The 2008 Recession Saved Our Company. The Coronavirus Recession Might Save Yours, Too

Paul Martino
Apr 22, 2020 · 33 min read

Normally, startups are the disaster. We describe our work as “disruption” or “creative destruction.” We take pride in dethroning companies that entrench themselves behind asinine laws and high-powered lobbyists. We topple broken markets so that something better can grow in their place.

Now, COVID-19 is the disaster. Startup founders are justifiably panicked. There are talks of a Unicorn die off, another tech bubble bursting. Companies that are “too big to fail” anticipate massive bailouts, industry consolidation, and a windfall of talent and IP from dead startups.

Some founders (and their tourist VCs) deserve to be in trouble. They inflated their valuations, hemorrhaged capital, and considered themselves too damn special to generate a profit. Thankfully, they are the exception.

Most founders pursue their mission with integrity and discipline. They set out to do something so risky, so profound, and so powerful that people like me fund them. Sure, we expect a return, but there are much easier ways to make money. Ultimately, we do this work because we believe that entrepreneurs change society for the better.

Real VCs are rooting for you right now, whether you’re in their portfolio or not. Many of us started (and lost) companies during the first Dot-Com Bubble and the Great Recession. We came out of those crises wiser and grizzled. And in some cases, we turned the disaster into the best thing that ever happened to our companies.

That was certainly the case with Aggregate Knowledge, a recommendation engine turned advertising analytics platform that I co-founded in 2006. As the Coronavirus pandemic began, I shared the stories of Aggregate Knowledge with Bullpen founders. It was comforting. They recognized that COVID-19 is both an existential threat and engine of opportunity.

If not for the Great Recession, Aggregate Knowledge probably would not have survived and eventually sold to Neustar. That sounds counterintuitive, doesn’t it?

So, here is the real, No Bull history of Aggregate Knowledge, told in the words of people who experienced it. Chris Law, David Peterson, David Jakubowski, and I were once in your shoes. The Great Recession of ‘08 and’09 was rough—there’s no sugarcoating it. But we want you to know that this might turn out better than you think.

Here, you will not find Silicon Valley’s usual puffery and bullshit. You can read press releases and corporate blogs if you prefer that. We were interviewed independently, so we couldn’t influence each other or rewrite the history to make us look better. This is the real story of how Aggregate Knowledge survived the Great Recession, with some takeaways that may help you navigate the present.

Paul Martino,

Founder and General Partner, Bullpen Capital

Chapter 1: The “Burning Man” Social Network

Paul Martino: I had an internship lined up with Microsoft in the summer of 1996, but I got there two weeks later than most people because Princeton, where I was in grad school, was on the quarter system. Meanwhile, some guy had nominated himself intern events coordinator. Who is this joker?

Chris Law [aka, Claw]: I organized a dinner at a Chinese restaurant in Seattle, and Paul showed up. I told the restaurant I'd have enough people to make the price $20 a head. A ton of people didn't show, so the bill per person was way higher.

Paul: Everything went wrong, and Chris ended up paying the bill. I'm thinking, this guy can't manage his way out of a paper bag. Sure enough, he and I would go on to form two companies together.

Chris: A few years after Microsoft, I’m thinking of moving to Silicon Valley, so I visit Paul there. He took me on a tour of all the hotspots, and by “hotspots,” I mean the nerd hotspots. We stopped at Kleiner Perkins and took a photo of ourselves beside the sign outside the office. I moved out to the Bay Area in 2001, just as everything was imploding.

Chris Law and Paul Martino outside Kleiner Perkins on the Silicon Valley geek tour

Paul: It was Christmas of '02, and I have on my desktop a to-do list. The first thing is, "Build social network." I convinced Claw to join Mark Pincus and I in building Tribe.

We built a great product, but we made a major mistake: not paying attention to our seed audience. Facebook won because Zuckerberg went after an exclusive demographic of desirable people. Guess who all the people on Tribe were in the early days? The people who had gotten kicked off of Friendster because they were posting pictures of themselves half naked at Burning Man.

Chris: It didn’t work, but one of the big insights from Tribe was that what people say they like is not what they’ll actually click or buy.

