Monitor110 Learnings: The Good, The Bad, and The Really Bad

The response to my Monitor110 Post Mortem was pretty shocking. I want to thank those who commented, sent emails, and simply took the time to read the post. If some of you are really able to take my experiences to heart and to avoid some of the mistakes made by myself and the team, that would be terrific. To that end, I am going to spend some more calories drilling down on key areas of note during my 3+ years working with the company.

The Good: Articulating an Idea and Raising Money

From the time Jeff Stewart and I decided to press forward with Monitor110, we were very thorough and systematic in our approach to raising money. First thing I did before formally deciding to invest was to go around to potential customers - principally hedge funds and Wall Street firms - and get their reaction. We were able to show them the v1.0 system (the one we trashed, remember?), screen shots of the next generation application and our vision for the future. The general response: if you guys can deliver what you say you can deliver, I'd be very interested in the product. Good answers; just the answers a potential investor (me in this case) would like to hear. Little did I know that what we said we could deliver we actually couldn't, and that it would take almost three years for the key constituencies (management, development, the Board) to figure this out. [The reason: buy-side investors wanted a system that would extract the nuggets of differentiated, unique information and present it to them in a form that was beyond clear, something so easy that they could look at it and literally make a trade. In short, readily actionable. Reality, unfortunately, did not line up with this expectation. The ultimate release was much more of a research application, not something that immediately generated actionable, monetizable data.]

Be that as it may, we didn't know the execution problems at the time and the vision we were articulating was very seductive, to clients, to investors, to recruits, to ourselves. From a variety of client meetings we honed our pitch, created a presentation deck that we iterated on several times, and set about pitching a variety of top angels and VCs in Silicon Alley, Silicon Valley and Route 128. We raised $1.25 million from a group of angels, most of whom we considered strategic due to their either working at hedge funds, bulge-bracket Wall Street firms or were independent traders. This gave us the runway to make key hires, begin building the next generation product and to systematically tap the venture capital community. The pitch deck was no more than 15 pages, had lots of pictures, a handful of focused, powerful words and concepts, and a clear explanation of how we intended to use the money. While I'm no Guy Kawasaki, I know a good pitch deck when I see it and can sell it. Especially since I believed so passionately in the company's mission and prospects. So my message to those seeking to raise funds is:

1. Believe deeply in the mission and vision of the company; otherwise, no one else will.
2. Use few words, many pictures and be brutally clear. If the audience doesn't get it within 60 seconds, it's tough sledding.
3. Think of lots and lots of use cases and be ready to share them at will. This isn't just for pitching; you'll need this to understand the market opportunity as well.
4. Pitch early and often. We learned so much from speaking to dozens of smart, insightful people. I think we would have failed faster and better and/or increased our chances of success if we had listened more.
5. Hone the pitch on lower-likelihood prospects early and ramp up to the real targets after polishing the presentation and the delivery. The first bunch of times you will suck. After sucking for 5-10 times you'll tend to get much, much better. There is no way to short-circuit the process; there is simply no substitute for experience.

The Bad and The Really Bad: Recruiting, Metrics, Lack of Focus and Cash Management

1. Great team, wrong team
2. Inadequate metrics
3. Resources spread too thin
4. Poor cash burn management

The Bad #1: Great Team, Wrong Team

I'd argue that Jeff and I were very good at recruiting. We hired great people. Smart. Passionate. Opinionated. Caring. Problem is, I think in retrospect that we hired many of the wrong people, not because they weren't good but because they didn't have the depth of experience necessary to solve the problems we need to solve. We took the approach of hiring "best athletes," on the theory that super smart people can figure hard stuff out. For example, a few years back one of the teams that competed and placed in the DARPA challenge wasn't from MIT, Stanford or CMU, but a team hacked together by a tech guy from an insurance company and a bunch of his buddies who said "We can do this." They drew parallels between the DARPA challenge requirements and the dynamics of video games, and devised a completely out-of-the-box approach to solving the problem. And they proved that it didn't take a bunch of rocket scientists to compete in a crazy robotics competition. This was our fantasy. We'd be these guys.

Unfortunately, our reality is that we were cracking monumental problems at the frontiers of natural language and statistical text processing, data harvesting (ripping and cleaning), entity extraction and real-time matching of terabytes of data. Instead of building a team that had experience in each of these areas and could attack the scale of our problems from the get-go, we staffed the company with bright people who had to learn the material first before attacking the problem. Because of this, it took much longer to understand the magnitude of our issues, time that could have been spent either solving the problems or taking a different approach. By the time we figured out the depth of our issues, we had burned lots of resources which left us precious little runway to get a salable product to market. Best of intentions. Worst of decisions.

The Bad #2: Inadequate Metrics

It took us a long time to build the next generation product. And during the development process, we didn't do a good enough job creating metrics to measure our progress and the efficacy of the components of the system. And by the time we got around to measuring stuff (hard release cycles, data precision and recall, speed of throughput, processes around source expansion and quality, etc.) we were very, very late in the game. In retrospect, we should have placed a much greater emphasis on the creation and use of key metrics, and building greater accountability into the culture. It would have forced us to face into our issues early on, potentially enabling us to change direction before wasting scads of precious capital. Our lack of a metrics-driven culture let the science project live on - and on and on. We discussed the importance of measurement dozens of times but got derailed by the many technical problems we encountered. We completely lost the forest for the trees. This was no excuse. We screwed up on this front, big time.

The Really Bad #1: Resources Spread Too Thin

We initially had a vision of a single product: a dashboard. The entire company was executing against this vision. Problem was, the market was telling us that a dashboard was not necessarily what it wanted. It wanted a research product using the data underlying the dashboard. It also wanted the ability to access our data via a feed or API. Therefore, our laser focus on a single offering split into three. While we were trying to listen to the market, we only ensured that we would do nothing particularly well. And as mentioned in my earlier post mortem, the Board was never really supportive of the research business and didn't really understand the opportunity posed by the feed business. What would have happened if we had only focused on one of the products? We either would have increased our chances of success or failed faster, both of which are superior outcomes to what eventually went down - a slow, painful death.

The Really Bad #2: Poor Cash Burn Management

Monitor110 wasn't some biotech company conducting research and using money to get through clinical trials. It was a technology company trying to sell a service to a very defined universe. Our cash burn got way, way ahead of where it should have been given our revenues. Because, as we thought, the ultimate salable release was right around the corner. But it wasn't. I can't count how many corners that product was around, but it was more than five and less than ten. Yes, we were working to solve a complex problem. But before we went "all in," we should have had much stronger signals from the market that it was prepared to buy what we were selling and at approximately the price point at which we intended to sell it. But because we were so concerned with disappointing our customers in light of the unexpected PR we had received, we really hadn't gotten much market input since early in the development cycle. We were so convinced that the demand would be there once we got the product out that we just kept building - and building, and building. And when we finealy stopped building and said "Here it is," they said, "That's nice. Kind of. And that price? Too, too high." Not happy words to ears that were poised to hear something materially different. And because of the burn level, it made staying in the game long enough to get the penetration needed to succeed virtually impossible. Moral of the story: test the market. Think. Design. Execute. Go back to the market. Repeat. Stop when the market says "I'll take it." And then start the cycle again.

Sure, there's more. But this will have to do for now.