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Here’s the program.
Andrew: Hi everyone. My, name is Andrew Warner. I am the founder of Mixergy.com, home of the ambitious upstart, and he’s smiling because he recognizes the introduction. Joining me, the person I’m referring to Jonathan Benassaya, a French entrepreneur, mentor, and investor.
He founded several companies which I hope to find out a lot about in this interview, including deezer.com, which is an on-demand, ad-supported music streaming service, and Milestone Factory, a startup incubator that operates in New York and Paris.
Jonathan, welcome.
Jonathan: Hi.
Andrew: So when you left Deezer last year, 2010, what were the revenues?
Jonathan: The last public information that we released in 2009 was 10 million euros. But since then, we’ve signed a strategy deal with Orange, the French ISP. We are very proud to have announced today that we’ve reached half a million of subscribers to our premium subscription offers.
So the revenues are much higher than 10 million, but it’s not something I can discuss today.
Andrew: So we won’t give out the numbers, but it’s half a million people who are paying for premium service, and roughly what is premium service? How much does it cost?
Jonathan: Premium service is a service that we sell 10 euros per month where you can download all the music that you can on your mobile phone, on your tablets, or your computer. You can download the content, get access offline, and access the content in [??] advertising.
So in the US you have Rhapsody, you have Mug, you have audio — it’s exactly the same kind of services. The beauty of our deal with Orange is that we are now bundling our premium subscription offer to all mobile subscription plans of Orange in France, and we are expanding this to other territories across Europe.
That’s why I’m so happy today. [laughs]
Andrew: I see the big smile on your face. Congratulations.
Quickly, anyone who’s doing the math, even though you’re not releasing the number, can say half a million people paying 10 euros a month, that’s 5 million dollars a month in revenue coming in, and you now are bundling with this phone service.
So when someone signs up for phone service, they could say that they want extra minutes or extra music. Just like they pay the phone company for minutes, they pay also the phone company for music, and part of that revenue comes to you.
When you started, when you got into the business, it was you and a friend. What was the revenue when you guys kicked it off?
Jonathan: Zero. [laughs]
Andrew: Zero. From zero to now whatever number we can release, over how long?
Jonathan: We started in April in 2007. I left the company as chairman in last November.
Andrew: Do you still have any role in the organization?
Jonathan: Now I’m sitting as the co-founder and the [??] of the company. I’m advising my investors if they need me on any specific task.
I am now moving on my new venture, and I truly believe in the new management. They’ve done an incredible job during the last year. We’ve positioned Deezer now in a real leader in digital music in France.
So I’m here, and if they need me they can call me.
Andrew: OK. I tried — even though we keep saying that it’s a European company, and that it’s a European service that has counterparts in America, I went deezer.com before the program started, just to play some music and get a sense of it.
You can play it right away. You don’t need registration, you don’t need anything. You don’t need to pay. It’s all advertising based until you want the premium service, and then at that point you can pay. My audience can check it out on deezer.com.
Jonathan: Yes, because you don’t have all the catalogs on deezer.com in the US.
Andrew: I noticed.
Jonathan: Our main competitor in the world is Spotify, and they are facing exactly the same issues as us. That’s why we are clearly the main leader in France, and we are expanding in other countries in Europe. Spotify is the leader in the UK and in Sweden. Now you have some other markets to address, but it’s really hard to address the US market with our on-demand ad-supported model.
Andrew: OK. The focus of my interview isn’t about revenue, it’s not about the way the product works. I want to find out how you got here. But let me ask you about that.
Why isn’t Spotify in the US? Why isn’t Deezer in the US? Why is it that there are these countries that have their own version of the same product and not more competition internationally?
Jonathan: Andrew, it’s really easy. In France, the digital market of the music industry represents less than 8%. In the UK it’s 12%. In the US it’s more than 50%.
So to put it in a nutshell, there is no digital business in the UK or in France. That’s why there is an opportunity for an ad-supported model to recruit users and convert them into premium users. That’s the way we found, that’s the opportunity we have in this market to launch our product.
On the other side, in the US, the US digital market represents 50% of the overall market. Meaning that the US market is no more digital than physical. So they don’t need any ad-supported model.
If there is an ad-supported model, which is unlimited as it is in France or in the UK, then it would hurt the existing revenue stream coming from the digital partners in the US, which is something that the music industry doesn’t want. That’s all.
Andrew: I see.
Jonathan: It’s just a [??] market.
Andrew: I see. So they’re saying, “We already have money coming in from digital. People are willing to pay money for music. Why would we tell them stop paying money for music and get it for free by listening to some advertising. Let’s keep it as is for now.”
I see.
Jonathan: Yeah.
Andrew: That makes sense.
Jonathan: But for the first time, the growth of this industry, I mean the ad-supported model, is more in the developing countries like [??], India, Turkey, Asia — anywhere the digital business doesn’t exist. I mean for the music industry.
Andrew: OK. So let’s find out how you started. 2003. First company you launched, was it Viagow?
