startups, VC, failure
When Startups Fail: Christopher Herot Talks Frankly About Zingdom’s Shutdown
Wade Roush 12/17/07
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they don’t tell you anything. Basically, there is a very small number of companies that go public. The vast majority of exits are acquisitions of some sort or another. And what you never see, unless it’s a really big acquisition by a public company, is what that acquisition really looked like.
Sometimes it’s really good and all of a sudden there are people building vacation houses in Stowe. In other cases, if you peel back the layers, there really isn’t a lot of money involved, but it’s all tied up nicely in a bow and there’s a press release where everybody congratulates the founder, and by the time you tie up all the equity, the employees may not see anything. But that’s less ignominious that saying “It didn’t work out and we’re not doing it anymore.”
X: But you didn’t just give up at Zingdom. You changed your product strategy several times along the way.
CH: Yeah. Looking back, maybe we should have bailed after the second year instead of spending five years on it. But very few companies that succeed are doing the same thing at the time of their successful exit as they were doing when they started. At every twist in the road, we thought we had found a new strategy that was going to make us successful. The possibility that the basic premise is wrong and that you’re just putting lipstick on a pig—you only know those things in hindsight.
X: Are you saying that you think the basic idea at Convoq and Zingdom was wrong?
CH: One of the premises of the company was that instant messaging and “presence” would be a key thing that people would use in business applications. And I challenge you to point to any company in the last five years that has successfully exploited that. It’s one of these things that is still ahead of its time. We came up with all kinds of cool things that you could build around instant messaging and presence, but in hindsight it was a leap of faith, a rather large leap, to try to turn that into a business.
It’s like video conferencing, which goes all the way back to the 1964 New York World’s Fair, where AT&T showed the Picture Phone. Every five years people “discover” video conferencing, but there is no data I’ve seen yet that shows that people actually want to see each other on video during phone calls. We tried to do that at Convoq because the technology of webcams and Flash made it possible. But I’ve never seen anybody turn that into a business.
X: In your blog, you warn people at East Coast startups that if they’re working on a consumer product, they’d better pay close attention to what their competitors are doing on the West Coast. Did you feel hobbled by being a consumer-oriented software company on the East Coast?
CH: I don’t know whether I would say we were hobbled. But I made a point of getting out to the West Coast every month or two—not just to go to these big expensive conferences like D where you can hang out with Walt Mossberg, but just to go to these Silicon Valley lunches where some high-tech company will feed you pizza or hot dogs or manicotti for free. Your typical geek-fest. They’re unabashed opportunities for these companies to recruit engineers, but you also end up in conversations about companies that you never would have known were getting started, what the going rate is for engineers, and how much people are paying for bandwidth. I think we’re starting to see more of that on the East Coast, but it happens more naturally in the Valley.
X: In your post you rue the fact that when you started out, you didn’t know about things like agile software development methods. If you were starting over now with Zingdom, what would you do differently?
CH: The whole world has changed. Five years ago, the development world was still thinking in terms of, “Let’s make sure we have it all figured out before we start building it, because it’s really expensive to make changes once you get the software built.” The alternative, extreme programming or agile programming, was all about embracing the fact that you are going to have to iterate, as opposed to denying it.
We did make some technology decisions that, in hindsight, were ahead of their time, such as building things in Flash. But five years ago, Flash was a horrifically difficult development environment. It was great for making animations, but trying to design a software application with menus and dialog boxes was unbelievably painful. Adobe eventually realized that and …Next Page »
Wade Roush is Xconomy's chief correspondent. You can e-mail him at wroush@xconomy.com, call him at (617) 252-7323, or follow him on Twitter at http://twitter.com/wroush.
12/17/07 6:26 pm
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
12/18/07 8:49 pm
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
2/17/08 12:57 pm
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.
2/27/08 11:05 pm
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.