Andrew Warner: Before we get started, have you seen articles like this on TechCrunch about companies that were launched by startups who joined the Founder Institute? Well, the Founder Institute is accepting applications right now and I want to encourage you to apply right now before it’s too late on FounderInstitute.com. The Founder Institute is a technology startup accelerator, an entrepreneur training program, that launches companies in 13 cities worldwide. What do you get if you’re in the Founder Institute? Training, mentorship, help getting investors, and just about everything else you need to get a startup launched properly. Go apply right now before it’s too late. FounderInstitute.com.
Do you remember Patrick Buckley, who I interviewed? He came up with an idea for an iPad case, then he built a store to sell it. In a few months, he generated about a million dollars in sales. Well, the platform he used is Shopify. If you have an idea to sell anything, set up a store on Shopify.com because Shopify stores are designed to increase sales. Plus, Shopify makes it easy to set up and manage your store. Shopify.com.
Do you remember when I interviewed Sarah Sutton Fell about how thousands of people pay for her job site? Look at the biggest point she made. She said she has a phone number on every page of her site because, well, and here’s a stat, 95% of the people who call end up buying. Most people, though, don’t even call, but seeing a real number increases their confidence in her and they buy. Try this. Go to Grasshopper.com and get a phone number that will make your company sound professional and see what it does to your business. Grasshopper.com.
Here’s the program.
Hi, everyone. My name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart. Today I’ve got with me Scott Rafer. He is a founder who has been helping Internet publishers develop the next big thing since 1995. The sites he’s worked on include MyBlogLog, whose co-founder did a Mixergy interview recently and talked about how Scott helped shape his company and how he helped them sell the company to Yahoo!. Others include Lookery, Feedster, and Mashery. My goal for this interview is to hear the stories behind the companies that he’s worked on over the last 15 or so years and to hear what he’s learned along the way. Scott, welcome to Mixergy.
Scott Rafer: Thank you. Thank you very much. Sorry about the bandwidth. I think the problem’s on my end.
Andrew: Where are you, by the way?
Scott: AT&T fibers. I’m in the suburbs of Detroit, Michigan doing a summer visit to the in-laws.
Andrew: Where you’ve got AT&T as your ISP. How’s AT&T as an ISP? Same as they are as an iPhone carrier?
Scott: No. I think they’re evil rather than incompetent in this case.
Andrew: Oh, really? What’s going on?
Scott: The DNS is insanely slow, right? The open DNS article in today’s Times, or yesterday’s Times is. . .
Andrew: Okay. What are you working on now?
Scott: We shut down Lookery at the end of 2009. I own the remains of it. [interference] have been doing as part of that. Did the sound just get worse? I’m sorry. I’ll start over again.
Andrew: No. Just as you were saying that, we did lose the connection.
Scott: Okay. The air conditioning just kicked on here. Let me kill that.
Andrew: Oh, okay.
Scott: Sorry about that. You won’t be able to hear me.
Andrew: Sure. A little Yerba mate here, while he does that. I’m finding that this the first August I’ve done interviews day after day and I’m finding that August is a really tough month to do interviews because most people are out of the office or if they are in the office, it’s a nice day out and they just want to go out, they don’t want to sit and do an interview. I’m especially glad Scott can do it. Okay.
Scott: I’m not sure that I can kill the current cycle. It won’t restart in 10 minutes as it is. After Lookery formally wound down, I started doing a bunch of consulting in similar areas, data targeting, these kinds of things. Did some work with a company called Sprout in San Francisco that’s great and worth looking at. They’re building HTML5 advertising media that people should take a look at. I spent a bunch of time with Halogen Network where I’m acting CTO. They are an ad network to high-end brands, whether it’s Gloria von Furstenberg and Prada and these kinds of people, working on a fluent media as it were, which is important because, naturally, selling luxury good is important, but that’s going to be one of the last sectors that gets pulled into double-click exchange. The reasons why they can’t use all of the exchanges, which are trashing everyone else’s pricing, so it’s interesting from that point of view. I also do some work with Bit.ly, which people have probably heard of, on the shortener side. And a company called FanFeedr which is fixing real-time sport syndication.
Andrew: How do you help these companies? Do you help them come up with a vision for the future? Do you do more tech work for them? Is there something else that you do? What do you do for them?
Scott: I’m an okay product guy and a crappy coder, so it’s usually not very technical. With Halogen, it’s a lot of data system creation. I’m backed up by the technical team that built MyBlogLog. It’s almost a big cookie systems contract, with a bunch of dashboards. The Bit.ly discussion is mainly sales operations, actually, which is probably a better thing to ask me about. Leads, funnels, all that stuff. FanFeedr’s a fairly general thing. I end up being, as many repeat founders are, a jack of all trades.
Scott: Certainly master of none. Whatever problem people are having, I tend to grab the first 20% of the problem and then go find an expert for the rest of it. I’m fairly efficient at that. Not everyone is. It spans the gamut. I also spend a bunch of time in a company called PercentMobile, which has very good mobile analytics now that Modele [SP] was snapped up by Nokia, they might be the only browser analytics for mobile that are interesting and specialized. For Dave, who I’ve been working with on and on since probably 2004, it spans the gamut. We talk product. We talk customers. We talk financing. Whatever works for people.
Andrew: You come in as an advisor, you help these younger companies get on their feet, you help them figure out their product, you help them get some development work. Then, you just let them go off into the world?
Scott: They’re not always younger. Halogen and Sprout are both four, five years old.
Andrew: That’s relatively young.
Scott: Relatively young, but with the stuff I do, my half-life is shorter than that.
Scott: It ends up being about a big market change. Something about a discontinuous market change, I ended up being able to help people react to. Using the term advising is a little bit funny with me because I won’t take common stock. The three currencies that I recognize are, well, really four, preferred stock, cash, booze, and you owe me one. Right?
Andrew: Preferred stock. . . I’m sorry, go ahead.
Scott: Preferred stock, cash, nice bottles of wine, right? Or bourbon if you must and a lot of people owe me a lot of favors.
Andrew: That’s what I’m seeing.
Scott: I call them in. I don’t let them sit out there. Common stock as an advisor and running around doing the stuff, almost since I got to the Valley in 1992, I realize that I’d collected on advisor shares exactly once. I collected last year for a deal that was 11 years old. It just makes no sense. The definition of insanity is to keep taking common stock for this stuff.
Andrew: What’s the difference between common stock and preferred stock?