Jonathan: No, it was ViGaO. It was what was called a video game observatory. We were doing a tool which was a kind of dashboard for the video game industry to understand what was the main trend in terms of video game development across the world.
I sold my company after one year. It was really interesting. I started to work in investment banking as a mergers and acquisitions analyst. After nine months, I decided to quit this position to build another company in Paris dedicated in in-game advertising.
Andrew: Excuse me. Do you mind if we spend a little more time on both of those steps? I want to take up as much as I can, and learn as much from your process.
First of all, I should apologize, and say I should learn how to pronounce the name. I added an extra vowel in it. It’s ViGaO. I added an extra one.
Jonathan: Don’t worry. It was not a B2C company. It was a B2B.
Andrew: What was the original idea behind the company?
Jonathan: I was doing the last year of my Master of Engineering here in Paris. I was doing my last-year internship, we have that kind of thing in France. So you have to spend six months in a company working something more engineering oriented. But I’m not an engineer in my mind, I’m more a business-oriented guy.
So I decided to work as the assistant of a CFO of a video game development studio, which is not really engineering related, but it was interesting to work on this project. The main objective was to help this company to shape a new business plan to address the transition of new consoles, the PlayStation 3 and the Xbox 360.
I don’t know if you know the video game industry, but it’s really interesting. When there is a new console cycle, you have to invest three or four years of R&D to develop your own video game engine so that you can develop new products on these technologies.
So if you’re developing an RPG game, then you will have to develop a video game engine for RPG games. OK? The main issue with that, in the past it was possible to invest in three kinds of technology to develop three kinds of games. But because of the increase of the developing costs of these video games, they had to choose only one. So you have only one shot, given that the French companies are not financed like the US ones.
So my main task was to design a tool to help the management to make this decision. That was all.
For doing this task, as I was working on a tool aggregating a bunch of Internet websites that related to video games, crawling their content, indexing the content, and doing some analysis of all the content that was available, and then trying to find some key indicators to help the management to take some decision.
At the end of my internship, I found out that all the video game industry needed these kind of indicators. So I decided to start ViGaO, which is the Video Game Observatory, in order to sell these kind of dashboards and key indicators.
So it was basically a data analytics company selling dashboards on a subscription for video game studios and video game publishers. That’s all.
Andrew: So companies like Take-Two Interactive I saw were customers of yours, and Atari. Can you give me an example of what kind of data you gave them? Maybe one example of a piece of data that you gave them that was valuable to those companies?
Jonathan: Mainly it was the breakdown of video game genre that was developed in specific countries. So for instance, you were able to analyze the number of video games per video game platform — I mean, which console — and which genre, so that you will be able to assess if there was an opportunity for a specific kind of game, or if this kind of game was already taken by 10 developers.
Andrew: I see. So if there are already 20 different boxing video games, I shouldn’t invest my time and resources building another boxing video game. I should think about something else. That’s what you mean.
Jonathan: Exactly.
Andrew: That didn’t exist before? Each one of these companies had to do it themselves?
Jonathan: No, it was internal business intelligence. Back in 2002, that kind of analytics coming from the Internet was not really, I would say, common. So when we came out with our solution, they were all very excited about the idea of having this information just in a web interface.
Andrew: I see. OK. Wow, all right. So you built that up. You decide — and this was surprising to me — that you’re going to go and work in M&A. Why M&A?
Jonathan: To be honest, my dream was to be an investment banker at Goldman Sachs.
Andrew: You know what? Some people in this audience would say that’s a kid’s dream. I have to tell you, as a kid I wanted to be an investment banker. The idea of working in M&A, in mergers and acquisitions, was fascinating to me. I’d read stories about people who were in that space. I completely get it.
What was it about it for you that drew in?
Jonathan: It was a dream I had since I was a little boy. That’s all.
Andrew: Was it about wearing the suits? Was it about buying companies and selling companies the way some people move houses on monopoly boards?
Jonathan: I think it was being part of the business world. That’s all. Saying, I’m working on this merger with this big company, I’m talking with the CFO or the CEO of the company, and blah blah blah.
It was really interesting to see the M&A business backstage. [laughs] It was not that fun. It was more like a war field.
Andrew: OK. So nine months later, you take a passion of yours and you say, “I’m done with it.” Why give that up?
Jonathan: I felt like I was not in the right place. I really think that my place is somewhere — I really like to see myself as a mountain climber. So if I’m at the top of the mountain, then I have to climb another one.
Andrew: I see.
Jonathan: The issue with mergers and acquisitions was that it was a job for the long term. You had to wait 10 to 15 years before talking to any clients. The salary was really high, but there is no height working with these guys. They were rude. The competition within your team is really fierce. So it’s not the kind of work you would enjoy.
I really felt like there was some other mountain that I should climb instead of trying this one. That’s all.
Andrew: All right. That’s pretty gutsy, after nine months to say no instead of sticking it out when you knew that it wasn’t the right direction. Was it a hard decision?
