got to read about some of the online market reports, which I had seen Morgan Stanley and Goldman Sachs had done. And I concluded that the large opportunity was actually on the business side rather than on the consumer side.

Andrew: The professor. How did you get to spend time with him? Did you just call him up and say, “Can I have a little bit of your time to talk to you about my business?” Was there some other relationship first?

Alexander: I think there was somebody who actually had gone on to business school at Harvard, and then they made the connection to him. And then he took a call from us one day and advised us. I think the other advisors, we should just give up, which we surely didn’t. [laughs]

Andrew: They were telling you to give up, the other advisors?

Alexander: There was a lot of people who said that. Absolutely.

Andrew: Wow.

Alexander: How wrong they were. [laughs]

Andrew: [laughs] Did that fire you up, because for me, I remember when I launched my first business, and people said no. I’d get fired up to prove that they were wrong, because I had started in my head to think of all the reasons why they were wrong. And then all those reasons would get me all motivated to prove them out, and it actually helped me to be turned down a little bit. Did that help you?

Alexander: I love it. I actually think it’s the best thing that can happen if somebody say no, that doesn’t work, that just fires me up.

Andrew: Do you have one person who was special? I tell you who my one person is. I went back to my entrepreneurship professor, and I said, “Look. Here’s my business idea.” And he said, “No. This is just completely wrong. It makes no sense. But here’s another one I’m backing, that I’m supporting.” I think he was an advisor of. It was called Cosmo. It was delivery of food to apartments in New York and San Francisco and so on.

I was so glad when that business failed, just because I wanted to prove to him that he picked the wrong horse to back. He wouldn’t give me any attention. But to prove him wrong is one the motivators that kept me going. Do you have someone like that?

Alexander: So you founded Cosmos?

Andrew: No, no, no. I didn’t. He wanted to back Cosmo. I took to him a company called Bradford and Reid that did a lot of email, newsletter marketing, and a lot of greeting cards. And I said, “Look, this is what I’m doing.” He said, “I don’t know. It doesn’t seem like there’s much of a market for it. You have to think bigger. You have to change.” And this and that. And then he told me about Cosmo. He said, “I’m an advisor to Cosmo. This is the kind of company you want to create or back.”

I can’t believe it. And I doubted myself for a little bit. I said, “You know what? This guy at Cosmo, they’re bringing in millions and millions of dollars of investment. Everyone’s talking about them. I like using them.” But I still wanted to prove him wrong and say, “No. My business is the one that makes sense.” Did you have someone like that that fired you up? No specific person?

Alexander: Clearly, I think one of the things I believe in long term, innovation. So, I think in five to seven year terms. And so when I do something, I don’t have in mind that there is anything quickly doable. But I think market strength was in these kind of environments. So if you look at what’s happening now, for example, it’s eCommerce and mobile, I think a lot of the things which we have done here at Empora will come to fruition via the mobile channels. We invested very early on in visual search technologies and similarity search technologies.

Now, we have gone beyond that. And I think if you look at how this all comes together, I think consolidated product marketplaces, mobile, then I think you can see this. And you often can’t see this when you get started, but we invest for the long term. So it’s five to seven year cycles. I believe in looking at the customer. So if some people talk about a lot of those things, they don’t have that foresight, I think. They just look at the status quo today and make the mistake to just translate that straight into what they’re saying.

And so, that’s why I also feel like I think one can be misunderstood many, many times. But if you look back at your customer and invent on behalf of your customer, then I think you cannot make a big mistake. So it’s great to hear the people saying, “No, it’s wrong. It’s wrong. It’s wrong,” while you think like, “Well, I have a five to seven year horizon, and I invent for the customer, and I’m customer-focused.”

And then you still make lots of mistakes, and you have a lot of learning along the way. And none of these projects are ever perfect. That’s the reason I think it always feels like every day is day one. We’re here in this company into the third year, but I think it still feels like we’ve just moved into that office.