Scott: There’s any number of people that have answers to that. I believe that the key answer is the pro-rata. Right? It’s the investor’s right to keep their percentage in the company as additional rounds of financing come in. That’s the biggest differentiator and is how the early common investors and advisors get drowned out into nothingness. The slide transaction with their recent acquisition, if you look at the numbers, the employees who are no longer there, or the advisors whose share percentages were set long before all the financing rounds came in, literally made hundreds of dollars, maybe, if anything at all. Max did well, but Max invested in his own series A for a couple million bucks. Right? And kept his percentage, he, in the jargon, exercised his pro-rata. It’s that pro-rata percentage that you can keep up with that makes all the difference and advisors stay common, in generally, and get enough pro-rata rights.
Andrew: I see. Advisors get common shares. It looks like they’re getting an equity stake in the business. It looks like it’s something significant and they’ll get a piece of the pie once there’s a big hit. What happens is, more shares are issues, their shares become less and less valuable because they become a smaller and smaller percentage of the company. When it’s time to cash out, they’re practically meaningless, is what you’re saying.
Scott: Right. It’s not that the founders realize this. Most of the founders, particularly the ones I help, are first-time, second-time folks, whatever. There’s a great company that I do some work with called Zemanta. I know a lot of these companies through a thing called Seedcamp in Europe, which is their Y Combinator. Advisor to them for close to four years. Is that right? Yeah, close to four years. I’m now doing it as a favor and I have to needle the founder occasionally to say, “This is all free at this point.” Of course, as it should be, the founder, as they’ve gotten bigger over time, he’s got an ability to go back to his board and get more options if he needs to in a way that advisors generally don’t. Normal rules of the game, nothing unusual except for the fact that I raise my hand and stop doing it.
Andrew: Actually, I want to know more about the normal rules of the game because as normal and common as they are, I don’t know enough about them. I haven’t asked about them in my past interviews. Let’s spend a little bit of time here if you don’t mind.
Andrew: You would do work for a company like Zemanta. What do they do? They make it easier for bloggers to pull in content and link the content. You do some work for them; you help them out. In time, the understanding is that they’ll give you some shares.
Scott: No. I signed that share agreement within. . . We shook hands on it Q4 2006.
Scott: Paperwork didn’t get done for six months because they’re European and it’s a little screwy over there. It just happens. Now I’m pals with them and been over to Ljubljana a couple times to see them, once for the founder’s wedding, which was a great wedding, last September. We were, in fact, my appointment just before this call was reviewing his financial projections with him.
Scott: We were digging into his model and what not. We do this every once in a while and when he’s got to do a big presentation. They just closed a great deal with WordPress which got written up.
Scott: I was not a significant part of that work, but whenever there was an issue, Bostjan would ping me and say, “Hey,” and suggestions on how I would handle this. I’ve dealt with Tony Schneider [SP] over time, so I had some idea of what to do about it. That kind of thing. It’s just a continuous hour a month, two hours a month thing. Years into it, that adds up.
Andrew: Okay. When you were saying that you were raising your hand, raising your hand for what?
Scott: Yeah. At some point, Bostjan either starts owing me lots of favors, booze, preferred, or something. Right?
Scott: He’s grandfathered into when I was taking common. Eventually, I would bug him for more common.
Andrew: Ah, I see. Okay.
Scott: I only stopped taking common probably about 8, 10 months ago.
Andrew: All right. Interesting. I felt like an idiot for not knowing enough about this, but here you are, about a year ago, you were still doing this. You were still taking common instead of preferred.
Scott: Yep. Bit.ly and FanFeedr, which I mentioned, were the last two. I was negotiating a couple of others where I had the V8 moment and said, “What am I doing? Why would I keep down this path?”
Andrew: I see. Do you have an advisor, somebody who says, “Look, here’s what you should watch out for. Here’s what I’ve see other advisors do. Here are mistakes that others in this space keep making”? Do you have someone like that?
Scott: I can think of a few individuals I go to when I need advice. None of them gave that specific advice. In fact, one of them was trying to get me to take common from one of his companies at the time when I had this realization. There are, I certainly have mentors. Oddly, for conventional assumptions, some are younger than me. I’m 42. Most are older. Most are retired VCs or former public company executives or what not. I ask them things rarely unless I’m in the middle of some very large. . . If the stakes are high, they get more calls.
Andrew: Mm. What other mistakes have you made?
Scott: I’ll hang out on Skype.
Andrew: Oh, you’ll ping them on Skype a few times?
Scott: No, no. I’m saying they don’t hang out on Skype like I do. People that ask me questions can ping me this way. These guys are running around doing what they’re doing, back and forth to this ski house or what not. I’ve made more mistakes than anything else. The first, call it, half of my tech career thus far, roughly speaking, the 1990s, I was too early to everything. Tragically too early to everything. Then I teamed up commercially with a guy named Oren Michels who is CEO of Mashery.
Scott: Oren does a very good job of preventing me from being too early to stuff. I didn’t have a chance to the degree I should to grill him on the second planet Lookery once we got out of the Facebook apps and he could have probably prevented that, too, had I shown the care of grilling him that I usually do. Most of my mistakes are being too early.
Andrew: Can you give me an example of that?
Scott: Feedster was the second time I tried to do blog search. The first time started in late 1998.
Andrew: ’98 you were doing blog search?
Scott: It was called RSS Search at the time. There were only 1,200 feeds on the planet. Summer of 2000, I spent a bunch of time. . . Summer? Probably spring of 2000, I spent a bunch of time trying to convince Evan Williams why he should let me search Blogger, which he didn’t see a priority which worked out better for him than for me. That was very early. It was a company called Fresher.com. We were doing the boom. We raised the 25 million stupid dollars. Crashed and burned terribly. That’s a pretty easy example to point a finger at.
Andrew: What else beyond coming in early? What are some other big mistakes?
Scott: This is the only. . . Sometimes you break a toe, sometimes you break a leg.
Scott: This is my consistent leg breaker. I stub my toe all the time. That’s the one I focus on so I haven’t really thought very hard on the others. They are more situational. I ended up not worrying about design enough. Eric and I, Eric who you interviewed, would come to grips on that. A number of times, I wanted to get it out fast and ugly. My [??] of ugly is not fixing it however. My goal had been acceptable on the web a few years ago, but isn’t now. I probably pushed it too far in that regard.
Andrew: You’re talking about MyBlogLog, which you helped Eric with. He actually called you a co-founder. You came in a few months after it was launched.
Scott: I showed up about a year later but we all went full-time at the same time.
Andrew: Okay. He said specifically here that they just rushed everything out ugly and that design wasn’t important to them. You are saying at one point, that was okay, but today, design is critical.
Scott: Depends who you are. David Cancel, who you also interviewed, who is co-founder at Lookery, he has a great post out on that, either today or last couple of days, it was the top post on DavidCancel.com, about an app that he and his co-founders had Performable use that they simply hate, but it solves a critical problem that no one else solves. Design doesn’t matter in that case.
Andrew: I see.
