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Host: Hey everyone, it’s Andrew Warner, I’m the founder of mixergy.com, home of the ambitious upstart. You guys know what we do here, I’m bringing on an entrepreneur to talk about how he built his business, talk about the successes along the way, talk about failures, what he learned from it all, and the goal here is not just to entertain you, ’cause i know that your gonna be much more entertained by cat videos on Youtube. But, to educate you and send you out into the world, so that you can build an incredible business, and then come back to Mixergy and let me interview you about how you did it, and then others can learn from you. It’s a like a circle of entrepreneurship, we all keep feeding back into the circle.
Today’s guest launched and sold two previous companies, and he’s now launching his third. His name is Doug Camplejon, he is the founder of MyPlay, which was sold to Bertelsmann; and MI5, which was sold to Symmantec. I want to focus this interview on those two companies, because those stories have a beginning, middle and end, and I think we can learn more from stories that are completed, then those that are still ongoing. But I also want to ask him about Fliptop, his latest startup.
Host: Doug, welcome to mixergy.
Doug: Thanks, happy to contribute to the circle.
Host: Thank you (laugh). So I’m looking at your background, it hasn’t all been a smooth ride, it never is really for entrepreneurs. Let me ask you this, why be an entrepreneur?
Doug: I don’t think there’s anything I would rather do in the world. When I was growing up, my father, who started out as an engineer, and then worked for companies, then started his own businesses, said to me, “”If you can wake up every morning and say, ‘Wow, I can’t believe I’m getting paid to do this, (even though sometimes as an entrepreneur, you’re not getting paid to do it) you’re in the right job'””. And that’s right for me. If I was sitting on a billion dollars, I would still go start companies.
Host: Now, I know that Myplay got funding, and MI5 is funded, is Fliptop funded, or is it coming out of your pocket?
Doug: So, I have had the good fortune to sell two companies, so so far I am writing the checks for this. The idea here was to get a product to market, go get some traction and then go out for our first round, later this year.
Host: And actually this business couldn’t have been around that long, how old is Fliptop?
Doug: So Fliptop, we sold… Symmantec acquired MI5 in April of 2009, and I incorporated Fliptop May 1st, 2009, so I didn’t take a lot of time. And we spent the summer kind of noodling around on ideas, and started building a team and working in earnest last fall. Launched our first product last month and actually are doing a bit of [?] right now, that should launch later this summer.
Host: Alright, let’s go back and find out how you got into this. ’98 you left Epiphany, where you worked on marketing automation, and soon after you launched, with a previous Mixergy guest, with David Packman, you launched MyPlay in ’99. What was MyPlay?
Doug: So MyPlay was a digital music locker service. The idea came from, this is pre-iTunes, pre-iPod, you know the one MP3 on the market had 64MB of memory, gigantic, held about 50 songs, and I started playing around with it and realized it was really a frustrating experience, I had a lot of windows open, I had to download software.
When I was traveling around, I couldn’t take my music collection with me because it was bigger than what would really fit in this thing. And I just said – this closet that I have at my house that had all my CDs and my DVDs and my games and I said all of this stuff should just be in a cloud so I can access it wherever I go. And here we are 11 years later and I can still open the closet and say all that stuff should be in a cloud. But that was the idea starting with music, but the idea ultimately why we called it my play as opposed to my music was that all your media should just be sitting out in a cloud and accessible wherever you go.
Andrew: Alright and the Mashugina music industry had all these different issues. By the way, when I was researching you, I was going back in time and seeing all the different things that they were willing to do and all the things that they weren’t willing to do. Man it’s nuts. There was one thing that I saw that was an ATM for music. You were supposed to go up to this thing even though you have a computer on your desktop. You were supposed to go up to this thing, plug in your real MP3 player, somehow download music to that that would somehow interact with my play and that was okay for them to do. But for you to use your computer to get music, that was nuts. So, I think just before you, MP3.com had a locker service that said basically if you have a CD, put it in your computer, we will verify that you really have the CD and we’ll have the music already up in a cloud to stream to whatever computer you happen to be on. We just need – was that before you or after?
Interviewee (Doug): That was after us. That was about 6 months after us. So the original idea when I came up with flip top was just that. I said I’ve got this library of hundreds of CDs. They are physical tokens of ownership. I should be able to put a CD in, have it recognize and say, oh Doug, you own these tracks and we should unlock the tracks. And David and I had calculated that to digitize the entire collection – the North American music collection into 128 kilo-bit format was about 12.9 gigabytes. Which at the time was a lot of storage. That was a few million dollars worth of storage. But it was achievable. No I can go down to fry’s and buy it for a few thousand bucks. But the idea there was to put it all in and as people put in their CD, it would unlock it. Well, one of the great things about having David as a business partner, and when i asked him to co-found the company with me, is he said Let’s go talk to a few lawyers. So we did, and they quickly said Oh, they figured that one out. And you’ll get sued to the tune of a couple thousand dollars per track. And so we backed off from that and required our users to digitize and upload their tracks. So a few weeks later when MP3.com launched the beam it service, as they called it. We just looked at our watches and said Okay are they gonna get sued today, tomorrow, next week? And sure enough it was a few days and this massive lawsuit came down from the record industry.
Andrew: I see. I didn’t realize you guys were first. Now to crazy distinction for them to even make. The fact that I’ve wasted my time uploading the CD doesn’t make that CD anymore mine or any less mine. It’s just the distinction that they were willing to make, and it seems to me that they were looking for reasons to just shut these different products down. What do you think?