Jonathan: No. It was obvious.
Andrew: It was obvious. OK. So the same year that you leave Calyon, and you decide to turn your back on the childhood dream of being an investment banker, that’s when you start another business. What’s that business?
Jonathan: It was in-game advertising related. So based on my video game background — I kept an eye on the evolution of the video game industry. One of the key opportunities of this industry was to create some additional revenue streams for video game publishers, because of the increase of the price of the development of a new video game for the new consoles. Because you have more pixels on the screen, so you need more designers to build new 3D models with more pixels so that it’s more real.
So given that video games are one of the most immersive experiences, we thought that it could be interesting for brands to be integrated within the video gameplay. But embedded in a way works similar to the real life way. I mean, with billboards that you could change, you can update with — it was for me a logical extension of the real life in the virtual life.
So we started to work on an ad serving technology to sell ads within video games. We started that in 2005 with a unique pitch, which was you can monetize now your fake inventory within a video game thanks to the Internet connectivity.
One of the key points was that we were addressing only online games. The main issue is that online games were only available on Xbox 360 or Xbox, but nothing on PlayStation. There was not a huge usage of PC connected games.
So it was really tough to address our market, and there were three competitors. One in the US, one in Germany, and one in Israel. After one yea, our competitor in the US, Massive Incorporated [interrupted]
Andrew: Acquired.
Jonathan: [??] an offer from Microsoft. At the end of, I remember it was in March or April 2006, the entire in-game advertising market collapsed. Because Microsoft bought the only one company able to serve ads within Xbox video games.
Andrew: So the only place you could serve up ads is within Xbox. Xbox buys a company that serves up ads. All the others now are struggling.
Jonathan: Yup.
Andrew: You’re one of them. What do you feel like? On a personal level, what are you thinking?
Jonathan: I feel like I’m really sad. I remember I had a BlackBerry at that time, and I was just walking from the tube station to my office. I remember this mail from my friend in New York from the New York Times mentioning that Massive was acquired by Microsoft.
During all this walk to my office, I was thinking about my employees. I was thinking about my project and all the time we’ve spent on this project. It was really hard to find the right feeling. So what I decided to do is to go to the office and say, “Look. Massive has been bought. We will find a way to succeed even with this in mind.”
Two days later I came to the office and said, “Look. Sometimes we have to take some hard decisions. It’s time for my hard decision. My hard decision is to say we are not giving up. We are going to China.”
At the end of the day, we were very excited about the Chinese market. One week later my partner and I, and five developers, were in a plane to go to Beijing with three days booked in a hotel in Beijing. One meeting with the French embassy in Beijing, and that’s all.
Andrew: You’re going to relaunch your business in China. Had you been to China before then?
Jonathan: No.
Andrew: What was your experience with the Chinese market at all?
Jonathan: Nothing. Nothing. Let me tell you why China. It was because when you’re target is to sell ads — you need to sell ads in connected games. In the world, you have two countries with the largest installed base of online video games — Korea, and China.
Korea is really exciting, because they have redefined the video game business model. What they have done is that the video game ships for free, but if you want to buy some extra power for your car or an extra magic power for your character, then you have to send an SMS with your phone. It’s called micro-transaction based business model.
So this business model was really mature in Korea. On the other hand, in China you have more than one hundred million connected users today, and all video games are for free. So video game publishers, they need a revenue stream.
This choice, moving to China, was obvious when you had this in mind. So instead of giving up, I just decided to move in maybe the best place in the world for in-game advertising.
Andrew: Why not say, “We’re going to stay home. We’re going to stay with the Western market, but we’re going to service it a different way. By maybe bringing micro-transactions to the Xbox and other consoles, by maybe bringing something else that we know to the market that we know.”
Jonathan: We had only three months of cash.
Andrew: I see. So you needed to just use the technology that you had and do something drastic.
Jonathan: Yeah.
Andrew: OK.
Jonathan: That’s the first time in my life that I had to fire five people at the same time.
Andrew: Wow. When I’ve been in situations like that, it’s very easy for me to want to just freeze up. To say, “I can’t think of anything. I need a moment here to just feel the impact of the punch that just landed on my chin before I can come up with a solution for how to fight back.”
How were you able to fight back and come up with a new idea so drastically, so quickly after taking that initial hit?
Jonathan: It took me 48 hours.
Andrew: That’s fast!
Jonathan: Yes, but when you have only three months of cash, you don’t want to go to the administration office to say that you cannot move, and you have to cease your operation. You don’t want. You just can’t. I can’t fail.
This is the only thing I can’t do is to fail. [laughs]
Andrew: Where does this come from, this feeling that you can’t fail?
Jonathan: I don’t know. I think it’s just the motivation and my focus on one goal. When I have something in mind I just try to stick to my goal. That’s all.
Andrew: All right. 2003, you sold to NGI. Who is NGI?
