Restarting a StartUp

I have been at my new company for 4 months and that’s a good time to reflect on what’s happened and what we might be able to learn about startups from this experience.   We’ve pruned the team, secured new capital, improved our board, hired new blood, and changed the company name from Poptok to AnyClip.  Why?

1.  Strategy matters.  When I got to Poptok the company was focused on creating an emoticons company out of movie clips.  Maybe this is an amazing idea, but betting a whole company on it?  There were many risk factors including a violation of one of my favorite rules — the Penchina Maxim.  Gil Penchina (CEO of Wikia, former Ebay Executive) once told me that Internet products should improve the user experiences of an already established widespread consumer behavior.

Was Poptok solving a consumer problem?  There is little data to suggest that consumers want to send clips as emoticons. It’s an interesting hunch, but unproven.   On the other hand, the newly created AnyClip solves two huge problems.  First, people are watching billions of movie scenes on YouTube annually.  The quality of these clips is consistently inconsistent.  Many of these scenes are shot with handheld cameras that are filming a television.  We are betting that consumers actually care about quality.  That’s a bet I’m willing to make.

The second problem AnyClip solves is the inefficiency of the clip marketplace.  Poptok found out that licensing movie clips is an expensive, cumbersome process.  And guess what? Because the process is painful and economically inefficient the market for movie moments is small.  But the movie industry is huge ($40 bn/year) and people watch movie moments all over the Internet right now with no measurable value creation tranferring to the owners or creators of this content.

2.  Enter with a Hypothesis.  During my discussions with Nate Westheimer before we arrived at what would become AnyClip we developed a hypothesis about what the consumer wanted.  When we started working we set about validating our theories.    We knew what we wanted to do, but we were not sure it was possible for many reasons including the legal landscape in the movie industry.   We were moving forward immediately.  This is not always possible, but Nate and I did considerable unpaid work trying to decide if this was an interesting opportunity for us.  The results of that work gave us confidence to join the company and enabled AnyClip to have new management that hit the ground running.

3.  Embrace DNA Change.  There were some dedicated, well-intentioned, experienced  people in charge of managing the team at PopTok.  But unfortunately they had gone through cycles of executive change and disappointment.  Morale was low.  Cynicism about a variety of issues was palpable as was a dangerous lowering of standards for evaluating success.   Early in my tenure, I was concerned about this teamearly,  but I took 6 weeks to make an informed decision, and 2 weeks to prepare for the changes.  This is never fun, but it has proven to be a crucial decision because it took the friction away from the massive changes we were trying to make.

4.  Earn Your Team’s Trust.  Lots of managers take trust for granted and I did this all the time earlier in my career.  employees of companies that change directions every couple of months start to doubt management.  This is very understandable.  Realize that words are parsed and people don’t automatically believe you will do what you say you will do.  We have a very fine team now.  They need to know that we are in the trenches with them if we expect them to join us for each AnyClip battle.   More than anything this means be transparent, consistent, and fair in all of your interactions with your team.

5.  Recognize that you will never fully understand what really happened before you arrived.  One of the challenges of the turnaround is that you inherit a series of issues  that must be addressed.  Contractual and organzational  baggage created by your predecessors transfers to new management.  PopTok did not have a particularly productive relationship with its Hollywood partners, but AnyClip must have an intimate real value-added partnership.  Of course for Hollywood dealmakers, Poptok and AnyClip are the same and a name change doesn’t obscure that the shareholders, legal agreements and corporate history all remain the same.  This is the baggage that needs to be addressed and put to rest.

6.  Walk before you run, but make sure you run quickly.  When taking on a restart, the first thing you have to do is stabilize.  As the great entrepreneur and my friend  Howard Tullman taught me a decade ago, “there is only one crime in a startup and that’s running out of cash.”  We cut the burn by nearly 50% at AnyClip so we are walking, but time is of the essence.

AnyClip needs to demonstrate significant vaule to content owners, consumers, and application developers this fall.   We will be presenting a massive transition from the old to the new in September only six months after we arrived and only 4 months after we started building software.  It’s as if this venture financed company 15 person operation was operating at the speed of a Y-Combinator seed stage startup.  Maintaining this velocity with productive, thoughtful improvements will probably determine whether this turnaround succeeds.