Scott: Even on MyBlogLog, Eric pushed harder for better design than I did. We would have probably been better. . . Things worked out fine, of course, but we would have probably been better off if he won more of those arguments than I did. They’re certainly doing a lovely job over at One True Fan. Have you talked about that yet?
Andrew: I don’t know if he’s talked about it publicly yet. He might be.
Scott: He is now. I didn’t know if he did at all in that interview.
Scott: They’re rolling it out this week, next week.
Scott: They have decided to use the asthetics of the Atari 2600, but that is at least a design decision. Eric’s a big ’80s buff, so it’s somewhat retro in that particular way.
Andrew: I see. So it’s intentional in that case.
Andrew: Let’s do the biographical portion of this interview. Why don’t we go back to when you first got into entrepreneurship, into tech entrepreneurship. Is there one company that you said, “This was my entry”?
Scott: No. It was actually, I grew up in a tech household. My father was product manager and sales guy on Route 128 near Boston. I grew up liking what he did except not liking how large companies treated him. This path was set in high school.
Andrew: You said, “I’m not going to be treated like my dad was. I want to do it but I want a little bit more respect.”
Scott: My cup’s a little bit more half full than that.
Scott: I looked around and said, “I want more control of pretty much every aspect of my life than he. . .” Everyone’s father in the neighborhood worked for the tech companies. At the time, it was much more sections than it is now. It was really amongst that.
Scott: They had to take vacations when it was this and that and going to the office and not going to the office and whatever else. I just didn’t want to have anything to do with that. I saw someone post in my Twitter stream this morning that they had gotten their first mobile phone in 2002. I was like, “Wow. I got mine in ’93.” It was all a part of this. . . I couldn’t really afford a mobile phone in ’93 and the thing weighed four pounds. You had to keep it on the floor of the passenger seat so it didn’t burn you. One of those giant Motorola things.
Andrew: It used to come with a big box.
Scott: The coily cord and the whole thing.
Andrew: The coily cord, right.
Scott: Yeah, yeah. I had exactly that.
Andrew: You did?
Scott: Yeah. It was a hand-me-down, in fact, I think from the guy whose startup I was working for. The budget for it was disproportionate to my lifestyle at the time, but the thing was, “Well, hey, I [interference] what I want when I want.” I’ve always been like that. For me, it’s a controlling my own environment thing much more than it’s a respect thing.
Andrew: I see.
Scott: There’s any number of people that don’t respect me for behaving like I do and that’s okay.
Andrew: You know what, by the way?
Scott: Social status is not my bogie.
Andrew: I’m looking at this interview and it’s sounding a little stilted because of the connection. I’ve had a drink with you, a long time ago, before we really knew each other. You barely remember it, believe me, I barely remember it, too. I do remember that it was a lot of fun over a drink. I wish that you and I, instead of doing this interview remotely like this, could be in the same room, preferably a bar or something comfortable, having a beer.
Scott: I don’t know where you are.
Andrew: I’m now in Buenos Aires. I was in. . .
Scott: Speaking of controlling your environment.
Andrew: That’s exactly why I came here, to control my environment.
Scott: I have not been down to BA yet.
Andrew: This is what I’m talking about with stepping on each other. Stinks! I’m going to have to bring this show on the road when I get back to the U.S. At some point, I need to do this interview in people’s offices, maybe with a beer or a whiskey, and just have a decent, normal, human-being conversation instead of this Skype conversation.
Scott: The island in my kitchen would probably work well. Then we can drink the booze of people I’ve done favors for.
Andrew: [laughs] All right. When you were watching your dad, you said, “I have a different path for myself.” What do you do with that vision for the path that you’re going to take?
Scott: He convinced me to go to engineering school for which he was correct.
Scott: I doubled it up with Wharton undergrad. I’m out of the M&T program at Penn.
Scott: Spent a couple years writing IPO prospectuses in New York, which sounds like it was well-planned, but in fact, I was just following my pals to New York to drink with them after school. Then moved out to San Francisco in early ’92 about five years too early to make money on the Internet.
Andrew: Why? Why would you go to San Francisco?
Scott: Startup I wanted to work for. I just moved from Tribeca to Palo Alto, so I followed them.
Andrew: I see. What was the startup?
Scott: A thing called Twerk [SP] Systems.
Andrew: What was that?
Scott: Desktop supercomputing.
Scott: We ended up in 3-D rendering and various post-script rendering things. We basically stacked up a bunch of of Unix boxes behind desktop LANs. We were actually using Mac TCP at the time and didn’t think that might be important. It led to any number of comedies of errors. We were using these ugly white boxes from [??] at one point and had a bunch of them stacked up in the next booth at some graphics show. Jobs actually walked in and saw a white box instead of a black one in his perfect tradeshow booth for NeXT. Flips out and started screaming for people to take them out. Nothing’s changed.
Andrew: Your booth at a convention, at an expo, he sees it. . .
Scott: No. We were in the next booth. We had a little section of the next booth with a bunch of ugly, industrial, white computers in it. Pure 1980s textured sheet metal, bad offwhite paint, the whole thing.
Andrew: He sees your computers and he says, “I don’t even want them anywhere near my booth. Get them out of my booth right now.”
Scott: Yeah. My NeXTcube shouldn’t be next to those.
Andrew: I see. [laughs]
Scott: It’s the only way we can run RenderMan and have Industrial Light & Magic as the clients, but so what?
Andrew: It’s not worth it. If it’s not pretty enough to be here, it doesn’t matter what it can do. All right.
Scott: He’s done well by that.
Andrew: Yeah. It’s worked for him.
Scott: Yeah, it really has.
Andrew: All right. What after that? After Twerk Systems.
Scott: After that, our largest customer hired me into Kodak Motion Picture, which is the only “real job” I’ve probably ever had. He hired me to be a troublemaker, basically. I was the first Internet guy for Kodak Entertainment.
Scott: Very interesting having a corporate experience given the rest of what’s happened to me. I also met a bunch of simply fabulous people. The Kodak Alumni Network is pretty awesome. I’m exercising it now. The thing that I’m hoping becomes my next startup is a thing called Handroll.TV where my co-founder and CTO was in fact the digital CTO of Kodak Motion Picture at the time, so 15-plus years later. Donna’s awesome.
Andrew: Handroll.TV was going to be your next startup. I remember you launched it not too long ago.
Scott: It may be. Marshall over at ReadWriteWeb, who was kind enough to write about it. . . Right now, it’s a project. I would love it to become a real startup. We were all emotionally geared up for it to become a real startup. Looking from the outside, it’s some cool software that people will hopefully be using in a couple of months. It is not yet a business, so I have a hard time calling it a startup.
Andrew: I see. You just saw an idea, said, “Let’s give it a shot, let’s launch this thing and see where it goes.”
