This transcription belongs to Episode #24: Andrew Kemendo’s dramatic yet insightful tale that taught us and Our Beloved Host, Morgan Friedman, a lot about client management. Please watch the complete episode here!
Morgan (Host): Hey everyone! Welcome to the latest episode of client horror stories. Excited to have your mentor we’re chatting today. He has a great story and I want to know how it ends. Let’s jump right in!
Andrew (Interviewee): Hey Morgan! Good to see you again. Awesome.
Morgan (Host): Same here!
Andrew (Interviewee): Well if you want, I can just launch right into it. And kind of
Morgan (Host): My favorite podcasts are the ones that skip all the BS and go right to the interesting, juicy bits.
Andrew (Interviewee): And so yeah, let’s just jump into it. So it’s 2021 to about five– Yeah, about almost five and a half, almost six years ago. I was running as CEO and founder of a company called Pair and what we did was, we have a suite of tools for computer vision that other people could use to build augmented reality experiences.
Augmented reality, if you’re not familiar, it’s where you’re able to view objects like they’re real, in real life, using a phone, sometimes you use a headset like Microsoft HoloLens or some of the other ones that have come out. But at the end of the day, you’re trying to create experiences for people to the virtual things like they’re real and interact with them. And the primary application that we built was for home furnishings.
So back in 2014 – 2015, there weren’t a lot of people or there weren’t a lot of apps out there at least that had really high quality ability to try furniture, for example, in your home for a chair or you know, a lamp or something like that. And so, as part of our business goals, not only did we want to sell, we really want to sell our tools, but we had to have a hero of story, we had kind of a have a hero application that allows people to see what it’s all about. As well as, use it if you’re not interested in necessarily building it, if you’re just a consumer and you want to use augmented reality, we had the best experience for AR and home furnishings.
And so as part of that, obviously, back in 2015- 2016, there’s a lot of flurry of activity around this space, around the augmented reality in the home space. We were approached at the end of 2015 from a top 30 retail company so fortune 30. Absolutely massive company. And they said, “ Hey, look, we want to do something with augmented reality. We’d love to get a proposal from you to say how would we build an augmented reality app for us and, you know, do a demo, not just a demonstration, but kind of like a beta test and roll it out.”
Morgan (Host): I want to chime in there that knowing only this, like already. Yellow Flag goes out from my mind because when there’s a negotiation and the power level is so disproportionate like it’s hard to work to come out on top.
Andrew (Interviewee): 100% And you know, that’s something that people should take away. And if you’re new to the startup game, or just starting your company or even if you’re a couple of years into your company, something that people may not realize is that it’s really easy for giant companies or government, even, to completely dominate all of your time as a small company. And take 100% of your bandwidth on just them, just one project. And so that’s something to watch out for.
It’s often really hard to say no to a big company that wants to do something because their whole exposure that you get everything else that would come with it. Maybe it’s an acquisition, possibly, right, who knows. Right? And so there’s a lot of really tempting reasons to do that. But it’s something you really have to evaluate whether or not it’s the direction your company needs to go.
Morgan (Host): Totally
Andrew (Interviewee): It may be and still might not work out. So that’s a good point. Anyway, so we were approached by them what they were asking for, we said, well, you know, we’ve actually gone slightly different direction. And the reason we didn’t suggest building a new app is because so many people already have apps they don’t want to download a new app, we’d actually see better uptake. If we did a web-based, capable, you know how to web based capability as opposed to making people build a new app, or I’m sorry, download a new app.
So that’s what we propose back to them. They said here we’ll make your web-based experience, it’s not going to be augmented reality perfectly on your phone, like you’d be a little walk around it. But it would be something similar in the sense that you could take a picture of your living room or kitchen or whatever. And we would reconstruct on our back end, like a kind of a 3d mesh of the space based on one image which is a huge breakthrough at the time. In fact, still, it’s kind of it’s pretty hard to do.
But what that would allow you to do is you take that picture and then on your phone, you can choose the objects that you want to see in this space without having to walk around it. You can be sitting down which we found convenient for people .
Morgan (Host): Amazing.
Andrew (Interviewee): People didn’t want to stand up and walk around. That was a big thing that we found. They want to sit and do something. And so we were offering experience that was web-based, they didn’t have to download anything. They could stay sitting at you know they could play with it a lot longer than like a more fully featured application. And they love that. This is great. We want to do it.