Interviewee (Doug): I think that – I used to describe it as you go into these large conference rooms with the record labels. And often times they look like a big law room. Big leather back chairs and mahogany tables and it almost felt like there was this wall of oil paintings called the wall of shame. And there was three frames on the wall. The first frame said radio. Because whoever blew that, they were giving away music they should have been paid for radio. Who screwed that one up? Then there was one called MTV. They also screwed that one up. How do we not get a piece of that? How do we not get paid for that? And then there was this empty frame that just said internet. And no one wanted to pose for that photo. And so evertime we would go in for a negotiation, it was all assumed that anything that happened in digital would take away from the business that they had. And so they all priced it as a zero sum game. And so they wanted to get – they assumed that if I took a CD and put it in my computer and it unlocked tracks, I somehow was taking money out of their pocket. And so we as my place should pay them for the full value of that CD. So it’s crazy behavior and it just took someone with the charisma and power of Steve Jobs to break that gridlock finally and kind of open that up.”
Andrew: I’m going to put this invitation out to anyone with experience in the music business during that time and even someone who’s hopefully still around a little bit today, even if they’re not fully engaged, to come in here and do an interview with me about those days. I don’t want to just treat them like they’re the evil industry that’s out to get innovation. There’s no way for me to learn that way. I want to invite them out here just to express what their point of view is because whatever situation they’re in, others are going to be in that situation in the future, and it’s either going to be us, me and my audience, or we’re going to be the ones going up against that industry, and I want to learn it from the inside instead of assuming the way that I did with you, from the outside. I assumed that you were the second player in the industry. When you make assumptions, right, you’re bound to make mistakes.
So you’re out in this space, you raise money at what point?
Interviewee: We raised money actually pretty early. So David and I got started, and this was the go-go days of the Internet, it was 1999, so I think David and I had called some “”angels””, some “”super-angels”” at that point, and we literally had a million dollars in a bridge loan within two weeks. And so we were off to the races, we hired an engineering team out of what had then become Go (which was previously Infoseek), some very sharp engineers who had been there and done it before, got some office space near the Oracle buildings, and were going. And ultimately, over the life of the company, we raised about $26 million. Again, zero revenue, Internet days, wonderful times.
Andrew: And the idea was to grow big, to conquer this space, and then to sell, or what was the vision?
Interviewee: Well, the idea was, if you looked at the record labels, they had no idea who their customers were. They said, “”We sold 7500 copies of the new Brittany Spears album this month, I have no idea who bought those.”” Even the retailers for the most part were not keeping track, in their databases of the credit card transactions, and marketing that stuff back. And we felt there was a huge opportunity being lost there. I think that people had already discovered that the number one reason why that new Bruce Springsteen album, I didn’t buy that Bruce Springsteen album even though I was a fan, was because I didn’t know about it because I somehow missed it. I wasn’t listening to the radio. Radio, if you think about it, is an incredibly inefficient way. You’re hoping that somebody hears that song and hangs out for them to announce it if they do, and then remembers it by the time they get to the store. And we just thought we could take that cycle and make it a lot more compact, and also use that information to sell other goods as well. So we thought it was going to be a really great way of merchandising music and other products.
Andrew: I see, OK. And how were you planning on getting your users.
Interviewee: So initially we did it all kind of virally and word-of-mouth. We then decided to accelerate that, so we were getting some good traction. We decided to accelerate that. David did a deal with America Online where they were exclusive to us for their Winamp products, hence the idea was that as people would sign up for Winamp, they’d say, “”Hey, would you like to have a MyPlay locker,”” we did some cobranding and things like that, and that started driving a lot of traffic to us, and so by the time we were acquired, we had a few million users who were on the service who were engaged in and using Tracks that way. So it was both organic and some pay deals.
Andrew: I see. What other deals did you have beyond AOL? I know AOL factors in later on also.
Interviewee: It does. So we had several dozen smaller, what we called side load deals, and the idea there was, because we had this burden of having people trying to upload, and remember, not a lot of people had broadband at that time, so that was a big limiting factor for us as well–We wanted to make it as easy as possible for people to add music to their locker. So David and his team went out and we would license sample tracks, you could go to MyPlay and immediately add this to My Locker, we did side load deals, you could go on to various other music sites and say, “”Oh, that’s interesting,”” add that to My Locker, and the idea was that it was kind of transferred server to server, so you didn’t have to go through the upload process. So we did a number of those things, kind of affiliate programs and side load deals, to bring traffic in as well.
Andrew: How did responsibilities break down between you and your partner David, your cofounder?
Interviewee: When I called David and bounced the idea off of him, I wasn’t looking for a cofounder per se, I just said I have this wacky idea, you know more about music, what do you think? And he said, “”How would you like a cofounder?”” I said, “”Great, when are you moving to California?”” He said, “”No, I just bought a house in New York.”” And so we had the development team in California in Redwood City, and David and some business development and PR folks in New York. And that’s roughly how the responsibilities broke down. We very much had a great partnership, a great friendship and great partnership, before, during, and after now, still, and so I did most of the product management, hiring, the finance and operations stuff in the company, and managing those folks, and David focused more on the business development and the PR, and a lot of the navigating our way through the legal minefields of the music industry.”
“… and so I did most of the product management, the hiring, the finance and operations stuff in the company, and managing those folks, and David focused more on the business development and the PR, and a lot of the navigating our way through the legal minefields of the music industry.
Andrew: Work for Bing.