Jonathan: NGI was — because they ceased their operation last summer — NGI was an in-game advertising agency. So what they were doing basically is selling product placement to video game studios.
But the beauty of dynamic, in-game advertising is you are able to change the ads. So you can multiply the number of times you sell an advertising company in the same video game.
So there was only three companies in China doing that kind of thing, and we were very lucky because the CEO of NGI was a very good friend of one of the employees of the French embassy in Beijing. So we felt very lucky in that just a couple of hours after our landing in Beijing, we were meeting with maybe the only one partner we had to work with. [laughs]
So this is my luck.
Andrew: I wouldn’t have even thought to call up the embassy and say help me by making introductions to businesses there, but that’s part of [interrupted]
Jonathan: [??] embassies around the world.
Andrew: Yeah. So they introduce you. When you starting working with NGI, before the buyout, what were you doing for them? What was your responsibility?
Jonathan: We were two independent companies. What we decided to do is to — we were a partner of NGI, and we were providing the technology for NGI to serve ads within video games. They had the relationships with the video game studios and with the brands.
One of the key points with the brands was our ability to track and measure and give them some analytics for their campaigns. So it was one of the breakthrough for them for in-game advertising.
So we were the technology provider, they were the sales force, and all together we were doing our business in China.
Andrew: I see. So you didn’t have to know about the culture. You didn’t know have to know about salesmanship. You didn’t have to know who the customers were. You need to just know the technology which you already knew coming into the country.
Jonathan: [laughs] That’s a myth.
Andrew: It is? OK. Tell me what the reality was.
Jonathan: No, the reality is that you don’t have the same culture, so when you don’t know that to go from point A to point B, you have to go through C and D, which is not in your mind, then it’s really hard to address an issue with your mindset.
So you need some people to help you find out the way to go from A to B through C and D, which is not something that you would do from your business background.
Andrew: Can you give me an example to help me understand how culture impacts a business?
Jonathan: First of all, before talking business you have to create friendship, which is something which comes after a good business relationship in our country. But before we have to be friends. Then after that we need to commit to the business, and then after this commitment we have to test the technology. Then if the technology works, then we can do the business.
But if we don’t stay friends, then you cannot do business anymore. So it’s a really good exercise to test your stamina, because when you have a meeting which lasts five hours, and you started at 9, and you finished at 2 PM, and you’re exhausted, and at the end you say, “What the hell. I spent five hours with these guys, and we’ve done nothing.”
Andrew: Wow. [laughs] So I would feel that, too. Especially with the pressure of having to grow a business with such little runway.
Jonathan: Yes, yes. With only three months. But you know, when we fired five people, and the life in Asia was really cool, because we rented a really nice apartment for almost nothing. We were agreed with our employees that their salary would not be fully paid.
So we bought six months, so it was easier for us to negotiate.
The good point with the embassy is that we met with lots of French entrepreneurs. Our lawyers in Beijing introduced us to some other foreign entrepreneurs. We’ve learned, in a fast-track way, the Chinese culture.
When you’ve done the first deal, and you understand that it will take time, and everything is based on the human relationship, and that sometimes even if you don’t trust, you have to trust. Even if you fail, you have to keep your trust in your partners. Because at the end of the day, it’s the country and you have to follow the trend.
Andrew: So what kind of a sale did you have in 2006? What kind of an exit was it?
Jonathan: A couple of million dollars.
Andrew: That’s stunning. You raised half a million dollars. Your company was almost dead. You do this drastic move, and within a few months, you sell for a few million dollars?
Jonathan: Yup.
Andrew: Wow. I hear the story hear, and I still don’t fully get — how do you pull something like that off?
Jonathan: It was really interesting. After six months on the market, we had the right relationship with the video game studios and with the brands. It was really hard for us to see the evolution of our partnerships going forward.
So we started to talk to some VCs in Hong Kong. We were in a [??] to raise one or two million dollars to establish our ourselves [??] in China. So it was a bit fancy acquisition from our partner. That’s all.
Andrew: I see. Wow, to establish yourself in a new country that you’d never been to before, and suddenly have that kind of turnaround — stunning.
Jonathan: Yes, but we were very lucky because there was no dynamic, in-game advertising, ad serving technology at that time.
Andrew: I don’t know that this is lucky. You’re being modest here. You were lucky, but you discovered the fact that this opportunity existed. You didn’t just discover it and say, “Boy, if we were Chinese, or if we had experience in China, we could probably take over that market.”
No, within days you fly to China. You open up the doors. You make it hapen. You understand the culture.
You don’t have to say any of this stuff, but I now understand. Julian is the one who introduced us. He said he heard you at the Founder Institute, he’s a viewer of Mixergy, he said, “You got to get this guy on.” Now I understand why.
Jonathan: I don’t read the story the same way you read it.
Andrew: No? Why? I want to open myself up to your worldview. I don’t want to impose mine on this interview.
Jonathan: No, no, no. It’s not the question of modesty. It’s just a question of pragmatism. When I really don’t get it, I just simply take a step back and try to really pragmatic. That’s all. Sometimes pragmatism is better than enthusiasm.