So we’d beat out everybody else which at the time what we heard was there was about 20 other companies they approached. These are all the bigger, biggest players that were competing. And so we were excited. So we won that. It wasn’t a very big deal in terms of money. It was less it was you know, six figures but you know in the single six figures and so we said great, awesome, let’s get started.
Now important to understand also, we didn’t actually have a production level version of this ready yet, like it was this was a proposal, in which case, we knew kind of how we will build it but we hadn’t built one yet to know whether it was before. And so it’s still kind of experimental, which is already– so now you’re compounding right, you’re compounding complexity, big company with small company, unproven technology. And by the way, this is something that we told them it wasn’t like one of these. “Oh yeah, we’ve got perfect. It works all the time. Here’s all these examples.” In fact, what we said was, this is pretty experimental, which is why we did charge a ton of money for it, right? Because we wanted to see if it would actually work. So they agreed to that. Myself and my team flew out to—
Morgan (Host): I just wanted to mention another yellow flag. When you share something experimental with anyone, client or not, even with a warning, it’s experimental might break, they’re still disappointed and frustrated. So subconsciously, your production level expectations, no matter how big the warning signs are.
Andrew (Interviewee): Absolutely, yeah, that is a great point. Because especially with very large, non-technical groups that are involved. They don’t necessarily understand the concept of iteration and they don’t necessarily understand how things can progress. When so they’re so exactly to your point. They’re expecting works perfectly, immediately right? Some kind of magic bullet stuff. And so luckily, the people that we were working with, let’s say half of them understood that the other half, kind of they were just not technical, so it would just fill up.
So fast forward, you know, two months after we won the deal, myself, my whole team, we flew out to meet their corporate headquarters, big giant, to do it. It was great. They hosted us we had a really great meeting, you know, set of meetings, talked with all those stakeholders, their VPs and SVPs. And everybody’s very excited. So we kicked it off. Everything was going great.
As part of the contract, the first deliverable was basically six months from that time, and it was going to be basically a demonstration to show that we were on track and doing what we’re supposed to be doing. And integrated with the whole corporate, their corporate team and their corporate IT and all that kind of stuff. So all that had to happen, you know four to six months.
About—Let’s call it 4 months in, I get a call from one of the VPS who’s kind of looking out for the project, and we’ve had fairly regular conversations at this point every other week, regular updates, things like that. So I get this call and says, “Hey, I just heard from my bosses.” Who knows if that’s true, but they heard from their bosses. “Well, we really want to see a demo before we go any further.” And it was kind of out of the blue. We had been having good conversations, but it just seemed like it was kind of an odd thing and it also wasn’t in the contract.
And so I said “Okay, let me take a look at what we’ve got so far. And let me look at the contract and see what that is and I’ll get back to you.” About I think a day and a half later I got back and I said, “Look, we’re not quite ready to show you what we’ve got and the deliverable date for the demo was like two months away. So you know, we’re quite a bit away from what you would expect.” And basically, the response was, you know, expletive-filled and we will cancel this contract and put you out of business if you don’t give us this demo that was not in the contract two months ahead of time.
Morgan (Host): Okay, all right. Nuclear bomb.
Andrew (Interviewee): Start from zero from like, Hey, thanks, but maybe we can just do the contract and it’s like Nah, we’ll blow it up. Wow.
Morgan (Host): Question. Usually, nuclear bombs don’t happen out of the loop sometimes, but often they’re like, their cracks you see before are there any cracks or clues you saw before this happened?
Andrew (Interviewee): That was the most so odd about it to me, at least because… I mean, I’m consistently looking for those cracks, right? Just to make sure that we’re not missing something. Our communication was good, that we have, you know, we’re on timelines and that we’re doing your duty to do.
And so I think what it came down to in that case was this is somebody who doesn’t hear though often. They also don’t get a lot of pushback often. And they’re fairly high up and it’s one of the largest corporations on the planet. And so they just assume that I work for them, as opposed to I’m doing a contract for them. And there’s contractual arrangements to it.
And I assume, and I… you know, obviously, we didn’t retro this individual. But yeah. And actually, you know, jumping way ahead, he loved us at the end of the day, but you know, so I think it’s a personality thing, and maybe he didn’t see it as sort of unclear because they deal with this all the time.
For me, this is an existential thing. He saw it as just a day in the life right? And that’s another big point here for people who are small companies working with giant companies. They’ll run over you like it’s another day and not even think twice.
Morgan (Host): So my final comment building on that is, is there’s a type of person who just gets angry as a method to get people to do things. And it actually doesn’t mean he’s angry, said differently successful bureaucrats in big companies are often good actors. And like you need a call, you need to act angry so you can get this, you act angry.