Andrew: Let’s finish up the story of Mondus, and then I want to get back to what you’re doing today, including Empora. I’m sure people are curious about it because you’re standing right in front of the sign of it. So, you sold the business. We talk about how it gave you freedom. Tell me about the one non-business benefit of doing that. Did you get yourself a new house? Did you buy a car? What did you do?

Alexander: Let me just move that chair.

Andrew: I like that. You’re so concerned with making sure that the logo looks good, that we’ve got to get the chair out of the way. I admire that.

Alexander: So, the one moment which was not so great?

Andrew: Mm-hmm. What was it?

Alexander: Clearly, when it comes to selling companies, I think there’s always a conflict in terms of who gets what and things like that. And then I realize that whenever it comes to big numbers, people are starting to fight. So, that’s not a great moment. And I think that always happens, I think. So . . .

Andrew: You just got into an argument after the sale of the company over who got what?

Alexander: I mean you see, it repeats itself all the time. VCs can’t get enough. They have outrageous terms. Some of the bridge loans they have given you, they feel that, you as the founder, you’re not, worth anything, you’re not supposed to take any money out. And this is not nice. You lose friendships along the way and relationships you have built-up before. So, on my conclusion, I think it’s better to be in control of your enterprises along the way and not have too much disturbed from the outside until you’re done.

Andrew: Did you end up with nothing? Is that what you’re telling me here?

Alexander: No. We as founders ended up with something, but it was a hard fight and you had to use your tools to get to that.

Andrew: Tell me, like, what kind of fight was it?

Alexander: I mean, it’s just like bridge loans which have been given to the company with very high interest rates, which were thrown out and certainly, I think arguments that well, founders can realize value later while this was [inaudible 31:44]. And I think arguments around that, where you had to make really clear where you stood and that there wouldn’t be any sale prices if these kinds of things you wanted were not fulfilled, because people put in four or five years of their life into a business to only see venture backers make a return. Then that’s wrong.

Andrew: Did you have to take them to court?

Alexander: No. It was just a healthy, fruitful, kind of [inaudible 32:25] discussion, where it was made very clear who was in what position.

Andrew: I’m going to be respectful, and I am not going to ask for details. But did you end up doing well financially at the end of that?

Alexander: Yes, absolutely., I think we did very well.

Andrew: All right. So what’s the thing that you bought? Did you buy anything for yourself? Did you buy anything that, personally?

Alexander: I’m not doing these things for the money. I think I’m doing these things really to influence and do something which I’m excited about. And this excitement comes from actually taking technology and bringing that to the customer and doing something which has not been done before. And when I see that, that really excites me. I think, initially, I didn’t spend any money. So I didn’t buy a flat. I didn’t buy a car. Actually, I did something completely different. I took the 16 year old car from my parents, which was at their house too, completely smashed into pieces already. And I said, “Well, I can afford now the Stamp duty and the tax and the gasoline.” And I put this into the garage or flat I had rented and enjoyed having, for the first time, my own car. Also it was 16 years old. I felt it was the best thing I could have done because showing off was a flashy car, would have probably sent me to the wrong hands because I was not married. So, it was better to actually be in total disguise.

Andrew: You know what? That’s absolutely right. It’s true.

Alexander: So, I didn’t do, for long time, much. But I think one thing I did, I secretly bought a little Mercedes Old Timer, which I long admired from 1972 . While my next job was in New York City, I really enjoyed having my little Mercedes there. Also. I never moved it much because it’s so difficult to move cars at all in New York.

Andrew: [laughs] Right on. All right. And you know what? What I was saying earlier was, that’s really smart, when you’re single, a lot of guys want to go and spend a lot of money to try to bring women to them, but you bring the wrong women over to you. And those wrong women are very sneaky and very tricky and just like you spend all your time thinking about technology and how to make Truphone work on the iPhone and multi-task and all that, they’re spending that kind of time figuring out how to get at you, how to get at your money, those are the wrong people . . .

Alexander: Yes. And so I looked at all these expensive things, and I thought I can really afford them. Like really large, nice flats in New York City. But what I ended up was moving into a very, very small, not eve one- bedroom but more studio apartment on Sullivan and Bleecker.