Interviewee: Yes.
Andrew: How did you guys know each other?
Interviewee: We worked together at Apple years ago. So my first job out of college was working at Apple. I worked in the multimedia group, became the Quicktime product manager, and so I ran product management for Quicktime for the first three releases of that, David was in the systems software team, and so we overlapped there and just stayed in touch.
Andrew: How did you know he’d be a good cofounder?
Interviewee: I think the first thing about cofounders, the most important thing in general in startups and cofounders in particular is besides high CPU, high throughput, intelligence–is trust. And so David was somebody that I felt like, I never really worried about being 3000 miles away from him, because we had built up this very trusted relationship. We had the shared experience at Apple where we both knew we cared passionately about the user experience, and getting that right. So we quickly became kind of this old married couple that would finish each other’s sentences, and that trust relationship really is what played out.
Andrew: And you left Apple seven years before you launched MyPlay. How did you know in those seven years that he was the right person. Or how did you guys finish each other’s sentences or even communicate and stay in touch during those seven years?
Interviewee: You know, I think we’d stay in touch socially, and see each other. One would be on either coast. From a working standpoint, any startup is multiple leaps of faith, and so it was really something where David was actually still employed at the time, trying to decide to jump ship for this thing, and it was just a vibe. As we started talking about the idea, as we were going back and forth, it really became clear that there was this great partnership where we would both bring something to the table.
Andrew: Did you guys work on any projects together before this?
Interviewee: No.
Andrew: Did you talk about it in a way that would let you know that you were on the same page or that you were in harmony about the way you thought about business? Because there is a danger, especially if he’s the guy who protected you from the record industry, that he might be too conservative.
Interviewee: Right.
Andrew: And that you might be too aggressive in this space. Unless you work together, how do you know that?
Interviewee: You don’t, you don’t. It’s basically, founders are oftentimes funders or you’re getting married over a few Powerpoint slides. The good news is that, unlike a lot of founders who sometimes come together who hadn’t really had a working relationship before, I got to see David and see what a great product manager he was at Apple, and vice versa. And life is too short to deal with a*holes and so there was that factor as well. I’m going to have a lot of fun working with this guy, he knows something that I don’t know, I know things that he doesn’t know, it feels like a good marriage.
But at the end of the day, it’s a leap of faith, like anything else when you’re starting a company.
Andrew: I’m looking at the chat room here. He has a lot of fans in my audience. He did a great interview. People loved him. Another person that a lot of people in the audience loved is Chris MacAskill. Do you happen to know Chris MacAskill, who went on to found SmugMug and he worked at Apple. I don’t know if there was an overlap.
Interviewee: I know of him, but I don’t know him personally.
Andrew: OK, let’s see if there are any other questions from the audience. Did you raise money before you hired developers, the big money after the million dollar round.
Interviewee: Well, we raised the million dollars, and then we started hiring developers, and had a core team of probably four or five folks, and that was plenty to get everything started.
Andrew: Ok, and the next round, and the next round.
Interviewee: Our first full round was that $5 million round we did from Institutional Venture Partners.
Andrew: Any pivots? I know it’s just a company that you guys ran for 2 years, it all happened really quickly, but were there any pivots back then?
Interviewee: There is a pivot right towards the end. So when the entire advertising industry fell apart, we decided–And actually I’m glad you asked this, because I think there is so much hype about pivots these days, and people automatically assume that pivots are all good pivots–and I’ve had both good pivots and bad pivots. At MyPlay we still had an outcome, an acquisition, but we did the wrong pivot. I think we’re all consumer guys, we built a really big consumer service, when the revenue model disappeared practically overnight for advertising on this stuff we said, we’ve got to go pivot, we’ve got to go figure out where the money is. Obviously it’s “”B”” to “”B””.”
“Interviewee: When the revenue model disappeared practically overnight for advertising and the stuff, we said we got to go to figure out where the money is. Obviously it is B2B and so what we decided to do is kind of created a blackbox version of Myplay that people to plug in to other things but why I said that was wrong pivot is it wasn’t where the passion of the team was. It wasn’t where the skill set of the sales team was, so it is a completely different model how you go sell that seven cycle and all those things and ultimately we saw things that we had the technology to go build at similar times like ringtone services and other things that would be probably been a much better pivot for us to go into. As it were we just ended up pivoting and getting acquired a few months later, so we didn’t really have to see that play out, but ultimately I don’t think that was the right pivot for us to do.
Andrew: I know that at the time a lot of companies were going B2B, was that why you made that decision. Where did the influence come to go B2B?
Interviewee: Panic probably mostly.
Andrew: So you panic, why reach for that, did somebody say hey B2B or where you reading all the papers and seeing that everyone else was going to B2B and you thought maybe we should too?
Interviewee: I am sure it was a bit of both. I think the real question was who can pay us for this and it was probably, one of my favourite quotes I think is Spielberg quote and says the difference between a good film and a great film is how much you leave on the cutting floor, and I think that similarly in start-ups the difference between a lot of successful outcomes are how many ideas you generate basically that you get to go, cull away the bad ones because if you are just choosing from one idea then you are going to go down that path as opposed to a hundred and go oh this one over here is actually a better idea. And I don’t think we went through that exercise [unclear]. I think we should have done really sad, imagine we are starting all over again, we have got a great development team, we got these sets of technologies, we can go leverage, here is the world as it stands today, looks really different that it was six months ago, what can we do, and I think if I was to do it over again, I would have generated a lot more ideas for them.