Andrew: I see. OK. How would an enthusiastic person have handled it? Because we are told enthusiasm and passion are the answers, and pragmatists seem like boring people who want to grow up to be investment bankers. [laughs]
Jonathan: Yes, but when you have only three months, you don’t want to fail. You have only one shot in your gun.
Andrew: Right. An enthusiastic person would do what?
Jonathan: I don’t know. I was not in that kind of situation. I would say that enthusiastic people would say, “Look, we could fail here. But let’s start something new. We have three months for reserves. Let’s try and figure out something new in three months.
Andrew: All right. So you come back, you take a little bit of time off. What do you do in this time off after you’ve just went through this big change?
Jonathan: It’s really interesting. My girlfriend was in China. We decided to take a week in Thailand.
Andrew: Your girlfriend is Chinese, or she moved with you?
Jonathan: No, no. She was in France with me, and she went to China in Shaghai. Then she came back to Paris.
So I spent one week in Thailand. Then after that, when I came back to Paris, I decided to say hello to all of my friends. One of my — he was not my close friend. It was just the office next to mine in our incubator in Paris.
I just came to give some news to the incubator team, and I met with my partner at Deezer. He was in a very bad situation. He lost his trust in his partner. They were building a dating website.
Andrew: A dating website?
Jonathan: Yes, dating.
Andrew: OK.
Jonathan: He lost his trust. So the atmosphere in this office — it was only four developers. It was really heavy. You could feel the tension. You could feel the electricity in the air.
As a side project, he started working on a personal project, called BlogMusic. BlogMusic was a website with a simple user interface, which was an iPod. The product was a service where you were able to listen to any music for free, which was great. But the way it was built, it was totally illegal.
Because what he was doing is indexing all the MP3s hosted across the Web. So it was not really legal. But in terms of proof of concept, it was great.
So when I came back to Paris in December 2006, he told me, “Look, I can’t work with these guys, and I have this project. The traffic is growing very fast, but I have received some letters from the music labels, and I have to shut down the service, or I’m going to jail.”
Andrew: To jail?
Jonathan: Yes. Not jail, but he was getting into trouble.
Andrew: But he was clearly doing something that was illegal, and he knew it, and they knew it, and you knew it going in. OK. So what do you say in response to what he just told you?
Jonathan: I said, “Look, you’re in a bad situation. So what you’re going to do is you shut down this website. We take a ticket wherever it is sunny. We stay 10 days and we will figure it out.”
He says, “OK. Good.”
So we took a week and flew to Punta Cana. We spend 10 days in Punta Cana. During these 10 days, we started out Deezer. So with all the punch [laughs], and by the pool, we were thinking about Deezer.
When we came back, it was in January 2007, he told me, “Look, let’s go.” So he decided to quit his former venture, and to quit his partner. I said, “Look, the only thing we have to start with is a good lawyer.” [laughs]
So we picked one of the best in Paris. The good point with this lawyer was that he had the right network to introduce us to the right people within the music labels and the collective societies.
So I spent almost nine months every day, every morning, every afternoon talking to these guys, explaining that we were just a tool to fight piracy. That the main objective was to convert our free users to premium users.
It was in 2007, and we’ve launched officially the website in the 22nd of August 2007.
Andrew: I’ve got questions here. I’m scribbling here. There’s a lot that happened in a short period of time, and I want to catch up on the understanding of it.
The first is, why did you say this was a good enough idea that I’m going to invest time to think it through — even though it’s in Punta Cana, which sounds beautiful, you’re still investing time and investing your reputation. Why this idea? What was it about it that told you early on this is a pragmatic, smart decision?
Jonathan: Again, from a pragmatic point of view, everybody downloads music from peer-to-peer websites. So that was a clear opportunity.
Andrew: Was this website, was blogmusic.net, was it doing really well?
Jonathan: Yes. It was doing something like 70,000 visits per day. He was rebooting the servers every 20 minutes.
Andrew: OK. So you’re seeing that there’s a lot of traffic here. You understand beyond this that there’s a bigger opportunity, because you see a lot of people downloading music illegally. You decide to go in there.
I love the tactic that you took with the music industry. You said we’re here to help you. We’re here to fight off…
Now, I’ve done interviews with the founder of mp3.com and many other people who are building companies going up against the music industry. Even when they had logic on their side, the music industry said no. We don’t want to do it. How did you convince them?
Jonathan: It’s almost a joke. Let me explain.
In August 2007, there was a status quo on the negotiation with all the major labels. They were all saying what you’re doing is great. It’s exactly what we are looking for our digital development. But please, if you sign with someone else, then we will sign with you.
Andrew: Ah. So they were at a moment in their lives that they were ready for this, but no one wanted to go first. OK, so what do you do?
Jonathan: It was a chicken and egg problem. So I learned from all the people I know in this industry that first the music industry, from a business point of view, has some practices. Like you can say, “OK, we do this,” and you can sign a contract two years later.