So him being expletive-filled like that didn’t necessarily mean he was just that angry. Maybe he maybe he thought okay, this guy’s really nice. And this is what I need to do to get Andrew and team Pair moving fast.
Andrew (Interviewee): Yeah. Well, I mean, effectively, it functionally worked. (laughs)
Morgan (Host): It worked? (laughs)
Andrew (Interviewee): Because at the end of the day, you know, like I said, you’re in a position as a startup founder especially if you’re not like a crazy growth rate, or your revenue rate is such that you can tell everybody know, unless you tell everybody now and it won’t be unless you’re at that position. You kind of have to deal with some of the stuff to some degree.
So anyway, so after that conversation, I went back to the team, I said, Look, we’re basically being crunched right now by our client, and we need to figure something out. We need to figure out how to, you know, show what we’re on track with because, you know, I can give them all the engineering documents, I can show them everything that we’ve been doing, or Jira, or Trello boards and everything else like that. And it wouldn’t make a difference because they can’t interpret, right? They don’t necessarily.
But I said, so let’s brainstorm real fast how we’re going to do this. And, you know, my chief scientist at the time said, Well, we just can’t. It’s just not— it’s not possible, right? It’s just impossible. And is it okay, well, I understand that it’s not possible to show the final thing, but is there a way we can give an example of the experience that they will have. Because I think that’s really all they’re looking for.
They don’t care that there are particular two-three servers, the first one which processes the image for depth, the second one processes that for flame detection, the third one actually puts everything together with sensor fusion, they don’t care about that. Like they don’t care. They just assume that it’s gonna work. They care about whether is it seamless experience integrated with their user experience and user interface and all that stuff. So I said, “How do we give them that experience? While we’re still in the build phase?”
Morgan (Host): Actually, I just want to do a parenthetical. To emphasize that, which is I’d make the broader version of that as a really useful lesson for the younger versions of ourselves. Which is, unfortunately, far too many people even in high-stakes professional contexts, judge the book by the cover. And by that I mean, they’ll care about like, how it looks, it’s smooth, seamless experience, not actually the 1000 times harder tech to bring that to life.
Andrew (Interviewee): In fact, I think that’s the big conflict often right. Between often seen that people who are less technical and very technical people who are to say, here’s all that goes into it. They say, I don’t care what goes into it, I just want it to work or something like that, right.
Morgan (Host): Totally.
Andrew (Interviewee): In many cases, that creates really bad expectations, right? In other words, maybe somebody senior has read a bunch of wire articles or they’re reading a popular science and they’ve read some kind of, there was some demonstration somewhere that costs half a billion dollars and, you know, had some proof of concept. And then they say, oh, that’s possible. Now, let’s go to this company over here. We’ll pay $10,000 for the same thing. It’s like well, what you missed was you know, half a dozen…
Morgan (Host): Exactly. Years of research.
Andrew (Interviewee): Years of research, exactly. Lots of IP protection and all this kind of stuff, right? Which just doesn’t go on and on. So, we were brainstorming how do we get this done and what we came up with was, okay, all of the user interface where all of the web hooks, all of the API’s and gateways and all that kind of stuff is already solved. So we knew how to take an image from the customer server, and we knew how to process or we knew how we’re going to process it. It was just the processing wasn’t completely built.
Basically, our neural networks, we’re not fully trained yet in order to be ready to do it. But we can run the image to the pipeline, easily. It just wouldn’t give us great results at that point. Right there would be there was just a ton of time to train.
Morgan (Host): Yes.
Andrew (Interviewee): And we weren’t there yet. So, we said okay, why don’t we just take that processing jump out? We’re going to continue to work on that. And what we’re gonna do is we’re gonna have a manual processing step where every time an image comes in, we’ll just replicate the depth and plain now for that manual, and then they’ll be able to have the experience. And once we finish it, we will just replace our automated system with the manual.
Morgan (Host): Come up with the original Mechanical Turk.
Andrew (Interviewee): It’s totally Mechanical Turk type solution. Basically, we set up a time with them that we were gonna say, Okay, on this date, at this time, from this time to this time, you could try it, right. And that would allow us to set up our terminals and workstation such that.
My co-founder actually had to build a new piece of software that handled those requests displayed, allowed for us to do annotations, where it doesn’t really allow us to do the plane detection, some other stuff. And then hit enter and it would send back all of the sensor fusion back in the right package such that so they will have the experience, and we could do it all within about two seconds. So it’s really fast. So it’s like extremely fast.