Scott: We’re about to put out the next major revision of it probably right after Labor Day. Of all the things people have done nicely with video, there’s actually been terrible Twitter integration with video for whatever reason. We think we have an interesting way of cracking that. There’s a number of people who have situational, social marketing needs that want to use many, many copies of it, put it on many, many webpages. It works out.
Scott: We’re very much at the “Golly, let’s figure out if we’re doing the right thing” stage.
Andrew: Okay. How much money would you spend on “Golly, let’s see if it’s the right thing” stage?
Scott: Right now, I’m calling in favors. Normally speaking, low five figures.
Andrew: Okay. It’s the investors who put in money for this?
Scott: No, no, no. In this case, me.
Scott: There’s a couple of paying client contracts that will more than make up for that in Q4, based on what we’re doing. The question is, does it go from. . . Is it just going to pay for itself back plus a little because we did the right thing for a couple of customers and do we really have something here?
Andrew: I see.
Scott: We’re sure we have a cool IT project that will make some money. I think we have a lot more. One needs to prove those sorts of things.
Andrew: Okay. All right. Let’s go back to the story. Kodak Entertainment helped you build a great network. What was next? Can you take me to one of the sexy startups? One that either flopped so badly it’s embarrassing but from to learn from or one that did so well that it helped open your eyes.
Scott: The only one that’s done startling well is MyBlogLog. Mashery is about to. With what Oren’s accomplishing there, they clearly will be, too. They’re killing it over there.
Andrew: Mashery is a. . . What is Mashery?
Scott: Mashery manages other people’s APIs.
Andrew: So it makes it easier. . .
Scott: Everyone from the Netflix Streaming API to the World Bank to a bunch of startups. They have a bunch of location APIs which they’re promoting this week, given the Facebook Places announcement.
Scott: Because why wouldn’t you? What turns out to happen in the web services and API world is that it’s very hard to make, to create a distribution channel that is secure and easy to manage and supports your business development nicely. You have all sorts of community management, CRM, and actual technical metering mentoring metrics problems. They solve the full breadth of those. That’s their hundred customers all pay them very nicely, in advance it turns out. It’s great.
The MyBlogLog thing was crazy good but it’s almost the most comical version of that. Eric and I live two different sides so it’s tough to think about how exactly he saw it. After being fired from Feedster, Josh Kopelman, who was the main investor there and wanted to keep going with me, turns out to be the earliest investor in Mashery, which is part of all that fallout, put this idea in my head for distributed social network, one that could get outside its own domain. This thing we think of as Facebook Connect and Twitteroff [SP] and all that, Josh had on the brain in 2005. He’s like that. He started bugging me about it and I didn’t know what to do about it. I was surfing around and I spotted the MyBlogLog code on Brad Feld’s site, probably January ’06. I reached out via LinkedIn and met Todd Merrick who had this little blog analytics utility. They’re friends from when they were 10. They’re both Florida NASA babies. All their parents worked at NASA. Said, “Wow, do you know what you could do with that?” Eventually, I suggested a couple of software prototypes which Todd and his guys did. They worked out pretty well and after a few iterations of that, I became CEO with a big chunk of it and what not. From the word go, we were kidding around internally that this would make the best sense for Yahoo!. We thought we were joking.
Andrew: It would make the best what?
Scott: Best sense for Yahoo!.
Andrew: Oh, okay.
Scott: The only acquirer were ever talked about internally was Yahoo! and we thought we were kidding around. It was from the first day that we ever had that conversation. We were all pretty much still bootstrapping all the way through. We had a term sheet for a really good VC. It wasn’t the greatest term sheet, but he’s good enough that you want to work with him and then Yahoo! floats in the door at Web 2 and soup to nuts, it was less than two weeks. Interrupting that VC and buying houses for all of us, frankly.
Andrew: You know what? Let’s dig into that story a little bit from your perspective. You get this idea from Josh who says to you, I’m calling him by his first name, you should be able to call him by his first name, I should just be calling him Mr. Kopelman.
Scott: I believe he would object.
Andrew: All right. In that case, I’m going to call him Josh, too. I’ll say I got permission from you, an old friend. He says to you, “I see social networks are out there. They’re growing. They’re very popular, but they’re isolated to their own little silos. We need to have a social network that works all over the Internet.” Plants the idea in your head. First question I have for that is why don’t you say to yourself, “Okay. I’ll launch this from scratch”? Why did you say, “I’m going to look out there and see who has some piece of infrastructure already built that I can partner with”?
Scott: This is a limitation of mine. I can’t create anything. I only synthesize.
Andrew: Why? In fact, I’ve read past bios of yours where you said, “I’m the third founder. I’m the third guy that the founders bring into the business.” Why not be the first? Why not be the launcher?
Scott: I’ve started doing that. I did that at Lookery. The first year of Lookery was great, it was just the second year we caused ourselves problems. Mashery, I was part of that. Certainly if Handroll makes it, I’m very determined that I’m the part of the turnover from HTML4 to HTML5.
Scott: Handroll is certainly where I’m putting all my time on that. I’m going to be part of that turnover somehow. I will be an actual co-founder in the truest sense of the term, in helping launch it and all that. But any influence I have on product ends up being one of synthesis, not one of creation. Based on what Josh had said, it was a problem that got stuck in my head, but I had no idea where to start. It didn’t even occur to me to even try and find a place to start. It occurred to me to just do a bunch of research and a bunch of almost random skimming around until somebody else’s idea occurred to me.
Andrew: With the expectation that someone else’s idea might occur to you and you’d take it to a developer and hand it to him and say, “Build me something like this”? Or with the expectation that you’d join the team? Or did it matter?
Scott: I had no expectation. I was out gathering data.
Scott: I knew that Josh had an ecology need correctly characterized, but I really had no idea what the implementation was going to be. I was just out trolling around and I rolled over a link on Brad Feld’s blog and up pops the little MyBlogLog, “Six clicks today.” I don’t know if you’ve ever seen that.
Andrew: Yeah. What you mean by that is MyBlogLog, for a long time, was just a log of the traffic, clicks in and out of a blog. If you moused over certain links on a blog that use MyBlogLog, you’d see how many clicks that link got today, which was cool for the audience to see and useful for the blogger to know where he was sending his audience.
Andrew: What was popular with them. That’s what you saw. What did that make you think when you saw that?
Scott: It made me think they were doing a database call from rollover.
Scott: I said, “If you can call up the number six, you can call up an entire social profile.” That hit me in the forehead and off I went. I reached out to them. I end up being much more interested in working with people who already have distribution than people who already have technology. Often it requires technology to get distribution, but distribution’s a lot harder to get.
Andrew: I see. Okay. What these guys had was access to blogs. They were already in their system.
Scott: They already had 9,000 bloggers.
Andrew: 9,000 bloggers?