Andrew: More ideas and then decided which of those you needed to pursue?
Interviewee: Which of those to go pursue. And I think we ended up knee jerking into B2B more than saying here is all [unclear] ideas of what we could do, we are really excited and we think that is the best.
Andrew: It is so interesting for me to do this, I think a lot of people wonder why go revisit the past or it is 20/20 hindsight, how does it help, you are never going to have 20/20 hindsight in the future while you are building a business, what I found when I was in business school as an undergrad taking business classes was that those Harvard business cases were really probably the most useful part of school for me where we thought through other people’s business issues long after they had solved them or moved on and thought about what we could do in their position. It forces you to just think about business, think about real businesses and to put yourself in that place before you end up finding yourself in your real business in that spot, so whatever you are going through right now, you say about panic and you have to decide, I need to go through that at some point in the future, people who are listening to us are going to through it, and if you practice by thinking about the past, or by thinking about other people’s businesses, I think it makes you a more experienced smarter business person.
Interviewee: You are to make new mistakes, as opposed to repeat the old ones.
Andrew: Let us talk about AOL, how did they factor in, actually I will bring it up this way, Yahoo made an offer for you guys, I forget how much it was, was it $200 million, I have got here in front of me, $200 million was pretty public, I asked David this he was pretty open, but I will ask for your perspective. Why didn’t you guys accept it and what happened there?
Interviewee: So we did accept it, we actually, it was an interesting roller-coaster ride, so AOL, I think the first offer was $175 million, we got them to $200 million, just to remind you how crazy the times where we actually had investors and said it is way too cheap, you should hold out for double that, we were 13 months old with zero revenue. Dave and I looked at each other and said, let us not be crazy, let us go do this. We went through the whole negotiation, got all the agreements ready to sign, David and his wife were actually going to fly out and we were going to go a celebratory weekend with my wife and I here in California, and the Tuesday before, I get a call from Jeff Mallett, who was the president of Yahoo at the time saying we can’t do our deal.”
“Interviewee: My heart sank from here down to well below the basement, so why not, and he said well, we just looked at the AOL deal and they basically have you locked up in perpetuity. I said what are you talking about, and so it turned out that AOL basically, as I think David had mentioned in his interview as well, basically resorted to some very slimy and even in some cases criminal practices during that time and we got caught in that. So David and the lawyer that we were working with had been negotiating this and the thing that ended up tripping them up was AOL, huge documents they would be negotiating with you at 2 in the morning Pacific time, 5 am their time, lots of pressure about getting it done, but they would make changes to the document, red line, they would accept those changes and then they would make more changes. So you are looking at a 100 plus page document that has been sent to you at 1:30 in the morning, you are not going to read the whole thing, you are just going to go take a look at what’s red lined, which understandably is what David and the lawyer did, except for those changes, but one of the changes they had made was taken from a 2 year deal with a mutual option to renewal, to a 2 year deal and AOL’s option to renewal, I think they changed one word to make that happen, and we miss it. So that ultimately became a poison pill where Yahoo said there is no way we are going to pay AOL a couple of million dollars a year whatever it was, in perpetuity, this is the poison pill for us. And as we found out later, AOL knew it.
Andrew: They were just trying to trip up Yahoo and trip you guys up in the process?
Interviewee: As we found out from an inside source later, they were trying to keep us out of the hands of Microsoft, Yahoo and Real Networks, [] cared about, but when push came shove they weren’t willing to step up to the plate, we went back and forth for a number of months, ultimately getting to I think it was almost $50 million worth of the deal, that we were going to go to AOL to kind of buy them out their deal, but they kept doing these things that were saying like, well the money has to transfer simultaneously, unless it lands in these, things that were like defied physics. And so it was clear that they were stalling and we had actually gone to anti-trust lawyers. This was as the Time Warner deal was going down, and so one strategy we considered was playing [] chicken of saying, listen we are going to, here is the press release, we are going to go public on Monday that we are suing you for anti-competitive practices and seeing if they would back down for that, but David talked me out of it because it was a [] scenario, we wouldn’t have been able to raise any more money, we wouldn’t have been able to land the company, it was basic and we obviously wouldn’t have the resources to see the end of the law suit come to bear, so we didn’t pursue that.
Andrew: I see, well, and was AOL interested in acquiring you themselves at all?
Interviewee: They dabbled around it but didn’t perpetrate around it. So it was this unfortunate thing where they didn’t have the, right word is, moral fortitude to say we don’t want you, we’ll let you go, it is the right thing to do for these guys.
Andrew: So interesting to remember the culture that they had at the time, the culture of dominance, of arrogance and to realize it does happen over and over, with every high in the market there is a company that is dominant, that ends up pushing a little too aggressively. I would love to do an interview with people back then to see what they were thinking inside the company. So, meanwhile it took you guys months to go through this deal and then when it didn’t happen, what happened to the business?
Interviewee: So we fortunately had enough money and some investors who put some more money into the company that gave us a runway, in the meantime we were doing some product transition and we opened up dialogues with some other folks and one of the conversations that bore fruit was with Bertelsmann who actually had a very interesting strategy. They had invested in Napster at the time but they also owned CD Now and BMG Record Club, so between those two they actually had the largest database of what music people have purchased on the planet, and with that they had the idea of saying going out and getting the licenses for streaming so that anything you had ever bought in the past from CD Now or the BMG Record Club would suddenly be available in you My Play locker as you, they wanted to turn Napster into, it is out of print, it is live, it is kind of the underground brand, which we thought was an interesting branding strategy.”