So we did it. So we’ve set up the demo. We did the demo. They were thrilled with it. We saw there was about a half a dozen different executives trying it out and stuff. So the next day we heard back like good to go continue working, happy with everything. We love you guys. Everything’s beautiful. Flowers, all that kind of stuff. No more threats. (laughs)
And so, that was a big, major hurdle. And when we did it, it oddly gave a better confidence to the team. In the sense of there was user engagement, it’s said that we were on the right track, even if the technical pieces they didn’t care about that we knew that our experimental approach was what exactly they wanted, even though they didn’t ask for. We told them here’s an experimental approach. They said, Great, let’s try it. It actually ends up being the kind of experience they want.
So fast forward. Another— Oh, actually, something I forgot that was… During the first meeting when we flew out, the person who has been helping us the most, and just like kind of shepherding us, their corporate process was awesome woman. I love her. I won’t say her name on here, but she was fantastic. She ended up leaving the company shortly after our project. And I’ll talk a little bit about why.
But when I sat with her, I said, you know, we’re sitting talking about this, I’m like, you know, we’re breaking even to project like, at best in terms of dollar figure. And she says, “Well, why didn’t you just ask for way more?” And it’s one of those things that you– it’s a hard lesson to learn as an early founder, but you have to ask for more than you think that you can get, and then negotiate from there. That was the, you know, that was one of the ones that really implanted into my brain. That especially when dealing with large corporate organizations, they have more money than they give, than they let on they do. They cost you nothing and you really aren’t risking anything to ask for more, especially if you’re already part of the conversation. It’s one thing if you come in with a bid and you’ve never talked to anybody and you don’t know… You know, there’s nothing— they don’t know you from the next person to bid way high, because it just won’t cost you the job.
But if you’re already in a relationship with them, then you can actually say Well, look, you know, this is really how much it’s gonna take, and then go from there. But it was just an interesting thing in the sense of, they’re gonna lowball—whoever it is, it could be, the biggest company like Apple, right? They’re gonna lowball you no matter what. Even if they have a trillion dollars. Because that’s what they’re supposed to do.
Okay, so fast forward, we do the demo, goes well, we’re back on track. I won’t talk through all the other problems that were all internal because it was really just about clients. But we were able to get it all together. We shipped it. We send it back, send it off to them, they were hosting it and they were running it after we sent our software. It went live.
I don’t recall the actual date, but it was like the summer of 2017, something like that. It was just before a big holiday. In fact they were using a big holiday to push it. To see what the lift metrics would be. So it was AB tested our version versus those standard vanilla versions, AB tested and it ran for… I want to say a month and a half, something like that.
So consistently, after that month and a half, we all flew back out and the numbers that we saw from the corporation were… and remember we’re talking about a massive multibillion-dollar top 30 giant corporation, who if you see a lift a quarter percent or some tiny…
Morgan (Host): Millions of dollars.
Andrew (Interviewee): It’s millions of dollars, right. And they showed us their numbers, not our numbers because we didn’t have— there’s nothing. We had no access to know how to do because it’s not on our infrastructure. It’s not using any of our metric systems, any of that. So we were completely reliant on them and trusting that they would tell us the truth about what was good or not.
So when we flew out they said AB tested. They saw a 1% lift in overall conversion rate from park to sale for our technology versus basically nothing. And,there was no drop off of users. So in other words, you could have a 1% left for some cohort, but you lose a ton of other people who just don’t even want to do the process, right. And that’s not a good outcome. But in our case, we did not see a drop off of people who were entering the system and then abandoning it. It was people who were completely finishing the workgroup and then actually purchasing them. So…
Morgan (Host): This is amazing.
Andrew (Interviewee): Like, yeah, for us, this is perfect. This is better than we ever thought it would be. It worked out great. You know, the technology work. That didn’t even work. It wasn’t even on our servers that it worked. They weren’t that kind of stuff. So it was like a slam dunk. So everyone’s happy with that. And then we heard like basically nothing from them and I was confused. I said okay…
Morgan (Host): For how long?
Andrew (Interviewee): This was probably a full month, maybe month and a half because at this point, they were our biggest client. We spent so much time with them. We had other clients we were doing, you know work and we were continuing to get people using our software as tools.
But they were still the biggest and we were like you know, okay, are they quiet because now they’re putting together acquisition details. Like why? Because they want to take it and run with it with a bigger deal. Are they stealing it? And now they’re gonna ignore us and go do it on their own like, we don’t know. And so I sent a note to one of the SVPs there who I built a relationship with that said, “Hey, can we get together and see what the deal is?”