Scott: Live, yeah.
Andrew: Wow. Okay. If you launch an idea. . .
Scott: Their network is already doing a million uniques a day.
Andrew: Okay. All right. If you were to launch an idea day one, you wouldn’t have 9,000 people, but if you partner up with them, you’ve got 9,000 bloggers, you’ve got the million, what was it, a day? A million impressions a day?
Scott: Actually, it was a million four uniques in a day. Coming through the system every day.
Andrew: Wow. Uniques. Okay.
Scott: They had not looked at it as a network, so they didn’t know, which was the first thing I asked them. I said, “Hey, can you count IP addresses across everyone you see every day? How many is it?” It was just a much greater number than they had expected. Every day to the next, the overlap was much lower than everyone expected. It was a million four the first day and a million new uniques the second day.
Andrew: I see.
Scott: Based on IP address, we weren’t getting traffic cookies. The third, fourth, and fifth days were still an extra million that we had never seen before. It turned out that people came back through the network twice a month, was what the number turned out to be. From there, we said, “Aha, this is actually nice reach. What do we do with this?” We kept going from there.
Scott: This, from my point of view, is synthesis, not creation.
Andrew: All right. I get that. These two guys have something great. You’ve just shown them that it was even better than they thought. How do you get to a place where you’re suddenly a partner with them? I think you had a third of the business is what Eric told me.
Scott: Slight exaggeration, but close enough.
Scott: If he wants to give me those extra percent in cash, that’d be fine.
Andrew: [laughs] My memory could be off, but it was essentially that. He didn’t say, “Hey, you’ll earn your shares in time.” He didn’t say, “I’ll give you a small piece, but we really control this business.” He called you a co-founder in public and he seemed to have treated you like that.
Scott: Indeed. I’m just needling him. Eventually, someone will watch this and tell him I’m needling him. What it was, I was talking to him and I suggested, because Eric, quite reasonably, said, “Who the heck are you?” I said, “It doesn’t matter. Please try coding this. It’ll take you a couple hours.” Todd said, “Yeah, not even.” Todd was CTO, Eric was head of product.
Todd either did it or got one of his guys to do it or whatever. Todd owns an entire development shop in Orlando, which provided us with a large number of technical resources whenever we needed and is still who I’m using for all my products. Todd did it. It worked spectacularly. We started seeing these millions of humans. They said, “Okay. What’s next?” I said, “We’ll try this next.” Whatever I said next, I think it was dropping third-party cookies, worked even better for a bunch of reasons. They said, “Great. What’s next?” I said, “You make me CEO and I get a big chunk of it.” That inspired several weeks of conversation, most of it civil.
Then by the end of March, we were off and running. I had made a bet, they had made a bet. Turns out we all made pretty good bets. When I got there, this was something they were doing one or two hours a week, it was not that which was most valuable to them. It was this side project which I said, “Wow, this is really important.” It had gone from paying for its own $200 in servers a month to something big. The decent sized chunk of equity that they were handing over to me wasn’t in an enterprise they had been slaving over for a year. It was over this thing that they had put up because it was bothering Eric and was running lights out with no humans on it until I said, “Hey. Please pay attention to this.”
Andrew: Got you.
Scott: It was pretty low risk from their point of view.
Andrew: Okay. They weren’t doing much with it, you were helping them improve it, you were giving it some guidance, and you were pushing to run the company, and then they said, “Okay. Let’s do it.”
Scott: Todd knew, actually, no one out here at the time, out in California. Eric was a bit better connected, but had lived back east for about four or five years. In terms of engaging with people in the Valley, I was the original pivot. Obviously now that they are both doing very well in that regard. Todd is, in fact, if you look at his Foursquare stream, checking in from First Round’s offices most days
Andrew: [laughs] Yeah, he’s doing well. Apparently now he’s, or Eric is an Angel investor, too, right?
Scott: Yeah. Todd as well.
Andrew: Didn’t know that. Okay.
Scott: Another thing I don’t do by the way.
Andrew: Another thing that you helped him with?
Scott: No. Another thing that I don’t do.
Scott: I don’t Angel.
Andrew: Why not?
Scott: I think it’s terrible economics.
Andrew: Why? Tell me about that. It seems like it, but you keep hearing about people get rich from. . .
Scott: It’s the exact same pro-rata issue where if the thing raises a ton of money, then the Angel investors can’t keep up. If you raise 200 grand in which I’m even an eighth. If I put in 25 out of your 200 and you sell it right then? Great. Fine. I don’t have any control over that. If, in fact, you raise three more rounds of financing, totalling 10 million bucks, I’m completely drowned out just like your original advisors. It’s the same issue all over again.
Andrew: I see.
Scott: I invest in my stuff and I actually do debt financing of startups. There’s a thing called receivables factoring, where if you sold something and the customer’s just going to pay longer than you have, you’ve got enough sold to pay all of your salaries, but the cash won’t show up in time, I’m very happy to bridge people in that regard. Then I know I’m dealing with a real sales person with a real invoice and real money and not just, “Oh, golly. We hope we’re developing the right thing.” There are a number of situations like that that I get involved in pretty frequently.
Andrew: There are enough entrepreneurs who are in a situation where they have money coming in the door, they have the invoices, it’s just not here yet and you’re going to cover them until it gets there?
Scott: It’s not what I do full-time, but it’s enough to be interesting.
Andrew: Huh. Okay.
Scott: More is better.
Andrew: More is what?
Scott: More is better for people watching this, right?
Andrew: I see someone in the audience, Anthony Serra [SP], is saying, “Calacanis does it all the time. He says, ‘I’ll give you $25,000 for 25% of the business.'” That’s different from the way most Angel investors work. They don’t get 25% of the business and they don’t deal with the kind of entrepreneurs who call in to him.
Scott: Correct. Jason has a lot more cash than I do, for one thing. First of all, making really loud oversimplified public statements is much more important to Jason than it is to me.
Andrew: I see.
Scott: Second of all, I’d like to see a list of people who have actually taken him up on that. I probably already have. It’s written here on the table in front of me.
Scott: Also, he did a heck of a lot better with his AOL deal than we did with our Yahoo! deal. He’d accomplished more, so great, fine. He’d been killing himself with that thing for years. We were on MyBlogLog for 10 months.
Andrew: Yeah. That’s a huge turnaround. All right. At some point, I want to do a whole interview about the economics of Angel investing. If somebody out there, in fact, if you, Scott, know somebody who I could do an interview with about that, I’d love to set it up.
Scott: Sure. We can figure that out.
Andrew: All right. We’ll follow up. All right. So, you’re in there, you guys all decide to work on this business full-time, MyBlogLog. What’s the first big change that you make after you’re in there full-time?
Scott: This was not a management task. The way you phrased that was CEO coming in and trying to manage the thing properly. We weren’t big enough.