“Interviewee: Which we thought was an interesting branding strategy and pool all those things together, which actually made sense to us and so that acquisition happened for one [unclear] and we transitioned the team into Bertlesmann but unfortunately because of the Napster investment they made, they got sued by all the record labels include their own and ended up having the entire house of cards from their additional strategy fell apart.
Andrew: Why were you guys able to get around the AOL issue with them but you were unable to do before?
Interviewee: I think Bertlesmann and AOL had a longstanding relationship and there was a side payout that happened and so they were able to do that and so AOL was willing to kind of be paid out of that deal by Bertlesmann but not by Yahoo.
Andrew: Okay, alright, what did you do after that, after the sale?
Interviewee: I took about a year off and decompressed, so did a lot of traveling, spent time with my son who was little over a year old at the time and got bored in that process, was thinking about some startups back in the enterprise space [unclear], where I worked for Steve Blank and had a talk with a friend of mine Jose Fasnelli and said I got these ideas, some of them have some security stuff associated with them and you started a security company what do you think, and he gave me some good feedback on it but told me what he was working on, it is a company called Wantoo and it was one of those, damn it is a better idea than mine kind of moments and so he wrote me into starting to help them out from a product management side and eventually joined and ran product management and marketing for them for about two years and then in the middle of that had the bug to start something again and had the idea for what became MI5 networks.
Andrew: What was it like to go work at another company after having been an entrepreneur?
Interviewee: It was an interesting change. I think a lot of entrepreneurs are not good employees, myself included and so I think that we tend to want to do things our own ways and speak up loudly and it is tough to plug us into a corporate culture at times. So I think that Wantoo was a very successful company, had great exit, $315 million acquisition by Symantec down the road and I feel very proud of the stuff that I was able to do because what I am passionate about is kind of early stage building teams, building products and so that part of it was fun but not being able to play in the other spaces was frustrating at times.
Andrew: How did you come up with the idea for MI5?
Interviewee: Was really just talking to a lot of the chief security officers that were around at the time, kind of asking about their top problems were while were trying to [unclear] them, and it was pretty clear from a lot of this conversations that threats were starting to move from email to the web, ten years ago it was the ‘don’t click on that attachment in the email because it is going to contain a virus’ and over the years the hackers had gotten very good at filling stuff in to browser vulnerabilities and plug-ins and things like that, but there was a kind of woeful lack of protection there, it was mainly folks like Websense and SurfControl that were doing URL filtering and so we thought, hey maybe there is an opportunity there to build a gateway to go protect against spyware and botnets and these things that were now coming into the web.
Andrew: And this was to protect companies and their employees, you were aiming at the enterprise?
Interviewee: Right, so the idea was just like an enterprise would put in an email security gateway to protect them against spam and viruses and things like that, we were the web security gateway to protect them against the bad stuff coming in through the web.
Andrew: Who was in that space at the time? Who are the competitors?
Interviewee: So, when we started we were the first kind of anti-spyware gateway, so there was nobody that was doing that but there were companies like Websense and Surfcontrol that were doing URL filtering, blocking it from going to porn and gambling sites and things like that, there were companies, one of the big security companies like TrendMicro and MacAfee that had web anti virus gateways but there wasn’t really lot of viruses that were coming through the web, so those hadn’t really taken off, and furthermore the players like that they were trying to do file inspection on the web had.”
“Start – 34:23
Andrew: Who was in that space at the time? Who were the competitors?
Interviewee: So, when we started we were the first kind of anti-spyware gateway. So there was nobody that was doing that, but there were companies like Websense and Surf Control that were doing URL filtering. So, you know, blocking you from going to porn and gambling sites and things like that. There were companies, a lot of the big security companies, like Trend Micro and MacAfee that had web anti-virus gateways, but there wasn’t really a lot of viruses that were coming through the web, so those hadn’t really taken off. Furthermore, the players like that, that were trying to do file inspection on the web had architectures that didn’t really scale past, you know, small businesses, so for large companies there wasn’t really a solution… I mean, if you take a second to process an email message no one will notice. If you take a second to process an email everyone’s screaming. So the idea was, how do you do this processing at a very big scale, without any custom hardware, and without slowing down the web browsing experience… and we felt and found that there was an interesting niche to fill there.
Andrew: Do you feel that companies like Symantec wait for entrepreneurs like you to solve that problem, figure out which entrepreneur solves it best, and then they go make a deal to buy them out instead of trying to create it themselves?
Interviewee: Yes. Yeah, I think they try from time to time, and have succeeded at times, and failed at other times to do that… But in general I think Symantec says, “”Ok, here’s our product roadmap, you know, we have a gap to go fill; what’s the best company to go fill that gap?”” And then go out and acquire them.
Andrew: Alright, so you had the idea, you saw the opportunity, what was the first thing that you did?
Interviewee: So the first thing I did was, kind of go looking for a cofounder… and I had a… there was somebody I had previously worked with at Apple, Steve Roskowski, super smart engineer just from raw brain power, and, you know, the fact that we worked together well. I thought about him, and he was interested for a while, but ultimately had another idea that he wanted to go pursue on his own. And so I was chatting with this venture capitalist I knew, Bud Colligan from Accel Ventures, and they put me in touch with a guy by the name of Ofer Doitel, who they had backed in his previous company. And, you know, I had talked to half-a-dozen different folks. I had actually, you know, been out looking for a VP of Engineering/Cofounder, and there were folks who had better resumes on paper than Ofer… They were more… they had a security background, or more kind of corporate firewall type of experience, but like the relationship with David I described, Ofer and I just immediately clicked. There was this immediate trust relationship. He had… He was from Israel, he had built a very high-speed scalable networking company for telephone carriers, and we just hit it off immediately. It was one of those things that we actually incubated in the Accel offices for a while, and sat in there. And again, over a few weeks we realized we really liked each other’s working styles, and would compliment each other well, and got started from there.