And so we got on the phone call, and he said, Oh, yeah, no, I’m glad you reached out. What we decided was, despite all of the great numbers and everything, it would break our entire— the way that we build our web application, how our back end, how we manage 3D content, because that’s a big piece of it, too, there’s just a ton of 3D content that we had to help them fix and it’s just there’s a lot of complexity to it.
And so what it boiled down to was, the lift wasn’t big enough and cheap enough from an overall organizational perspective that they would be able to invest in it. Because it would take more than 1% of a change in their organization to fully realize the value at stake.
And I think that’s another really important point here is, is really focusing on not just the outcome of the project, right? But the outcome more broadly. When you’re thinking about like, are you aligned with the organization that you’re working with, or the client that you’re working with?
Because you can have a successful point or project. Like we talked about a very successful project. But if that project does not fit into the larger corporate narrative, or government narrative or whoever your client is, then it’s going to die on the biome.
Because there’s not enough people internally advocating for it to make a good change, or the corporation or organization is going a completely different direction. And the group that you’re working with is kind of over here in the lab or something. As I’ve seen this time and time again. Go ahead.
Morgan (Host): By the way, I think that’s a great point. In economics, this is called transaction costs. And classically, people tend to not think about the external transaction costs for really small transaction costs, can down the whole ship.
Andrew (Interviewee): Absolutely. And the thing is, as a founder, you have no idea what is going on, right. Especially again, if you’re dealing with a giant corporation that’s global, you have no idea what their internal structure is, like, who you’re working with. So you kind of just have to get lucky in some senses that you’re working with a client or a customer inside that organization that’s already on a group.
Because you could be working with a customer within that organization. That’s, you know, nobody cares about or they’re not really well funded, or people think about all those guys and gals are over there, or their at a decline and they’re really doing like a last-ditch effort to save themselves.
There’s so many corporate politics, government, organizational politics, things that go on, then you as the service providers, just have no clue about, which it should inform your calculation to an extent. In the sense of, if you put all your eggs in that person, in that basket for this large organization, that’s a really high risk, right? Because it could go really and I say high risk because I want to help people to think about risk versus benefit, right. Risk and reward, right?
So in those cases, it may be high risk, but that means that it can have a huge reward. Whereas if you say, well, it’s high risk, I don’t see the reward potential. Obviously, that’s an easy calculation. But you’re gonna have to take risk somewhere you just need to identify where that risk is and whether you’re fumbling on your risk or not. Right.
Morgan (Host): Totally.
Andrew (Interviewee): And so, picking your clients and I think that’s another key point is, you should not, obviously this depends on like where you are as a business. But in the best case, when you’re thinking through a client that you’re working with, you need to be thinking about you hiring them, not them hiring you.
Again, hard to do if you’re still trying to get traction if you’re trying to hold up. But it’s still really important because even if you’re in that transactional, even for that phase where you’re trying to figure it out, it could be detrimental to you to cut a deal with Amazon, or whoever I’m not, by the way, Amazon was not the company, I’m just using that as a big example.
So you know, cutting a big deal with Tesla or whatever or Apple, even though it might seem like that’s the best choice, it could still… You could say by doing this deal with that giant corporation, it’s going to slow us down so we’re gonna say no to a million dollars. Because it would deviate us from…
Morgan (Host): It’s hard to say no, because it’s hard for humans to say no to that million-dollar offer behind it. On the other hand, it’s so common, where your strategy is to focus on this but that you really want something completely different. Vaguely related, but it’ll pull the company in a very different direction. So it requires a lot of thick skin.
Andrew (Interviewee): Also, everything in our case was and you’re 100% true. You’re 100% correct in the sense that happens all the time. We’re going in this direction, big company kind of says hey, go that direction. And then you know, you do that, thinking it’s gonna be temporary and now you’re on that path and you’ve totally lost your way. What I would say though, is that in our case with this specific deal, we wanted to shift away from the app, you know, we want to ship to the web application model, which now obviously works, right.
But you know, we want to early to shift to that web application, like user browser based experience over more and more mobile applications. And this was the first great chance for us to get paid to do it. Right. And so in that sense, we were able to continue the work we were doing, even after this. So in other words, we’re able to resell and continue work in that direction. And that worked out great. In fact, it was basically perfect.