Andrew: I meant what was the first product enhancement that you made or what was the big change you made to the product itself?
Scott: Adding the faces.
Scott: This was the thing that got us all going. I said, “Look, all these cookies need to have faces.” After which, all you could do was get out of Eric’s way because once you put that statement in front of him, he knew what to do with it more than anyone else. The lucky part of the whole thing was that the widget that was everywhere for a while, looks sort of like the Facebook Connect widget does today. Todd and I thought the widget was a terrible idea. We thought it was all about the website and the widget, what a waste of time. Eric just beat us to death until we gave up and let him do what he wanted. He was completely right. That was all the value of the thing was that face widget that neither Todd nor I wanted.
Andrew: That widget was. . .
Scott: The faces are the people most recently on your site.
Andrew: Exactly. You go over to a blog like Fred Wilson’s blog and you suddenly see all the people who were on the website recently and then a big picture that said, “You click here to add your picture to it.” Of course, you click over and you go to MyBlogLog where you can add your picture. In the future, when you were on anyone else’s website, if they had that widget, you would show up the way that all those other people I saw on Fred Wilson’s site show up.
Andrew: If you guys were against that, what did you have in mind? What was your vision?
Scott: I was, on some level, repeating the mistake that Josh was complaining about, which is I was then trying to make sure all the faces were on a centralized website. It didn’t occur to me to actually break it up. It occurred to me to put out data sensors all over the web to enrich the centralized website, but actually distributing it in the way Josh was talking about was that widget. This is why you trust your product guy with product decisions. Hold on, I’ve got a three. I’ve got to tell him I’m going to be late.
Andrew: Ah, okay.
Scott: Because I’m late, we’ll plug a guy named Ravi Mishra, Athleague, which is a great little startup out of Boston.
Andrew: Cool. What do they do?
Scott: They basically do a bunch of lead gen for big sports brands by managing intramural sports leagues. Whether it’s college intramural or one of these after-work soccer game things, they end up running around, creating a bunch of easy ways to recruit players and manage them and schedule stuff. Reebok, for one, and a number of other smaller people can’t get enough of this.
Andrew: I see. Okay.
Scott: Ravi’s out of the same program at Penn that I am, though something like 15 years later. We talk every once in a while.
Andrew: Going back to MyBlogLog, that was the next thing you did. You started putting faces to all those hits that were being counted up on all the blogs that you guys worked with.
Andrew: You syndicated out through the widget. What’s the next thing?
Scott: The next thing was hold on with both hands as we went from 9,000 live sites to 50,000 within, I don’t know, three weeks of coming out of alpha. Two weeks after we were out of beta, we were sold. There wasn’t a lot. It was a couple of good product decisions, making sure the server stayed up, and then managing the lawyers properly. It’s a little boring as far as the storytelling is concerned on that end.
Andrew: How about this? You could have raised money, but you decided. . .
Scott: We had this one deal with this one very good guy, but generally speaking, I had not done a very good job of fundraising, which is why it was a crummy deal with a good guy as opposed to a good deal with him or whatever.
Andrew: Even though it was an investor who planted the idea in your head for this distributed social network?
Scott: Yeah. Josh hated it.
Scott: Josh was so sick of my working on blogging stuff. He had never said anything about what sorts of sites to distribute this around. It didn’t occur to him that it would have to be market-segment oriented, I don’t think. When it came back to blogging, right after the Feedster debacle and everything else, he’s like, “Oh, not blogging again. I’m very sick of this and I have options and I’m going to take them. No.” I felt bad, because I knew it was going very well, so I kept asking him. I made him pass on it four times. He was actually in the room when the Yahoo! guys got serious. It happened in his rented suite at Web 2, where the Mashery launch was going on and I wasn’t really supposed to be working on MyBlogLog at that moment. He pulled me aside and said, “I know those guys. You’re now talking to the right people. They’re really serious. If they don’t buy it, I’m investing.” Thanks Josh. Great.
Andrew: Why didn’t you, at that point, say, “Hey. Let’s make this thing bigger and then we’ll sell it to Yahoo! for more money later on. If you’re interested right now, let’s get together”?
Scott: Because pulling in your first decent chunk of cash should be everyone’s priority.
Andrew: I see. Okay.
Scott: There’s a talk I gave. . . You know what these Ignite talks are that Brady Forrest has put together all over the place?
Scott: I spoke at one of the early Ignite New Yorks and my point to every founder is get a little rich. It may only mean a couple hundred grand, but the difference between having made a little money and having made none, when it comes to dealing with investors on your subsequent ventures, is night and day. You’re negotiating from such a different position.
Andrew: Do you have an example of how life changed afterwards? After you got a little rich, as you said.
Scott: It’s just that if people offer me stupid deals, I’m never desperate enough to take them. The guys at Harvard Business School have very useful negotiating strategy classes. I was fortunate enough to be visiting a buddy and sat in on one. There’s a concept over there called “Best Alternative to a Negotiated Agreement.” Harvard people run around talking about BATNA all the time, as an acronym. Your best alternative gets so much better than when either you’re negotiating or you’re dead.
The problem with deals you shouldn’t have done isn’t the day after you’ve done them, it’s the 18 or 24 months you’re committed to seeing them through. You can’t get that time back. I have very particular beliefs of how the universe works, which there is no afterlife. I’m really focused on what happens with most of the minutes of my life. The idea of I got forced into a bad deal, so I have to spend the next two years fulfilling my commitments to these people drives me crazy. It also drives me crazy because I did spend most of the 1990s doing this in deals that I should have never signed, fulfilling my commitments to people. If I make a commitment, I fill it. It means I will go way out of my way to avoid making bad ones. It also means it’s much easier to not feel like you have to sign something stupid when you’ve got lunch money for years.
Andrew: What’s an example of an obligation you got into that you wouldn’t have otherwise? That you got into because you needed the money or you needed the deal.
Scott: The money we took, after Josh’s, into Feedster was clearly going to be a mess no matter how things turned out. I didn’t expect that I was going to be fired in the first board meeting after we closed the round, which is extreme. I’ve never heard of it before. Unfortunately, they fired me in the last five minutes of the meeting, not the first five, so I actually had to go through all the bullshit on the way. It was all that and no mercy either.
Andrew: They knew, going in to the meeting, that they were going to fire you. They still made you go through the whole thing, then they said, “All right. Goodbye.”
Scott: Pretty much, yeah.
Andrew: You close a round for a company that you started, and then they say goodbye.
Scott: I didn’t start Feedster. I was the third guy again.
Andrew: Oh, okay.