Andrew: Did you go to Ofer with a thesis on the solution? Or did you just go to him with the problem, and hope that he would come up with a way for these pages to load quickly, and still and still be checked for viruses?
Interviewee: So I think the ultimate architecture Steve and I had talked about a bit, and we had brain stormed, and Ofer really pulled in kind of picked his top engineers from his last company. So we spent some time sitting around saying what are the different architectures? Or what are the proxy architectures? Or real-time streaming architecture? What are the ways to go do this? So I came to it with a problem, and some theses, you know, or some design goals… But it was really Ofer and his team and Steve that came up with the architecture that ended up being the winning one.
Andrew: What did that first version look like, and how long did it take you to come to that first version?
Interviewee: So we brought on the team, probably in the spring of 2005. And launched the first version about a year later. So we put a lot of time into it. The first product was just an anti-spyware gateway. And so we thought spyware’s so hot, that’s what everybody cares about, that’s what we’ll focus on to begin with, and that will be our minimum viable product. Turns out the MVP thesis is a little different sometimes in enterprise than it is in consumer, which we’ll talk about. So we launched that in mid-2006, and started to get some customer traction, but what we quickly kind of realize is that when you’re selling enterprise products a lot of times the question is where is the budget gonna come from? And so in the case of Vontu, for example, they were able to get budget from people who were worried about compliance, and data security… Things that they can pull from. There wasn’t a spyware gateway budget that was there. People were spending six figures on WebSense renewal, and they were pissed of that they were spending six figures on WebSense renewal, because there wasn’t a lot of technology there, but they didn’t feel like they had a lot of choices. So we quickly realized we had to go from a single function product to this platform.
End – 40:02″
“Interviewee: …And so just like the email gateways became a platform where you could kind of plug in these software modules, we kind of went back to the drawing board, did some licenses of some technology for URL filtering and antivirus definitions, and other kinds of things, and kind of re-released the product as a platform, and that’s really when it started to take off.
Andrew: So going back, would it have made sense, instead of spending a year building out the product and launching it, to maybe go out to market with ideas for products, and see if people would be willing to pay you for them if you built them?
Interviewee: We did, and people seem to say ‘yep, that’s a [great] idea’…
Andrew: …like spyware, when you were serving, and the way the lean startup movement says to do, and they were saying ‘yeah, we’ll buy it’…
Interviewee: Yep, I think there’s an art to customer development conversations in the lean startup methodology; I think that oftentimes when it’s somebody who says ‘I don’t want to say no to a friend, or I don’t want to say no to the CEO’… I believe you need to get out there… it’s kind of like doing reference checking on a client. If you’re reference checking on a job candidate, and you just check the references that they give you, they’re all going to say great things. The question is what tricks do you use to get to the ‘oh yeah, but they never show up for work on time’, what’s that thing you can go dig in? And I think in the customer development process it’s really the… how do you get to those things that people, if they had an lcd on their forehead, it would read out what they were really thinking, but they may not be saying to you. So we had a ton of people telling us ‘yep, sounds like a great idea. Spyware’s a big problem for us, we’re gonna do stuff on the gateway, we’ll probably spend on the desktop, we’ll do stuff on the gateway as well. Sign us up, we want to be on the beta list’. And I think that the challenge is how do you get to people saying ‘Will you pay for this? Where does this rank in your priority of problems?’ What are the sets of questions? I may in fact encourage Steve to blog about this with like ‘what are the set of customer development questions… [AUDIO SKIP]… to get to the meat of the problem, as opposed to getting a bunch of people saying ‘yep, keep me in the loop, let me know, I’ll be on the beta list’, which they’re not qualifying.
Andrew:Yeah, I think the guys from KISSmetrics told me that one of the things they were doing with their surveys at KISSinsights was creating the surveys for people. Because apparently we don’t know what kinds of surveys to ask or what kind of surveys to put in front of our users. You said earlier that the minimum viable product is different for enterprise. How?
Interviewee: Well I think that the risk factor of putting a physical piece of hardware in your network is much higher than going and trying on a consumer web service. So if I go on to Dogs.com and enter my information, and I don’t like it, I just go away, it’s not a big deal. For an enterprise product though, you’re saying ‘I’m going to go put something in your network that is not going to take down your network, is not going to open up security vulnerabilities, is going to be something that fits into the way you that manage other devices’. So the bar is much higher for people to go develop a product, and allow people to plug it into their network.
Andrew: Mmm, I see. What is it about the platform, why did the platform sell?
Interviewee: So I think the reality was that… I mean people want to solve the problem, so they look at who’s got the functionality in there and the pricing, all those pieces. The platform sold when we went into these large enterprises; take Citigroup for example. You know, we went into Citigroup against Blue Coat, FaceTime, and Trend Micro, and these other players that had been established for years and years and years, and we beat them in the bake off because of the way that we had designed the platform, they could do in one of our boxes [saner] PC software. In one of our boxes they could do what it would take them 15 or 30 of another box to do, and it wasn’t just the cost and the [???] space, it was the management of 30 boxes to go make that happen. And so we were able to scale in a way no one in the space was able to scale because of the way that we had basically taken this technology for really high speed carrier switches and bringing it into an enterprise class piecing.