Because we, not to go into too much detail here, but we wanted to separate everything on the client model. Kind of think about like a monolithic application where it’s a native mobile application for iOS or Android. And that’s all you need. You can do it offline. Whatever, right? But it’s all on your phone or your device. That’s the way the kind of world was.
We wanted to split that. Actually, we want all of our processing to be online in our server side, and you just have a fairly lightweight front end on your mobile device or just the browser. Why do we care about that? Well, number one, or the primary one, is it makes a much smaller footprint on your device. So it’s easier for you to say okay, I’m okay, downloading a 20 megabyte application. That’s the first.
The second thing is we get a lot better metrics, we get a lot better ability to count what people are doing and what how interactions are happening by having a server-client relationship like that. It also allows us to scale way broader because we can scale just the back end without having to scale the front end, which means anybody in the world could build the front end and use our services, and it doesn’t cost us anything more. It’s just software as a service annual recurring revenue type of subscription based on API’s.
So we very early said, okay, the business model that we need to be in is one more serving capabilities, not building new applications, right. And so all of that fit perfectly in with the proposal we did for this organization. So in the end, it was fine. It was good because we were on that track already. But it did slow us down a little bit. Because we had spent so much time working with this client. It took all of our time until it was eight months or so that we were not out building smaller relationships which may or may not last as long.
Morgan (Host): Make sense and it’s a good learning. So the client dropped this bomb. Glad you reached out. It’s over. Then what happened?
Andrew (Interviewee): So about a year later…
Morgan (Host): Actually, before we hear the future, Like they did pay up? End it nicely?
Andrew (Interviewee): Yeah. Actually the invited the whole team back out again. And we had kind of like, it wasn’t a dinner, but it was a presentation meeting for a handful of senior VPs in the organization to talk about like future directions. So we say, okay, we’re probably not going to do anything with this right now.
But we do want to keep you engaged as a company so that we can continue moving in this direction. Like where could we go with all this? Let’s say, you know, six months, a year, two years from now, if we want to start to come back. And so I came and I presented our long term vision and kind of where we were going with it, how I fit in with theirs, their engineering team, so I did a lot of research to talk to their teams a lot. To understand where their direction was going. To see if it actually did merge. In fact, it kind of did.
And what we’re seeing now is that they’re doing today in 2021 really, even in 2019, 2018, 2020. They’re doing all the stuff that we talked about doing with them already. So, you know, at least that makes sense. And so how much of that I gave them versus they did on their goodness, but doesn’t matter.
At the end of the day, they were happy with us the guy who called and yelled at me wanted to be my best friend. You know, I mean, it’s like all that kind of stuff. They were very positive. We have here relationships, all that and that kind of was in and you know, or at least I thought that that was it for us and we moved on and then that was the end of the business relationship.
Morgan (Host): Before you get to the end of what happens in a year. I want to add observation, I’m going to make the assumption that for them to internally that are breaking the contract. And if that assumption is true, it’s a good example of how kind of power of contracts is because it forces clarity, because when you have the trillion dollar corporation, especially, it’s like, like they can do what they want, doesn’t matter what word on that paper says.
Andrew (Interviewee): No, in fact, you know, big companies will say explicitly that, and that’s kind of how I felt that they talked to me about it. Which is Oh, yeah, what were the contract? What are you going to do about it? You don’t have money, you’re not going to sue. Even if you did sue us, you’re gonna go out of business before we would even get out of litigation. So and even think about right it wouldn’t…
Morgan (Host): It’s funny that the big companies actually fear apparently because everyone knows that of course, they have trillion dollars however rich you are, you don’t have a trillion dollars. But it’s funny that they’re like so direct about it.
Andrew (Interviewee): Well, funny is one word for it. Another way you can put it is, it’s super anti-competitive, immoral and unethical and all that other kind of stuff. But it’s so…
Morgan (Host): (laughs) I cannot.
Andrew (Interviewee): I mean, it’s pervasive, and frankly, because I mean, that wasn’t obviously our only interaction. So we had so many of those. It really did make me a little bit more cynical about, what’s the level playing field, right. What is competing on technology? What is being a leader in kind of future tech, what is all that? And I haven’t fully worked through that myself. Part of why not in starting—
Morgan (Host): It actually gets deeper issues like what is the law?
Andrew (Interviewee): Well, I mean, yeah, there’s that for sure. It’s, not just what is the law, it’s like, what are markets for? What are startups for? Like? This’ll sound cliche or whatever, but I didn’t start my company with the intention of just making a bunch of money. I started my company because I had a scratch that I had, I had an itch that I had to scratch for myself.