Andrew: Oh, that’s a cool area.

Alexander: On the corner of Sullivan and Bleecker. And I really enjoyed it. It was a simple life, and simple life I enjoyed.

Andrew: Did you get to date much while you were there? Did you get to date a lot of American women while you were there?

Alexander: Let’s say that New York City is the best place if you’re single.

Andrew: [laughs] I disagree. I think Los Angeles is. I left New York City for Los Angeles just for that reason. But we’ll move on. We’re both married now, and the audience wants to talk business. So let’s move on to business. You then go on. You become a venture capitalist. I talked about two of the companies that you invested in. I’d like to spend just a little bit of time on Truphone, and then a lot more time on the company whose logo you’re sitting in front of.

Alexander: [inaudible 36:08]

Andrew: Sorry?

Alexander: The venture capital side was really a really tough time. It was really the recession. A lot of these companies that were built had found that the customers had gone out of business. So fantastic management teams around ideas which were often the next generation. For example, the next generation of a residual subscriber line. DSL service, like all optical networking. A fantastic team from Lucent was already on the road to do a $2 billion IPO. So I had to pack it in completely. And eventually the whole company was acquired I think for very, very little money. It’s a fantastic technology team, with finished product. But as these iterations of technology move on, the [inaudible 36:57] had broken away on the telecom side. But what venture capital helped me with was to broaden my horizon. So while Oxford broadened my horizon from being an engineer to somebody who is more broadly educated, what the venture capital really taught me that there isn’t only software or Internet companies, but there are telephone companies and many, many other flavors and different stages of companies. And I started really enjoying it.

It was a very tough time, so a lot of companies had gone through restructuring and had to be restructured or went out of business. And the recession really taught me that there’s not always the sunny side, but there is also a very dark side to these kind of corporations. And when you downsize, that’s a very dark side to a corporation. But that made me very careful and tread very carefully for the next couple of years. But eventually, I decided to go back into starting companies from scratch, and that’s how I got to Truphone an that’s how I got to start Empora.

Andrew: I’d like to spend a little time on Truphone, because I remember when I was overseas, before there was Skype, there was Truphone. Before you count on Skype. I don’t even know if it was around, but I know I couldn’t count on it. It was Truphone. And I remember once being stuck somewhere with my iPhone, couldn’t make any real phone calls, couldn’t do anything. Except I found Wi-Fi at a coffee shop. I used my Truphone to dial out, and I was able to connect with my sister and her boyfriend at the time. And it just was such a life saver at the time. What was the original vision for Truphone?

Alexander: This is really interesting that you say that. I hear that quite a lot from people which go somewhere into the middle of Canada heli-skiing or something, and then they say, “Oh, it was a life saver to have Truphone and make a connection.” You hear that a lot on the web when you search on blogs, where people connect via Truphone where they didn’t have any other way to connect.

But the truth is that Skype was really an earlier company. The company was around, and there was an opportunity to invest into it several times on my side, which I declined because I had an earlier experience on venture capital and it was instant messaging. But what I realized is actually the telecom industry is changing. What Skype really changed and revolutionized is the behavior of how we utilize a desktop.

And at a desktop, we’re suddenly using something new. Nothing unheard of, because we had [inaudible 39:31] and others. But it was a usability success. It was very simple to use. And it suddenly turned — also, there were a couple steps between, because I had to get a headset — my desktop PC, which I had at the time, and my laptop into a communication device. [inaudible 39:50] And the company has built fantastically on that and will continue to revolutionize.

But what I realized was that the mobile phone was different. So I realized that the mobile phone had a SIM card in it, so it was already a communication device. But the mobile iPhones had essentially a lot of limitations in terms of computational strengths and the capability to connect to Wi-Fi. When we started Truphone, there were not even phones around with a Wi-Fi capability. So I remember the first Nokia 6680, which connected via Bluetooth to the laptop. And then from the laptop, it connected to Wi-Fi. And so a lot of people said, “Look. You will never make a success out of this company because downloading applications to a mobile phone is something which people don’t do. They do ring tones and that’s about it.”