So for instance, in France there is a company called [??]. They are doing exactly the same thing as iTunes, and [??] is the same thing as Best Buy in the US.
They have signed the agreement with the labels two years after launching their music store.
Andrew: OK.
Jonathan: OK?
Andrew: Uh-huh.
Jonathan: So there is there is a gray area which exists in the music industry, in France at least.
So the 2nd of August, one of our investors, business angel — and the only one. He’s the owner of the second largest [??] in France. So he’s a billionaire. He knows everybody in the industry in France.
He came to our office and said, “Look, guys. You launch the 22nd of August.” We said [??] on the 22nd, because we have no agreements. He said, “Look, you have to sign only one. I said, “OK, why do we have to sign [??] the 22nd?”
He told me that on the 23rd, Neuf, which is the 3rd largest MSO will announce a music offer to their users. But their music offer is going to be, how could I say, not very user friendly, and it was with only one music label.
So what he told me is you should talk about this deal to the collective societies. Maybe they are not aware of that kind of situation.
I thought that there is a fight with the music labels and the collective societies. They can’t bear each other.
Andrew: What’s a collective society? Is that a union?
Jonathan: No. The collective societies are the companies collecting the licensing rights for author’s rights and what else? Mechanical reproduction rights, that kind of things. In the US you have PRS — no, it’s in the UK. In the US you have — I don’t remember the names. I’m sorry.
But you have three companies [??]. You have ASCAP, BMI, and a third one. I don’t remember the third one. So these guys are collecting the author’s rights, and the labels, they collect the master rights. So the right on the master.
So don’t worry. It took me 12 months to understand the process of the music right business.
So what I did, I called the collective societies in France, which is called the SACEM. I said, “Look, you know that the 3rd largest MSO is going to launch a music offer?” She said, “No, you’re kidding.” I said, “No, I’m never kidding with you.” She said, “No, I can’t. No, no, it’s not possible. Let me just make a phone call to my assistant, and I will come back to you.”
After two minutes, she came back to me with a voice, she was so angry and upset. She told me, “[??]” [laughs] I said, “Look, I didn’t know that. Because they are going to do exactly what we do, but they don’t have an agreement with you, while we are talking to you since nine months. Do you think that it could be of interest to demonstrate your innovation, and the way that you address innovation through the signature and the announcement of the first agreement for ad-supported, on-demand websites?”
She told me, “You know what, Jonathan? Maybe not.” I said, “Look, I don’t understand. We have an agreement.” She said, “Really? Do we have an agreement” I said, “You know, I really thought that it was totally crazy, because the rates were so high, it was not bearable for the company for more than five months.”
I said, “Look, we can sign the agreement the way it is.” She told me, “OK. Let’s do that.” She called me later in the day, and she said, “OK. We can sign the 17th of August.”
We signed the agreement the 17th of August. The 18th, we chose Deezer as our brand name and website name. The 22nd we launched officially the website. The 23rd, Neuf, the 3rd largest MSO in France, announced their offer, which was not really [??]. The 24th, thanks to our business angel, we announced the first partnership with an MSO in France.
The traffic went from 1,000 connections per hour to 100,000.
Andrew: 100,000 connections per hour to your site?
Jonathan: Yes. In one day.
Andrew: In one day.
Jonathan: You can imagine that we had only six servers, so [laughs] we started to rent lots of servers everywhere in France to have some bandwidth and some CPU to run our site. It took us one month to have the right architecture, infrastructure to serve the streams.
Andrew: Now, I introduced you as a mentor. I met you because you’re a mentor at the Founder Institute [??]. You’re trying to teach other entrepreneurs how to do what you did.
I’m listening to you here, and saying, how is anyone going to come up with this creativity? A large part of it is like teaching someone else to be Picasso. It’s art.
It’s trying to figure out the nuance of what the situation is that you happen to be in. Who likes whom. Who needs to strut. Who needs to show. Who needs you. Who do you need. How do you convince them.
How do you teach that to someone? How do I teach it to my audience here?
Jonathan: [laughs] I think that one of the key points is to observe. I’m not talking about the business model. When we talk about the business model, and how do you hire the right people, and how do I choose a co-founder or not, how do I raise money?
As a manager, before trying to address those kind of issues, we have to address really pragmatic issues. How much do I raise? Do you think that a model that could work? What do you think about my product, etc.
So this is mainly what I do. At the end, when we are in a dead-end, we try to come up with some creative solutions like we’ve done now.
I think there are no specific rules. It’s just, again, pragmatism. Try to find the small leak, you know what I mean? The small weakness where you can just enter and create something big. That’s all.
I think it’s, yes, it’s philosophy, but it’s really hard to try to explain.
Andrew: How does somebody find that opening? How does somebody find their China? How does somebody find their rights holders?