Andrew:I see. And how did you get your customers?
Interviewee: Alot of direct sales in that case, so we had a VP of sales who had been Frontbridge, had a small team of a couple of reps, couple of inside folks, and it was pounding the pavement…
(end at 45:02)”
“[Beginning at minute 45]
Interviewee: … it was pounding the pavement. We did a lot of webinars. We did some trade shows. In that case the enterprise market was really about meeting, we were measuring how many meetings face-to-face meetings or web-x’s we would get and the conversion rate into beta out of that. So we actually hired at one point a firm that was getting paid per meeting for a qualified set of customers and we used that as a very successful lead-generating mechanism to make sure the sales reps had their calendars filled meeting with real prospects rather than doing a lot of cold-calling themselves.
Andrew: Oh wow. How long was the sales cycle?
Interviewee: Anywhere from three weeks to nine months. It was really all over the map. You know we had folks like Fenwick [sp?] and West, a law firm that wasn’t our counsel but ended up spending six figures with us who plugged into the networks, immediately saw a bunch of stuff and immediately cut us a p.o. the next week. We had deals like CitiGroup that had been going on for nine months when the acquisition went down.
Andrew: So how do you adjust in a market where the sales cycle is so long? How can you change your product?
Interviewee: What we actually had to do is we had just started to crank up a sales team and when we got into market and realized that we had to build this broader product. We actually laid off the inside sales team. We shut down sales completely and went back to the, “”Let’s go build a product. Lets keep the burn rate low. Let’s go build this new thing and then let’s go get it out into the market.””
Andrew: I see. So were there any big pivots after that?
Interviewee: No. No. That was really the right product. We kept expanding on that. I think ultimately it was one of the occasions where working with Gartner [sp?] Group actually turned out to be a really good relationship. So we had a great analyst there, Peter Fursbrook [sp?], who was really smart, understood the space, obviously he liked us so we thought he was smart. But he really, in the magic quadrant, we lucked out as well in that they kind of, as we were rolling out this new product, said, “”The market is shifting. It’s shifting from the single-function URL filters to these multi-function secure web gateways and as a result here’s the players.”” And they kind of put us in the lower-right quadrant and the furthest in that, so they said we were small but we were the most innovative company in the space. So I’m sure when Symantec was considering who to acquire, that certainly played a role.
Andrew: OK. I see Vantu was also sold to Symantec, I guess, the year that you launched this business. Am I right about that? No. I take that back. I don’t know when, but they were sold to Symantec. Was that …
Interviewee: That was in ’08 I think it was. 2007 or 2008. 2007, I think.
Andrew: How did you connect with Symantec?
Interviewee: Ari had had some discussions with MMF Business Partnerships but also had a very interesting … One of our investors in MI5 was Josh Koppelman [sp?], First Round Capital, and Josh had started a business previously with a gentleman by the name of Dave Brussin [sp?], and Dave had been the CEO of a company called Turn Tie [sp?], which had been acquired by Symantec. So we made Dave an adviser originally and he came in and really liked what Ophir [sp?] and the team was doing with the architecture. He had left Symantec at the time but still had very good connections there, and ultimately he got more and more engaged with us as the business and we ultimately gave him a success fee. The conversations were already starting with Symantec saying, “”We want to buy you guys. We want to come in.”” And we said, “”I’ll tell you what, Dave. We’ll give you actually a success fee if Symantec acquires MI5,”” and made him extra-motivated to play a part in that process.
Andrew: I see. What was life like after you sold? What was life like?
Interviewee: Well, I took all of a few weeks off. But it was good. I was really happy about the outcome. We had a nice outcome for everybody, the investors and the employees. I think the two things that really matter most in an exit first is: Is this going to be a good home for the product and the people? So the biggest disappointment for me in the Yahoo, AOL and Bertelsman [sp?] scenario with MyPlay ….
[End at 50:00]”
“First is: Is this going to be a good home for the product and the people. And so, the biggest disappointment for me was that in the Yahoo, AOL and Bertelsmann scenario with Myplay, the money, of course, was disappointing, but the bigger disappointment was that all this great work that we had done didn’t live on because of what happened at Bertelsmann. And so the most important thing for me was feeling like I know 10 years from now Symantec is going to have a way of security gateway, it’s going to be based on our technology, you know that product is going to live on and there is tremendous satisfaction in all that hard work you put into it continuing on. And an exciting, great place for the employees and I think Symantec is a great place for people to work, I think that they’ve been very supportive of the team that I’ve kept in touch with. So that was really important and then, obviously, being able to go back to your investors and go, “”Here’s the check for your investment. Thank you very much for your support,”” is a great feeling.
Andrew: Why did you take another year off, or take some more time off before starting a new business?
Interviewee: I just had this idea in my head that was kind of burning, and I couldn’t say …
Andrew: What was it?