And while I agreed, I knew that this would not stay forever like that. So we started off on the Nokia 60s to enable them to make calls. And if you look at today at the Nokia 71, this is still one of the most powerful devices to converge.

So when I talk about convergence, it means you have a SIM card, which is from Truphone, and you have an application on it. So when you walk into a friendly environment like a flat down the road here on the Portabella Road, which is a cinema. I know the Wi-Fi password. I walk in, and when you call me on that, I terminate on that Wi-Fi network and make a crystal clear sound call. Much better than a Skype call in terms of quality on my mobile phone. The same is true in my office and my home. So I’m already covered at max I would say 70 percent of the places. And this is what I call convergence.

And I realized that Skype is never going to be able to do that because they don’t have the SIM card which we call the Truphone local web. And then you have the SIM card with multiple numbers and we are going to put multiple countries on it without roaming charges, plus the application which allows you to receive that call also on a desktop or on the mobile while the application is running.

But while people were really right about the Nokias that people wouldn’t download anything on the Nokia which is true still today. I think the Nokia from a platform is not a device where people really have a behavior to download an application and utilize them as on an iPhone.

In the course of the history of the iPhone [inaudible 42:16] on a global base. And that changed the company and that whole foresight that there wouldn’t be this lack of capability of downloads actually hindering the company. So the next thing in [inaudible 42:38] was Skype staying on a complete IP communication company, which is now also mobile and still on the desktop and moving to the TV.

I believe that the convergence product between SIM card and application is one which is going to be very, very powerful for the customer.

Andrew: So you’re saying is what Truphone has that Skype doesn’t have is that SIM card. That you can take the SIM card out of your phone and put in a Truphone SIM card. And you have both the ability to make phone calls the way we ordinarily would on our phones and the ability to do it over VoIP, which is what I was doing when I was in the coffee shop.

Alexander: That’s right you can do it over VoIP and I think. But you can do it equally over the SIM card, or you can do VoIP over the 3G SIM card. But the SIM card has the greater advantage that it is a global SIM card. So we’re the first carrier in the world which is a global SIM card and Voice over IP carrier. So we can address customers anywhere on the planet.

Andrew: I see. So if I’m going through Europe, instead of picking up a different SIM card at every country that I happen to be in, I put in just the Truphone SIM card and then I can make phone calls no matter where I am.

Alexander: Yeah. You land in another country and it offers you, actually when you have arrived, it offers you [inaudible 43:58] and/or in addition by the local number. So I travel with my UK Truphone SIM card to the United States. When I land at the airport, I get offered a US number and a US rate.

So I feel really great about that because I don’t have to go and buy an AT&T SIM card. But I’m now still on my Truphone SIM card people from the UK can still call me. American friends can call me on the American number. And by the way when I return back home, they can continue calling me on my US number. While I’m in the UK, I can receive that call on GSM or on VoIP. Both is fine.

Andrew: So is the market for that just limited to people who travel a lot?

Alexander: Yeah. Absolutely. I think initially the market is for the people who are high frequency travelers, expatriates, people with second homes in other countries which really happens often in Europe. Students from other countries. But you have to consider that the international calling market has grown from about 20 billion minutes to 400 billion minutes in the last 20 years. So from 1990, we have seen a 20 to 40 percent growth, from 10 billion to 400 billion minutes.

Andrew: I see.

Alexander: So we still a have 20 percent year over year growth on these international routes clearly because it is enabling calling, which was before absolutely unaffordable.

Andrew: Right. And you know, even today, if you’re an AT&T or Verizon customer, and you want to call in internationally, it just doesn’t make sense. They’re charging way too much because they know that the few people who are making calls like that frequently can pay whatever they want, can pay a lot, that they’re price insensitive, and the rest of us are using VoIP.

