The Story of TOMODO: Part Four - The End
This is the fourth and last post in the story of our company. Click here to read from the beginning.
(for audio version click here)
Growth
Our product, Start A Fire, just kept growing and growing. After two years of attempts we finally got to witness the hockey stick soar. We were serving bigger and bigger brands and got to a point where we had 3,000 of the world’s biggest and most well known brands actively using Start A Fire.
Analytics vs. CTA
It turned out that the bigger and more established the brand was, the more they cared about our ability to provide analytics about the earned media pages they were promoting and less about our ability to add a Call-To-Action to these pages. Our added CTA features, like adding recommended content, were still in use but more as a baseline. We were able to tell brands not just how many people clicked on a piece of content they were promoting but also the average time spent on a page, the average scroll depth and its breakdown by geography, device and time of day. Brands used that in order to compare the effectiveness of different pieces of content they were promoting on different platforms like Facebook, Twitter, Outbrain and Taboola. They also used it in order to compare what content “worked” and what didn’t.
Problems Moving Forward
Because an unfortunate chain of events, a financing deal we were working on dropped at the last minute. We could have better prepared for it, but we didn’t. It left us with a much shorter runway than we had planned. It also left the company not in the best shape for another fully qualified VC round. These rounds usually depend on metrics and we were not there yet. The original plan was to do that almost a year from that date.
We had another funding offer “on the table” for less favorable terms but we decided to take a step back before signing it. It was a good time to reflect on our strategy, our options, and how we can extend our runway. Throughout the product lifetime, we experimented with monetization, so we got the rough idea of what can be done and what cannot. There was a problem we just couldn’t overcome: the brands were seeing Start A Fire as a “nice to have” and not as “a must”. Another concern we had was that no matter how we crunched the numbers, we couldn’t justify VC returns, even over the long run.
Our Options
We felt that raising another VC round was the wrong thing to do. We decided to forgo the newer funding offer and focus on monetization in order to extend our runway. In parallel to that, a very lucrative M&A offer came in, and we decided it was a good time to explore that as well.
Monetization
We had some enterprise deals in our pipeline but, as well known, the sale cycle in these deals is really long so we couldn’t rely on it. Our monthly subscription program ran into trouble because of Start A Fire being perceived as a “nice to have”. There was another vertical we had deployed which was using ads on Earned Media that were promoted using Start A Fire. We knew we were stepping into a sensitive zone and we tried to be subtle about it. It did inject some nice cash flow and extended our runway, however, responses by publishers made it very clear for us it is not something we wish to continue doing. We stopped doing that relatively fast and our option to sell the company now appeared more attractive than ever before.
Selling The Company
The acquirer defined a set of validations they wish to have before we can close the deal. They wanted to see that their salespeople can sell Start A Fire as part of their offered platform. In parallel, we tried to find other potential acquirers. We had some negotiations with other companies but nothing went as far as this one. Usually, an acquisition is a long and scrutinizing process. A lot can go wrong along the way. There is a certain point that I knew that once crossed, it will be really hard to go back to normal company operations. We crossed that point when we decided to let our team know about the potential acquisition. We crossed it even further when we started optimizing the company towards the acquisition. I was fully aware of the risk we were taking and that if the acquisition will fail, it will be impossible to go back. It took about three months to nail the predefined validations successfully. By the end of that period, the acquirer announced - and it is also something we could see in the press - that they will go through some structural changes. We were notified that the deal is off and got the impression that they won’t be making any deals in the near future.
By that point I felt we had pretty much exhausted our options. It was time to say goodbye and pay back what we had left to our shareholders.
Goodbye
These were an amazing four years and a hell of a ride. I travelled around the globe and met some very interesting people. I learned a lot about how to lead a company, how to manage a team, how to create great products and make tough strategic choices. But as always, it’s about the people who made everyday meaningful. My co-founder Oren, investors, the entire team - past and present, thank you all for the last four years. Friendship is truly thicker than business. I’m now going to rest a bit and spend some time with family but I can already feel the urge to start working on something new :)