And I wanted to see how many other people had that same itch and if I could solve it for them and do it in a creative way and build a movement, right. And help make augmented reality real and help make computer vision real as a real thing that you can do really interesting things. And if that’s not really the case anymore as a small company, that you can go into a market with a game changing idea or great team or any of that, and really make a big impact on it.
I mean, that’s a really hard thing to live with. If you’re creative, founder type, you know, if you’re creative person, you see, hey, this industry over here or this way of doing business or whatever it is, I think I can go on and impact that. And then as you start impacting it, big players come in and they just step on you or they just take your stuff and they run with it themselves or any number of things. It’s a little demoralizing. And what it was about to say is part of why I’m not starting for it now is because it’s very hard for me to see ideas that don’t only have acquisitions as their excellence, right?
Obvious, it’s not 100% true, but the rate of which you as a founder and synonymized to sell to a big company because they’re going to try to crush you or try to acquire you is higher than I think it’s ever been. In fact, I was stationed with a bunch of VCs and PE firm friends. And they’re like, Yeah, I mean, right now the market for the foreseeable future. The chances of starting a company in 2020 or 2021, and IPO are multiple smaller than it was if you started in 2008 or two, or 2000 or 1995. Just because the dominance with these political players just doesn’t align with you.
Morgan (Host): Yeah, I really think that aging something else and I enjoy these like 20 years I’ve been in industry, there’s been a palpable change from. Like 20 years old, I believe a lot of people are like, oh, I want to change the world and you felt it in the air. Now, everyone just has a social mobile app game with coins. And it’s like, everyone seems to no matter how much you raise, you know, is this really just helping us some sort of way? Everyone sees through it.
Andrew (Interviewee): Yeah, unfortunately. Yeah. There’s some good folks out there but it’s just harder for them to get all the way to the finish line. I think. So the whole experience, not just with this one client, but the whole ecosystem. All informs that. The good thing about that, what I’m talking about, is that’s not going to deter anybody who’s dead set on doing something so and I think that’s great.
Like, if somebody told me this, when I was starting my company, I’d be like, that’s for somebody else. Right? You know what I mean? And so that’s, you still have to have to know.
Yeah, so about a year later. I’m in Colorado. I think it was Halloween. Myself, my family had gone to some kind of thing. And I get back in the car and I looked on my phone and I didn’t I got an alert or somebody sent it to me and said corporation that we worked with is debuting a new augmented reality in the browser feature. And it was but it was a big public thing.
Oh, the other thing I forgot to mention was, when I asked early on, hey, can we get publicity for this? Can we do a press release saying what we’re doing all this because that would help me. You know, that would help immensely. They said, Oh, sure. If you pay us $300,000. Yeah, that’s good co marketing. Like we’d like to support small companies making edge stuff. No, they were just like, you can pay us because that’s how much it costs for us to do.
So anyway, so fast forward a year, and they, very publicly funded out and they’re showing up, and so I try it out. And it was the exact experience that we built minus all of the back-end processing like computer vision work that we have actually done on the technical side. And the reason is because they did not have access to that and they did not have IP for it so they couldn’t. They knew that if we had tried to just use it, it just wouldn’t work because they still had to use our API keys and stuff like that. But it didn’t do all that. And within a week, I think they pulled that entire thing because it didn’t work because they were missing and they were lacking that critical piece. And there were a couple of articles that came out panning it saying this doesn’t work. This is trash, like everybody, they’re all moving backwards, all kind of stuff. And so, you know, mixed feelings there, right?
One is what the hell? We have a functional thing that actually worked and why couldn’t we just go? Somebody in the corporation was like, “Hey, that was great. Let’s try to do it. But without those things.” And then it didn’t, it just fall on its face. So you feel a little good that it fell on its face, because it didn’t use you. But at the same time, it’s like what the hell we could have done so much.
Morgan (Host): You feel a little good. The shade in front should be huge. You should feel good. A billion dollar company that broke the contract and screwed us tried to take ourselves and do it on their own and they fell flat on the face publicly like that. That’s like increase your own perceived value in your head at least by some real amount.
Andrew (Interviewee): Only for a couple of seconds. In real life. (laughs)
Morgan (Host): (laughs)
Andrew (Interviewee): Power dynamics still exist. So fortunately. That it. There’s my client horror story from computer vision augmented reality starting in 2016.
Morgan (Host): I like this story, especially this at the end where they fall flat on their face. Question, other than the lessons that we discussed in this last almost hour, 45 minutes. Are there other less obvious or different learnings or ways in which you change as a person or change or processes you changed coming out of this that you want to share?
