When Startups Fail: Christopher Herot Talks Frankly About Zingdom’s Shutdown

12/17/07Follow @wroush

Part of the reason high-tech entrepreneurs are attracted to Silicon Valley is the perception that it’s a place where risk-taking is encouraged. West Coast venture capital firms not only excuse failure, so this perception goes, but celebrate it: if a high-tech entrepreneur doesn’t have a couple of tanked companies on his resume, he probably wasn’t being innovative enough. By contrast, the perception about investors in New England is that they penalize failure, which therefore becomes a taboo subject.

Both perceptions are probably exaggerations. But whereas West Coast companies come and go like the butterflies in Santa Cruz, it’s still unusual to hear any of the details when an East Coast startup closes down. That’s why a blog post last week by Christopher Herot has been attracting so much attention.

Herot was co-founder and chief technology officer of Lexington, MA-based Applied Messaging, which later became Convoq, which later became Zingdom. Founded in 2002, the company made Web-based business conferencing software that competed (unsuccessfully) with WebEx, and later released a consumer-oriented click-to-call system for initiating anonymous phone calls or instant-messaging sessions from web pages on networking sites, dating sites, or classified-ad sites.

On December 9, Herot posted an obituary of sorts for Zingdom, explaining that despite the project strategy adjustments and three rounds of capital over five years—Bay Partners, North Bridge Venture Partners, and Polaris Venture Partners put in about $30 million altogether, according to PE Hub—the company “never achieved the traction that would have provided the necessary return on capital” and was closing its doors. Herot’s account was remarkably frank and unvarnished, lamenting, among other things, that the company had spent too much time perfecting software features that users didn’t want.

Given that Herot didn’t seem to have any hangups about telling Zingdom’s story, I called him up last Thursday to see what other insights he could share into the rarely-discussed process of coming to grips with the failure of a product—or a company. Here’s the writeup of our conversation.

Xconomy: That was a very unusual piece you posted. We don’t hear much about that side of the startup process—when things don’t turn out as the founders or investors envisioned.

Christopher Herot, co-founder and CTO of Zingdom, formerly ConvoqChristopher Herot: They say success has many fathers and failure has none. There are always articles about the miracle of somebody starting a company in his garage and selling it three weeks later for a billion dollars. But there’s very little written about the other outcomes that can happen.

X: What did you hope to achieve by telling the story?

CH: I guess there were a few reasons for writing the post. One was that it was just kind of therapeutic. Also, I was thinking that somebody should write the definitive story before it all evaporated from our memories. There is also a very practical reason: The company is winding down and I’m helping the investors sell off the IP and helping the engineers find homes. In the old days, you started making phone calls. Now you just write a blog post and everybody knows about it immediately and responds appropriately. I’ve already gotten quite a few inquiries about both the IP and the engineers.

X: How common do you think it is for technology startups to end this way?

CH: Let me put it this way. There’s this myth that everybody makes money in Las Vegas, because when your friends go there, there are only two outcomes—either they come back and tell you how much money they made, or … Next Page »

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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  • http://www.innovators-network.org Anthony Kuhn

    Wade:

    This is a great example of transparency, and reminds me of another startup’s efforts to tell the whole story. Redfin.com, a real-estate startup, revealed the costs of their startup efforts to the world recently, providing many nascent business startups a chance to see the cold, hard numbers instead of hype and obsfucation.

    Thank you for this excellent interview. I cross-posted in my blog at the Innovators Network in hopes that some of my readership will visit your sight for more revelations!

    Best wishes for the holidays,

    Anthony Kuhn
    Innovators Network

  • http://www.commonangels.com James Geshwiler

    Chris & Wade,

    Thanks for sharing the real story and the reflections on about how to build a company. Chris’ list of lessons learned at the end of the blog, in particular, is excellent advice for entrepreneurs, new and old. I hope the sober message is actually encouraging and helps others build better companies.

    Sincerely,

    James Geshwiler
    Managing Director, CommonAngels

  • http://www.bain.com Robin Buchanan

    Here’s another example of technologists building a business solution in a vacuum…Herot and Zingdom’s key assumption was flawed:: “”instant messaging and “presence” would be a key thing that people would use in business applications””

    Anyone in the corporate world would tell you that adoption rates for zingdom’s solution would be slow to nil because that (zingdom’s solution) is NOT how business users communicate (again a failure in the understanding of the business domain)…This was designed to be a biz solution, NOT building font technology.

    The company claims to have used extreme and agile development practices, yet failed the fundamental step of capturing biz requirements. Herot reminisces that he approved feature requests which he knew were “lipstick on a pig”, but his failure to prioritize requirements (which includes rejecting useless features) shows lack of leadership. Ultimately the investors pays for this mistake by not getting any return on their capital.

    The VC’s should have insisted on the market validating the biz’s critical assumption before continuing to pump $30M into a venture and the company iterating its product strategy as if they were nightly builds. Ultimately if the VCs do not take action, the market always does it by not accepting the solution.

  • Chris A

    While some might espouse this as just desserts, I would thank Mr. Herot for his honest and frank conversation. There is little offerings of how a business fails, except what I have read above.

    What I would have offered was a more immediate marketing of there system. Followed by a slow build up of embedded corporate partners. I hope whatever Mr Herot’s next venture brings he succeeds.

    When any of my friends have embarked on a career in software, some engineers some artists, they have all experienced what I call the silicon valley triangle. A project heads out never to…

    That will not happen with Zingdom (Mr. Herot’s IP), it will pop up here and there, in this and that. Remember Gary Kildall, we will always see c: etc. in the background.

    I too hope to someday find “angels” to fund my visions. Until then the lowest hanging fruit of the VCs will more than likely succeed due availability and pervasiveness.

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