Alexander: That was really worse if you look at, like, I just read in the book about the Rolling Stones, they didn’t even call their girlfriends when they were in Japan because it was just not possible at the time. And Mick Jagger said it was just too expensive to call his girlfriend.

Andrew: Right. It was because it was too expensive.

Alexander: Right.

Andrew: Right, that’s a good line. “Sorry baby, it just got too expensive.” Tell me about this new business, Empora. I called it just a fashion search engine, but it’s more than that. What is it?

Alexander: It’s the invention that you can do visual search on objects. You can really take an object, look at it mathematically, and that’s what we come from. We come from kind of a patent and invention [inaudible 46:46] calculate the visual impact, often an image, and then relate that to each other. One calls that visual similarity search. It’s a very specific subject area. When we saw that, we felt it could be applied to many, many areas. But we felt that the apparel industry was its way to move online and was particularly destined to do so. And why? Because we’re saying when we want to buy something, we sometimes want to go for a very particular outfit or something which looks very particular. We want to look like Steve Jobs and have kind of a black turtleneck kind of sweater and jeans. But it’s not so important that we hit exactly the brand or the outfit, but something very similar looking is equally okay.

And by the way, the fashion industry turns around its products really quickly. So when we see pictures of maybe six to nine months [inaudible 47:50] back, wee don’t care. But a visual search can enable you to do [inaudible 47:55]. So we invested very heavily in making that possible, with very high throughput and in a way that we have constructed the website which is today Empora, where you can click not only buy this, but say, show me similar outfits. And if you look at similar items, you get now very satisfactory search results. That wasn’t the case three or two years ago. We had to invest quite heavily to build this functionality out for our customers. We feel it delivers a great benefit to the customer because it sorts through hundreds of thousands of objects in a way that you can sort them, not only by price and by color, but along the lines you just click a picture. So the search phrase becomes a picture itself. You don’t have to complex, on a complex line describe the whole object, but you can just click the picture of the object [inaudible 48:49] and it searches for similar looking items. So that was initially . . .

Andrew: I’m on the site right now. I see Rachael Bilson. She’s in leather shorts, and I can get the shorts that she’s wearing. I can get the shoes that she’s wearing. I can get a purse similar to the one that she’s wearing. And this is done by man or by machine?

Alexander: This is done by machine. This is a perfect example. This woman was photographed maybe two years ago. You still want to look like her, but the search results you’re getting on the right side actively brought into this page by a machine, and they will be up to date and shoppable even in two years from now. So it’s also . . .

Andrew: The first four pants that I see, none of them are leather, even though she’s clearly wearing leather pants. I see denim. I see khaki, and then I don’t know what that last one is. So how far have you gotten, and how much further do you have to go?

Alexander: I mean, you can always go further. So what you just searched for some of the characteristics [inaudible 50:11] of certain quality of the material. Can you recognize silver and gold in jewelry? Can you recognize leather? Can you recognize silk? Can you recognize wool from a picture perspective and from the characteristics of a picture? And this is absolutely doable. More algorithms, more signs put into actually the core of Empora enable that kind of characteristic. Leather usually has a certain characteristic that it’s shiny, and that can be done, absolutely. So at the end, we are a [inaudible 50:51] startup [inaudible 50:53].

So, but what you had pointed out is one thing. This is also a network really. If you are in a social networking environment, we have acquired for Empora a company called FashionFreaks.net. There is a social network, and when you click on one of the girls which have uploaded a picture of themself, in the US it would be called [inaudible 51:15].

Andrew: In the US it would be called what, I’m sorry?

Alexander: There’s a US company which started a bit later called [inaudible 51:22], for the US listeners. And when you click on an outfit, which you have uploaded, you can see how we put in, in a very Google AdSense like way, picture advertising of our database of products. [inaudible 51:37]

Andrew: Sorry, this connection is getting worse and worse. Sorry, once again, we were loosing the connection for a moment but you’re back. So you’re saying that within that social network, if you’re looking at an outfit if I understand you right, there’s an ad for a similar outfit, and it’s the computer that’s pulling up the similarity and displaying them. Did I understand that right?