Andrew (Interviewee): I think the biggest one is try not to be in a position such that you have to consider that you feel like you have to say yes to organizations with such a big power dynamic, difference, right? Big difference in power differential.
If you look at any of the largest startups that went to IPO or whatever, it’s the rare one very, very, very rare one where a large corporate deal that was kind of secret and experimental or not even just experimental, but just a large corporate deal was the thing that took them to where they needed to be. It was a series of a bunch of small deals or a bunch of smaller more manageable plans to actually get them to the flywheel that they needed to get.
And so for current founders, future founders, do your best and not be in a position that somebody can bring you a bag of money and it influences how you feel. That’s the biggest problem and that goes for whether it’s corporate or if it’s venture fund. I mean, my favorite my favorite VC funding story is Sequoia. I think at Sequoia I want to say and the WhatsApp team.
So WhatsApp had this team of like five people or something some ungodly small and they had an office in I want to say Mountain View or Palo Alto, something like that. And they had been crushing it with drugs, like in South America and I think Asia and like it was just off the charts. And nobody knew where these guys were, who they were, anything.
And all the venture funds will try to find these people everything and they were just off the radar because they were just printing money. Anybody who downloaded it cost them $1. They’re printing money than five people working for no worries. The VCs literally got on foot and walked around knocking on doors opening buildings to try to find them in order to pitch them. Right.
That’s the position you want to be in. You want to be in a position to say no, to a $100 million investment. Because you don’t need it. Right. That’s my favorite founder story. And by the way, once they found them, I think it was Sequoia who found them and pitch them, their CEO is like no. And so they had to keep coming back until the number made sense for them.
And so that’s the biggest takeaway for me is I don’t want to be in a position you shouldn’t be in a position ideally, to have to respond to the big bag of money, right? And that means your idea has to be on point, your execution has to be on point or a team has to be on point from day zero, right? And that’s really hard to do.
Morgan (Host): I think I want to add one lesson that we hinted at about a half hour ago, but is I think is so important is worth fleshing out in our final four minutes, which is talking about the power dynamics difference. There’s a subtle nuance there. Where you throw saying hey like for them it’s just like heavies and they and they don’t care. But for you, it’s like existential. It exist in your company. I want to add a slight nuance there that for the individuals that work in the big company, they don’t give a shit.
It’s a nine to five job for which they’re paid a salary while you and your team is to use your word. It’s existential. Everything depends on it and not just money, but like this big project is mission. Your obsession while they’re literally 5:01pm, I’m going home. And dealing with any big company, it’s dealing with literally every single person there from the top to the bottom. It’s just a job, nothing more. While for you guys, it’s existential. And that is one of the underlying sources all these problems because from their eyes, everything is just a job and nothing more than that.
Andrew (Interviewee): It’s worse. It’s actually worse than that because you couldn’t have people on in that corporate team that you’re working with. You’re like, I’m sorry, I feel free. There’s nothing I can do about. Like they may even know about it. And they may even care and they may even care about their plight, but getting legal involved is five rungs above them and two organizations over so even if they did care, there’s nothing they can do about it. So for the ones who do care, they’re stunted. They’re the ones who don’t care it’s a day in their life and so you know, you just have to take care of yourself. Absolutely.
Morgan (Host): Yeah. And I think for people with a personality where when they the only two things that they care about, at least for me, I only do things I care about and I can say absolutely necessary to get along. And it’s been difficult for me to deal so like to internalize the lesson. That is just a nine to five job they like they don’t care does that because this is on me to understand so many like crazy stupid decisions of bureaucrats made, because it was just a nine to five job, you’re gonna come to very different conclusions than when it’s existential.
Andrew (Interviewee): And I’m on the other side of it. Right. So I’m a director at a very large public company or a large public org. We see acquisition deals all the time. There’s companies who want us to do a deal, and I just don’t think about it the same way as if it was my company. And it’s just part of, it’s just the reality of it. As much as I try to empathize, even for me who’s been through it, it’s just one of one and another laundry list of things to do. So that’s why you could, there’s so much out here on this we could talk about.
Morgan (Host): Totally, this has been fascinating, and the hour is about to explode. This has been great. Thank you for your time. Wonderful story breaking tonight. Everyone who’s been watching it, thank you for making it till the end. I hope you enjoyed as much as we did.
Andrew (Interviewee): Thanks, Morgan. Talk to you soon, bye!
This transcription belongs to Episode #24, please watch the complete episode here!