Jonathan: I am the mentor of one of the companies we have in our incubator in Paris. What they are doing is something really great. It’s a platform as a service to build contests in two or three clicks, and plug these contests into your website, or your Facebook page.
The technology is great, but the business model was not exciting. At the end of the day, they came and they said, “Look, we have lots of people trying our free offer, but we don’t know how to convert.”
Then I said, “Look, why don’t you ask your potential clients what they’re willing to do, instead of trying to invent something new for them.” Then they’re spending one week to speak to all the agencies — I introduced them to several agencies to understand what was the best business model to address this market.
Then we found that at the end of the day what was really important for these guys was not the product, it was the ability to use this platform as a [??] solution for their own clients. They were happy to say, “Look, we are using the technology of this startup. It’s really French-based DNA. That kind of thinking.
People don’t like startups in France. I mean in big groups.
So I called one of my friends in New York. She’s really good in business development, and she knows almost all the people in the media industry, especially agencies in New York. I asked her, “Look, can you spend just two or three days just meeting with some of your key people that you may know that could be of interest for this technology.
After three days, we were having 10 clients. After one week, 12 clients, and this is growing. I said, “Look, you have the right technology. You’re not in the right market. You have to go to New York.”
So when the discussion at the incubator, they were saying, “We are working on a fundraising process.” After one week, they were [??] the right business model. After one month, they are now expanding to New York without raising any money.
One of the key points is that I told to one of the co-founders to keep a job at Google to finance the company. I think it proves to be the right solution to bootstrap this company in the short term.
They are in my incubator since four months, and it’s great to see these guys moving forward from Paris.
Andrew: A salary from Google is what they’re using to bootstrap their business.
Jonathan: Yes.
Andrew: Can it be that if you can’t come up with these ideas on the fly yourself, that you just need a good advisor, as an advisor? Not just a mentor, not just someone who’s running the incubator, Milestone Factory.
But any advisor do you think could come up with ideas like this? Any advisor who knows it. Here’s how I can phrase it: Can you outsource this kind of innovation? No.
Jonathan: I think it’s something you have with experience. I read a post on your website. I think it’s Paul Graham from Y Combinator saying that you should take money from business angels who’ve raised and earned this money through their ventures.
I think this is the best thing to do. To try to work with entrenpeneurs who really earned their money through successes, who failed, and who have time to spend with you.
Andrew: OK.
Jonathan: The honesty of saying your model is not good, and I think that the best way to do it is this one. The Reddit example is one of the best one in the market, I think. This is what an advisor should do.
Andrew: Where the founders of Reddit came up with one idea, and their investor, Paul Graham, said, “No. Go in a completely different direction.”
The only reason he could do it is because he had experience as an entrenpeneur.
Jonathan: Yes. My experience is my brother, he told me, “Look, I want to start my own company.” He started with really — it was trying to help people able to call a doctor anywhere in the world. To try to find some medicine for themselves.
So they were using webcams to call doctors so that there could be a kind of chat and conversation about any specific issues that may have arose. I said, “Look, you think that it’s really interesting?” They said, “Yes, it is.” I said, “OK, if you really think that it is interesting, you should move forward.”
After one month, they came back to me and said, “Look, we have the perfect business plan.” We spent — my brother lives in the south of France, and I live in Paris. So they took a train, and they came here for one day.
After one hour, I said, “Look, what you’re trying to build is too difficult. You have some mountains to climb, and I think your mountains are like this, and not like this. So you have no experience in terms of an entrenpeneur. You are just graduates. So you should try to find something more high which would help [??] in an easier way.”
I just said, “Look. Why don’t you create a social network of people just to rate and rank hospitals abroad.” So that when you are abroad, you don’t have to think about the hospital. You go to this website, and you will have some feedback from users saying that this hospital is good, you can go, it’s clean. The doctors are highly skilled. So you can go, it’s a no-brainer.
This is exactly what you need when you are on the road. Am I right?
Andrew: Uh-huh.
Jonathan: They said, “OK,” and we spent the entire weekend here in my house trying to redefine the business. They will launch in two months.
Andrew: I see. All right. So here’s what my audience is going to be thinking right here. How do we meet Jonathon? Right? They must be thinking, “I would like to sit in Punta Cana, or I’d like to sit in his kitchen and brainstorm my idea and work it out.”
I looked you up. I did my research on you. What I couldn’t find was a website for the incubator. Is there a website for the incubator, a way for them to connect with you directly?
Jonathan: No, there is only my blog, and my blog is not up-to-date. They can find me on my Twitter, it’s john_benassaya. If they put my name on Google, they will have my cell phone and my GMail address.
Andrew: Your cell phone and GMail address are Google-able?
Jonathan: Yeah.
Andrew: Wow. All right.
Jonathan: That’s the best way to be reachable. You don’t have to build any website or whatever.
Andrew: That’s the best way to get flooded with emails and phone calls, too.
Jonathan: No, because when you put this way, people think twice before trying to contact you.