Scott: MyBlogLog’s probably my last time being the third guy. That was the, I don’t know, third or fourth or something. You’ve looked blankly at people for moments, button your lip, and walk out. I push things to the limit enough and done enough bad financing deals between, call it, 1994 and 2003. I’m pretty convinced that’s my last bad one. This was summer of 2003 this happened. I realized that leaving silently was going to pay dividends later no matter how things fell out. I just shut up, grabbed my bag, and left attempting not to stop or slam the door, which I have no idea if I succeeded at not stopping or slamming the door. It was certainly what I tried to do.
Andrew: Why’d they let you go?
Scott: I have to imagine the documents I signed covered that and I’m not going to go into it.
Scott: Not for any reason that I think was constructive to anybody. Obviously, I promised some things in the pitching of the business and there was no data as to whether or not I had succeeded at them because the money had been in the bank for four days. It wasn’t non-performance, there was no ethical issue, there was no whatever. The investor had his own reasons. The company operated for another two years after that before they pulled the plug. Case [??]. We had just caught up with Technorati on traffic. We were number two for a while, caught up with them on traffic and never saw the cap levels again after that month.
Andrew: Wow. You get to number one and they say goodbye and they’re never number one again afterwards.
Scott: I would hesitate to call us number one, but we had gotten to indistinguishable in size to Technorati.
Scott: They certainly were always the marketing leader and with the exception of that month, they were pretty much the far away traffic leader. They’re still going. They have raised a huge amount of money. Returning it will be difficult. By the time that rolled around, Feedster had raised three and Technorati had raised 15 or 20. They were different kinds of startups. Frequently, the number one guy raises a lot more money, cashes out bigger, and there’s number two that doesn’t raise as much, but the founders don’t do very differently. The extra money and the extra turns are venture capitalists.
In the demand aggregation side for publishers, there’s the Rubicon project and there’s PubMatic, and some guys in New York, AdMeld. AdMeld and PubMatic are going to end up raising a quarter of the money that Frank will over at Rubicon, but all the founders probably do about the same. The university endowments and pension funds will do a lot differently.
Andrew: Yeah. I see what you mean.
Scott: I can’t really get worked up emotionally on behalf of pension funds and endowments. Founders, sure.
Andrew: I’m dying to ask you about Lookery, too, but I know that we’ve gone way over on time. Do you have a couple of minutes to talk about Lookery?
Scott: Sure. I can stretch him out another 10.
Andrew: Okay. Let’s do that. What was the original idea for Lookery?
Scott: Hold on a second. Sorry. Let me. . .
Andrew: Go for it. I’m going to pour myself another Yerba mate. One of my last Yerba mates here in Buenos Aires. I don’t know how many more days I’ve got here, but it’s not many more. I’m sure I can find this in the U.S. Right, guys? Anyone know if I can find Yerba mate in the U.S.? Probably on Amazon. It seems like I can get everything from Amazon. If not them, then. . .
Scott: Turns out it’s going to be unavoidable. Sorry about that. The idea would be David Cancel and I reacted to the heat around the original Facebook platform by saying, “Wow. There’s no least common denominator advertising network for it. Golly, there’s got to be.” We stitched one together, bought some duct tape, and started brokering ads. Six months in, we were doing a billion ads a week with four people, David, me, Rex Dixon, and Todd Sawicki.
Scott: Started really building it out from there, raised financial rounds, whatever. The first Facebook redesign created that business, effectively. We kept trying to fix it. We could have sold. . . We ended up selling that part of the business in November. If we sold it in June or July, we would have sold it for a lot more. We attempted to pivot from there, unsuccessfully. The thing we tried to pivot to, Demdex and a number of other people are starting to do a pretty good job of but won’t be a real business until next year, the year after, and once again that would have just made the VCs money, not any of the Angels or any of the early employees. I had no commitments to VCs I hadn’t taken money from, so we shut it down.
Andrew: What was the original idea and how did you stitch it together?
Scott: The original idea was golly, we know how to put together an ad network.
Andrew: Right. How’d you stitch that together? How would you get an ad network so big up so quickly?
Scott: I knew a bunch of the publishers.
Scott: We took the open-source ad server, repackaged it to run on Amazon web services, which was all David. It drove him nuts but he did a brilliant job. Started calling other ad networks that wanted volume but didn’t want. . . No one quite knew what Facebook was like at the apps level. Everyone was scared of it. We were just either without shame or without fear or without something. We took responsibility for all the craziness that was going to go on in the Facebook apps world and brokered a lot of ads. We had some direct campaigns but not very many at all.
Scott: Remnant network all the way. It was all running on Amazon. One customer service guy, one guy who really understood advertising who’s now the number two at ICanHazCheezburger, me, and David. That was it.
Andrew: Then Facebook makes that resdesign. Why did that redesign impact your business?
Scott: Because it killed the volume of all the crappiest publishers who were, of course, our key publishers.
Andrew: I see. I saw the speech you gave at the time where you said the platform is dead. Was the platform. . .
Scott: It turns out I should have said, “Except for gaming.”
Scott: I’m not a gaming guy. I don’t understand games, clearly. Zynga et al had done amazingly well over there, but games were almost, they weren’t nonexistent over there, but they were a relatively small part of the traffic. Games in the way you think of Farmville and what not. The correct statement being, “Everything but games are dead,” which was everything I knew.
[baby crying] We’ve got young twins and one of them’s upset. Sorry about that. I started this during nap time, but then we ran over. They killed off our core publishers.
Andrew: Before that, from what I remember, you could just see all the different apps that people created on Facebook everywhere. You would see it in your news feed. You’d see it on people’s walls. Today, when I go in, I can barely find an app, it’s only the stuff that’s like Mob Wars that I come across or Farmville.
Scott: Only stuff that’s paying them a lot in advertising.
Scott: You’re seeing the [??].
Andrew: Can you talk a little bit about the pivot?
Scott: Sure. We believe that data targeting ads were going to become much bigger. So far, so good. We believed that the demographic targeting of it was a flow hanging through. We went and we negotiated with a bunch of smaller social networks to get demographic data, age, gender, location, this kind of thing, to be able to use on a cookie-driven system anywhere. All that was somewhat correct before 2011. The way the business is actually shaping up, it turns out to be people selling data into the demand-side platforms, the DSPs. What they’re starting to call server-to-server data is the jargon in that little world. That’s what we were doing and we were right. I hadn’t consulted Oren tightly enough, so I was too early.
Andrew: [laughs] I did talk to David about that and we talked about how today that’s starting to grow. I asked if if he would have stuck it out, would there have been a business for Lookery? Would Lookery had been a leader in this space? He seemed to think that yes, maybe you guys should have stuck it out longer. What do you think?