Interviewee: Well, the original idea for Fliptop was really one of being frustrated that I couldn’t get information delivered to me when I wanted from sites. A few examples, I was doing a Craigslist search, I think it was buying a road bike at the time, and it’s crazy to me that I had to keep going back to Craigslist to go, “”Hey, is there is update.”” I said, I have the computer, there should be an agent that is acting on my behalf that emails me, texts me the minute that there is a new Match result. It was crazy to me that I get these newsletters that felt like banner ads to me, it was that there were sites that I wanted to know, and I’m like a car nut, so my favorite website for cars is a site called AutoSpies. And it was crazy to me that I have to wade through this huge newsletter of all this mostly irrelevant news for me, once a week or once every two weeks, when all I wanted to know is, tell me when there’s news about Audi, or tell me when there’s news about Tesla. So, that was the original idea for Fliptop. So we started out and built real-time alerts products, and there’s actually two products, you can drag a button into your browser, and when you’re on a website, let’s say “”subscribe,”” and you can choose how and when you receive that, and we leverage RSS, but the belief here is that RSS is a great technology, and a lousy user experience. So for 90% plus of people on the Web, they don’t need to know what that orange button means, what does RSS stand for, it’s like putting SMTP next to an email icon or LDP next to a print icon. It’s just stupid. So we felt like great technology should go into the background, you should really have an alert button or a subscribe button, let’s go build that. And so that’s what we set out to build, and we built it, but in the process of watching that, which we did at the demo conference recently, and it got some great press, we started saying, well let’s now add other ways to subscribe–Twitter, Facebook, etc.–and started to realize that there is going to be this really rich set of data sitting in our reports with this great reporting console, analytics console, and so if you could collect all of the ways that people subscribe to your website, you know, email marketing, Twitter, Facebook, RSS, Youtube, etc., into one place and then also append third party data to that, demographics and sociographic kind of data, you’d have a really rich database to do much better marketing out of, and so we decided that’s an even bigger opportunity than the original one and so while we’ll still support the first product, we’re now actively working and getting ready to launch later this summer the subscriber analytics product.
Andrew: And the marketing would happen by the website that the user is getting updates from, or by a third party?
Interviewee: So you’re talking about the subscriber analytics product?
Andrew: Yes.
Interviewee: The idea for the real-time alerts product is that you’re large site, let’s say you’re a sports site, and you want to give the option to type in your favorite teams, and as soon as there’s news published about those teams, we’ll send it to you. And so we sell to the publisher in that case, a monthly subscription just an email marketing service, and they go market that out to their customers, so we don’t have to market directly to their customers for that.
Andrew: I see, OK. So if I’ve got this on my website, and people are getting updates just about bootstrap companies that had exits, and that’s all they want to know about, you come back to me and you say, do you want to market to these people who want information about bootstrap startups.
Interviewee: Right.
Andrew: I see.”
“Andrew: Do you want to market to these people who want information about bootstrap startups.
Interviewee: Right.
Andrew: I see.
Interviewee: The subscriber in [unclear] product there was something that we conceived in a way that you don’t have to use the fliptop button to use. So even if you said I don’t want to put the alerts button on my site or I am not ready to put it on my site, yes. I just want to start getting more information about who my subscribers are, as you may just have a Twitter handle or an email address and you want to know who are these people
Andrew: Ah, I see, so you are going to be able to based on the way I am already interacting with my users, based on the way they are already subscribing to be able to give me insight into who they are.
Interviewee: Exactly.
Andrew: Got you, okay. Alright, I know the product hasn’t launched, I don’t want to ask too many questions since we said upfront that I wouldn’t, do you feel comfortable saying anymore or do you want to just leave it there?
Interviewee: No, I think depending on when this goes live, we will have a beta sign up coming on the site within a few days, so if you check back, kind of later in June, there will be a beta sign up form, will be starting to put product in the hands of people in July and roll out publicly towards the end of the summer or early fall.
Andrew: Okay, alright. Keep letting me know what’s going on with this, I would love to just keep alerting my audience about what’s going on.
Interviewee: Yes.
Andrew: Alright, thank you, thanks for sharing the story, thanks for being so open, and do you guys have a blog, is there a place where people go and check out what’s going on with fliptop?
Interviewee: Yeah, you can go to just blog.fliptop.com, it is also linked off the main site, I just did a post up there by the way from my experience and the Geeks on a Plane trip with Dave McClure,
Andrew: Oh you were on that?
Interviewee: Yeah, it was great, highly recommended, but just a fun story to leave your viewers with is, I had the most amazing customer service experience as a result of Twitter on my flight back. So you should go check out the post, but the short version of it is, we had flown out in Asiana Airlines which I had never flown on before and they let us use their business class lounge, and so we tweeted thanks Asiana for letting us use your lounge. Week later, I am flying back, getting very attentive service from the flight attendants and going wow, it is a very friendly airline. As we are landing the flight attendant comes up to me and says, I was from first class, we were flying in coach as entrepreneurs, of course, and says I tried to think to myself how could I give you even better service, so I have decided to write to a handwritten note, and she hands me a three page handwritten note and I am going like, okay thank you, and when I opened it, it made sense. She introduced herself as the head flight attendant and said because we were one of the first people to tweet about Asiana, that she wanted to let me know how great she thinks Twitter is, how great an airline Asiana is and clearly somebody at Asiana had picked up and monitored my tweet and in that week had briefed the flight crew that we were going to be on that flight and to give us extra special care. So amazing, Twitter customer service.
Andrew: Wow, who ever knew that that was possible. They tied right back to you being on the flight again, that’s incredible.
Interviewee: It’s amazing, so I wrote down the letter, it is on the blog.fliptop.com, you can see it there.
Andrew: Blog.fliptop.com and of course check out fliptop.com also. Doug, thanks for doing this interview. Great to meet you.
Interviewee: My pleasure, thanks Andrew.
Andrew: Thank you all for watching. Bye.”