Andrew: Can I suggest that maybe the first thing they do is contact you and say, “Thank you for this interview.” Then later on they hit you up for ideas and time in your kitchen? Is that appropriate?
Jonathan: Yes. I travel — first of all, I don’t think that I’m just pragamatic, and I try to address issues with some ideas. Second, I travel a lot. I spend most of my time in the US between Los Angeles, San Francisco, and New York. I’m really happy to discuss with people.
One thing learned is that the best way for me to learn is to listen to people.
Andrew: So you want them to contact you and tell you what’s going on with them.
Jonathan: I would say that if I have the time [interrupted]
Andrew: [laughs]
Jonathan: I’m a new father. So I have to take care of my baby and my wife. If I have the time, I would love to spend time with anybody.
Andrew: Right. Well, next time we’re in the same city, I’d love to get together with you in person and here [interrupted]
Jonathan: Where are you based?
Andrew: I’m now in Washington, DC. But I’m not really based out of anywhere. I’ve been traveling a lot lately.
Jonathan: OK. So if you are in Los Angeles next week, I’ll be in Los Angeles.
Andrew: For Twiistup, or for what?
Jonathan: For… I work on something new.
Andrew: OK. [laughs]
Jonathan: [laughs]
Andrew: Well at some point I’d love to see you in person. I’d love also for my audience to really not just take these ideas in, and I know that they’re going to benefit from this. I know another way, by the way, to think of creative ideas, is to be exposed to the creative ideas of other people.
Just like when you go into a museum, you see artists appreciate art. They draw it out. They paint it. They reproduce it as a way of experiencing it, internalizing it.
I’m confident that people who take in your stories, and other people’s stories, are internalizing the way that you think, and it’s going to come out of them in ways that they can’t expect. I can’t promise tomorrow it will come out, but I know when it’s in there it comes out at some point.
Do you agree or disagree?
Jonathan: I do agree. I couldn’t agree more.
If I can add something. Nothing is impossible.
Andrew: Of course not. We’re talking to a guy here who got on a plane a few days after realizing his whole business disappeared — flew to China, took his company from nothing to selling for several million dollars in a matter of months. Proof positive right there that nothing is impossible.
You’re not just some self-help guru who read it in a book and decided that you’re going to be the new Tony Robbins who’s saying nothing is impossible. This is a guy that actually proved that nothing is impossible.
Jonathan: If you believe in you, if you believe in your ID, then you will come up with create ideas. That’s all.
Andrew: If they believe in it.
Jonathan: Yeah.
Andrew: Do you really believe that? Is that all it takes is enough self-confidence and belief that you can actually put something good together? You don’t think that many people walking around with self-confidence, they didn’t earn a belief that maybe they need to tone down, because…
Jonathan: Let me tell you something, Andrew.
Andrew: Please.
Jonathan: I came through very bad things when I was a little child. I think that when you come through those kind of things, you see life and everything with another sight.
Andrew: Like what? What kind of bad things?
Jonathan: Personal things. So family things. It’s really hard to just have to [interrupted]
Andrew: I won’t push, but give me like a — like lack of money issues? Or you mean physical abuse issues?
Jonathan: No. In one word I lost my father in a car accident when I was 14. It was just in a gigantic project of building something huge [??] loop, which is in the French West Indies. So we came through really hard times with my mother and my brother.
Self-confidence is not something — I just try to avoid being self-confident. I believe in me. I think that when you have enough patience and sometimes pragmatism to take the right decision then you cannot fail. Even if you fail, then I believe in God, so sometimes you just have to give it up and to move on to something else.
We just talked about the good points, but they have tons of bad points also.
Andrew: I asked you earlier, where does this confidence come from. Where does this belief that you have to make it work come from. Does it come from that? This feeling that you had to early on?
I remember when we had trouble as a family growing up. It made me every night say I’m going to find money when I grow up. That’s what kind of sent me in the direction of investment banking. That’s what made me read about these guys who had control over their lives. Maybe.
Jonathan: Maybe. There is something my mother had to deal with when I was a child is when I have something in my mind, it’s in my mind.
Andrew: I see.
Jonathan: You cannot move it.
Andrew: Fair to say that a lot of kids have that, but the fact that your mother kept point it out, and kept saying this is one of your attributes, reinforced it in you and made you think this is really who I am, because I hear it all the time?
Jonathan: Maybe. I’m not a therapist. [laughs]
Andrew: I’m not, but I play one on the Internet. Sometimes I try to get into there just to understand the psychology and what goes on behind the story.
Well, I won’t pry, this isn’t about that. This is about hearing your story. I really am grateful to you for coming here and telling it. I cannot believe that I didn’t hear, read, see this story anywhere else. I’m grateful for you to sharing it here.
Jonathan: Thank you, Andrew.
Andrew: Thank you. Thank you all for watching.
Do not flood Jonathan’s voice mail and his email. Be nice. Help him out, say hello. Say thank you, and then ask what you need. I’m going to say it first. Thank you, Jonathan. Thank you all.