Scott: We certainly would have had a shot. David’s a very friendly, optimistic guy, both friendlier and more optimistic than I am. To the extent that really came push to shove, because he has also made some investor commitments over time that have not treated him well. He understands and has. . . We didn’t know each other then, but we have a shared history in that regard. Should we have stuck it out? Only if we didn’t have to sign the financing deals that neither he or I would sign. If somehow there was this magical sticking it out process that didn’t require us paying a bunch of employees and this and that. The things we would have probably done differently that would have changed things a lot is the day we pivoted, we should have probably been a two- or three-person company again. Instead, we went from 11 to 8. We should have gone from 11 to two or three. The other seven people are some of the best people I’ve worked with. Thinking about it is shitty even in retrospect. Includes Jay who runs Shareaholic now, which is. . . Have you talked to Jay?
Andrew: No, I’ve got to interview him too.
Scott: I can introduce you to Jay. Half of the rest of them are at Performable.
Andrew: Working with David [??].
Scott: Working with David because they were worth working with four times nevermind two, and Todd, who’s over at ICanHazCheezburger. Great folks, but we shouldn’t have been spending money on them when we didn’t know exactly what was going on. If we had gone down to two or three and really worked it from there, would we have lasted? Yeah, we might. That would be the magical oh, if we had, could we have made the current financing last long enough, where our existing investors and ourselves wouldn’t have been completely drowned out and therefore been worth continuing.
Andrew: I see.
Scott: We didn’t. I have to imagine we both would again.
Andrew: This was pretty public. TechCrunch put you in the dead pool. People talked aabout how this guy who had done so well before suddenly had this company that closed up. How did that feel? Why did you overcome that and still make the right decision to close the business?
Scott: First of all, the dead pool TechCrunch thing. . . PR’s a two-edged sword. Even in, here we are in blogging era, one can sort of manage these things. I, in fact, had been chatting with Eric about our shut down announcements. By making sure he was the one who had it, he let me work with him on it a little bit. That thing was published after five p.m. on a Friday, Pacific, in August. It turned out to not matter, people talk about it enough, whatever. I did an okay job of bearing it. I was part of the process on how it was put out. I can get attention to the things I’m working on which means there’s going to be attention on them and then I’ve just resolved the idea that goods news isn’t the only kind that goes out.
Andrew: It’s painful when you’re well-known to say, “Hey. This didn’t work out. This failed.”
Scott: You’re projecting on me.
Andrew: Actually, I am. It would be for me. You’re right. It’s not for you, why?
Scott: You brought up reputation already.
Scott: I didn’t.
Andrew: What do you mean?
Scott: You made the comment about, earlier when we were talking about my father, this and that, and the other thing, about reputation. It would have never occurred to me in those terms. I care about the commitments I make and I care about having control in my life. I am satisfied. In Lookery, I fulfilled my commitments to the best of my ability. I treated everyone well who I could treat well. I didn’t screw up how I want my life to be. Okay. It’s the next day.
Andrew: I see. The other part, the part that would matter to me, the part about losing face, losing reputation, having people doubt the next project, that doesn’t influence you at all?
Scott: No, largely because people have such incredibly short memories. A number of people retweeted, including Josh interestingly, retweeted something about all that matters is making a graceful exit. That’s all people will remember in your legacy.
Andrew: Uh huh.
Scott: I couldn’t, fast enough, go find the picture of Dennis Crowley making a complete ass of himself on the way out of Google. He was about as ungraceful as humanly possible on the way out of Google, seems not to have effectively affected the man’s overall legacy or reputation much.
Andrew: In the moment, you can feel that way because in the moment, I can intellectualize it. Before going to be, I can say to myself, “Hey, you know what? Dennis Crowley is a good example of how you can leave ungracefully and still end up on top later on. I’m seeing Scott Rafer, he doesn’t care as much. I should relax.” In the moment, I can’t. In the moment, I’m saying, “No. Scott Rafer’s going to see this. He’s going to say, ‘Here’s the guy who interviewed me who’s now a big failure.’ And all these other people are going to laugh.” That’s what I would think. None of that occurs to you? None of that is. . . No?
Scott: I don’t know. I don’t know how much time you spent in northern California, but that would make you a failure is a foreign concept to San Francisco Bay Area.
Andrew: Because the culture is so open to trying and failing and giving people another shot that they just overlook, they don’t even consider it a failure. It’s a bump on the road.
Andrew: I see.
Scott: There are ways of doing it really badly. There are people that have obviously wasted money in stupid ways. On Lookery, even after the investors’ money ran out, I put in a bit after that in order to try to keep the thing going. I went above and beyond to try to make it work, still didn’t work, okay.
Andrew: I see. No beating myself up, no stretching this out forever, no a painful three years where it’s just me in a closet saying, “I’m going to make this work.” It didn’t work out, I’ll have another, and you’ve had a dozen since then, probably less.
Scott: Certainly less, but thank you. The people involved, among other things, David and I made sure we sent out bad news in a timely way.
Andrew: I see.
Scott: There were no surprises. When we’d peak and we’re going in the wrong direction, people knew it within a month. Send monthly letters or whatever you do. There was none of this, “Golly, you said things were going great two weeks ago.” It’s like, “No, I didn’t.” You can manage things that way. I’ve been out there doing this kind of stuff for close to 20 years now. We screwed up with 3 million bucks of people’s money. The last two of the three that we raised basically for the pivot. The first million we did well by and then the rules changed, shit happens. I can feel okay about that. I’m not psyched. I’m not excited that it worked out that way.
It was a mourning process that lasted a few weeks and the mourning process was about my attachments to the people, my attachment to what we were trying to accomplish and the commitments that I hadn’t been able to make good on financially. I ethically made good on them, but if I hadn’t been able to make good on my financial commitments to the investors. There’s a mourning process around that but none of it was about, “Oh, golly. I’m a loser. I should roll up my tent and go find a corporate job.” Not how I’m wired.
Andrew: That’s a healthy attitude. I’m going to remember this the next time I have some kind of issue, some kind of setback and it’s freaking me out. I’m going to remember this part of the interview. I’m going to also remember one other thing. First of all, thank you for doing this interview, but here’s another thing. You had to cancel at the last minute the first interview you and I set up. Instead of just canceling and saying, “Screw it. Andrew will figure it out.” You helped me out. You got me David Cancel, one of my best interviewees.
Scott: He’s a magical guy.
Andrew: You did it with minutes. No kidding. I swear I spent, I think, the first half of the interview just telling him how grateful to you I was that you introduced me. Just this morning, I saw Kareem Mayan tweeting out how much he loved David Cancel’s interview. Really, thank you for being such a mench. Thank you for doing this interview. Thank you for being such a mench in general.
Scott: Of course. When you get back north of the Equator, let me know.
Andrew: You bet. We’ll have a drink. Count me as one of the people who owe you a drink.
Scott: Indeed. See you. Bye bye.
Andrew: All right. Thank you all for watching. Bye.