Alexander: That’s right.

Andrew: I see the power of that. Okay. So it’s kind of like Google AdSense, except for instead of reading the text and finding similar ads to it, you’re looking at the pictures and finding relevant pictures for that.

Alexander: Exactly, and there’s large amounts of people in the fashion industry which create outfits or actually have stored files of product pictures. And you can utilize them for a long time to match against that, because the blog entries and many, many of these other entries and imprints on the web, reside there for a very long time. They create demand, but the product is not available anymore. So we for example have a trend pages which are up for maybe two years while the trend [inaudible 52:49] few years ago. There is still demand today to buy African tribal dresses.

Andrew: I see.

Alexander: And the ones which we picked at that time are long gone, not available anymore. But others are available. So how can you define such a trend, describe that mathematically, and bring pictures into those pages which have relevancy? That’s the question which we solve with that kind of innovation from an ad perspective. From a consumer browsing perspective, it really brings you all the fresh content all into one place, from hundreds of different e-tailers, and you can shop them all together at one destination, which is a great advantage. And this is very focused towards the cutout images of fashion.

Andrew: Were losing the connection here. It was a little fuzzy at the beginning, then it got strong in the middle, and now it looks like it’s going in and out. So why don’t we do this. How can people connect with you? First of all they should check out Empora.com and see what you’re working on now. Second, they may want to install Truphone on their phones. And thirdly if they want to connect with you directly, are you blogging? Are you online somewhere where they can say hello?

Alexander: I’m [inaudible 54:16] blogger. So I’m really on Facebook. I’m on Twitter. I’m on LinkedIn. I’m also on Posterous. Sometimes I upload . . .

Andrew: I saw that actually. Your poster is really good. You use it a lot.

Alexander: Yes. Well, you see I’m also experimenting with all these tools, so I use my personal account to experiment. So it can look sometimes like I’m spamming, but I’m only testing out how these services interact with each other. But essentially I really want to always understand very early on how the world is changing. And I think one of the big changes which we’re seeing now is that searches are becoming much more social, and there is a big question mark for me. What is the kind of power balance between that social search and between that kind of algorithmic search? And equally at Empora, I’m asking myself the question visual similarity search versus exact matching searches. And how is that translating into a mobile environment? Because a mobile phone and a camera. So I can’t tell too much, but there’s a lot of innovation in our research, which we will launch going forward, which has to do with mobile, visual search, and mobile . . .

Andrew: I can see that. So if I see maybe a friend of mine who has a nice watch, and I want to get that watch, I might take a picture of the watch and then check it out online and find out if I can find similar watches. Maybe a cheaper one, maybe one that’s more expensive so I can brag to him that I’ve got a more expensive watch. But essentially that’s what you’re talking about.

Alexander: That’s right. We call this functionality. I can say so much. This is a kind of stealth secret approaching. We call it snogfrog. So when you go to snogfrog.me, then you will see that there’s already a holding page, and this is somehow related and this is one of the newest innovations.

Andrew: Snogfrog?

Alexander: S-N-O-G, like snogging, and then frog dot me.

Andrew: I see, yeah.

Alexander: There’s nothing much you can do yet, but I think you have to just wait and be patient. This is a kind of a stealth project.

Andrew: So I would need a username and password to get in. So people are testing this already. They’re taking pictures of each other’s stuff to find out how they can get it themselves.

Alexander: Yeah, but the people which do this right now are only approved internals.

Andrew: Well, when you’re ready to show it to the rest of us, we’d love to jump in and check it out. There’s actually someone down the hall from me who has a much better than mic than me, and I would love to take a picture of his mic. I know this isn’t clothes, but I’d love to take a picture of his mic and then go online and find it.

Alexander: Okay.

Andrew: Maybe we’ll save that for version 2. Thank you. Looking forward to talking to you when snogfrog is up and running. And hope to see you at some point in person.

Alexander: Okay, great.

Andrew: Cool. Thank you all for watching.

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