Paul: I was so sick one week in the summer of 2004 that I couldn’t go to the office. At home in bed, I started screwing around, trying to see if I could build a recommender system so that when you showed up to Tribe, it would recommend people you should know and Tribes you should join. It worked unbelievably well.

Chris: That was the core nugget for Aggregate Knowledge. It's not what you say, it's what you do. We were going to build something powered by this recommendation piece. People who bought this bought that. People who read this read that. People who read this bought that.

Lesson 1: Be in the game with people you trust, who will have your back when shit hits the fan.

Chapter 2: Million-Dollar Accounts and No Office

Aggregate Knowledge misspelled, a frequent occurrence

Chris: We were brainstorming names for the new company, and Aggregate Knowledge was the answer. I take the blame and the credit for this one. It made us sound smart and didn’t pigeonhole us into anything, but it's the longest domain name in the freaking world. It was so hard to type.

Paul: I've learned over the years that the secret weapon in your fundraising process is a good venture lawyer. They’ve done deals with almost all the people you want to pitch and can play matchmaker. So, Mark Stevens, who incorporated both Zynga and Electronic Arts, was my guy. He tells me that Randy Komisar at Kleiner Perkins is going to love this Aggregate Knowledge idea.

Chris: We used that picture that Paul and I had taken in front of Kleiner Perkins in the late 90s during our nerd tour of Silicon Valley. We ended our pitch with it.

Paul: The day we got the term sheet signed, John Doerr [now the Kleiner chairman] heard about our picture. He took us out in front of Kleiner Perkins to the same sign, and we took the same photo with the whole Kleiner Perkins partnership.

Photo with the full Kleiner Perkins partnership after the deal agreed

Chris: Komisar told us to think about the things that we were doing as experiments. If any experiment came back with a negative result, that's okay. Just don't fuck up the experiment.

Paul: We signed our first couple of customers right out of the gate. We had figured out a way to add Amazon-style recommendations to their websites by cutting and pasting a couple pieces of code. This was revolutionary at the time. Pretty soon, we get a phone call from the Chief Technology Officer at Overstock. By the end of the week, we're on the phone with their CEO, Patrick Byrne.

Chris: We were in a Kleiner Perkins conference room hearing how excited the Overstock guys were. They were willing to give us some serious money for this thing, and if they were willing to do it, then a lot of other companies would be, too. Everybody got a $100 worth of stuff on Overstock. I bought these cherry red stools that we had in the office for a good five or six years.

Paul and Chris signing the Overstock deal with the blue and yellow hippo watching
The ugly stools Chris bought with the Overstock credit

Paul: Our company barely existed, and we had our first million-dollar customer. By six months in, we had the absolute plumpest media and retail accounts around. Everything we did worked that year. I mean, we were a 13-person company that raised five million bucks from Kleiner and had a couple million dollars coming in. We hardly even touched the money in the bank.

Chris: We finally got an office in San Mateo. We bought old, used cubicles. Everybody had their own industrial gray cube. And there was the foosball table. That and poker Fridays were our big outlet.

Poker Fridays at the Aggregate Knowledge office

Paul: It was a geeky place. I mean, it was hardcore computer science geeks and data science geeks.

Chris: Our whole mentality in ’06 was to go big or go home.

Paul: '06 went so well that we had everybody and their brother fighting to give us $25 million, which back then was front page news. We ended up doing the deal with DAG Ventures. We almost had $30 million of working capital, so we had to scale this thing.

Lesson 2: Cherish the times when it all goes well at a startup. Those golden periods are few and far between.

Chapter 3: Too Hot to Fail

Paul: In ‘07, the first thing we needed to do was hire a world-class marketing person, and I had never hired one in my life. Through Claw, we met this guy named Chris Lochhead.

Dave Peterson: I was doing marketing at Mercury Interactive, which happened to be one of the fastest growing crown jewels of the enterprise space. Christopher Lochhead was the CMO.

Paul: Lochhead came up with some brilliant positioning for us. He coined the term “discovery,” which is a search where you don't know what you're looking for. I tried to hire Lochhead full time. "No way,” he said. “But let me introduce you to Dave Peterson. You'll love him.”

Peterson: Paul had raised a monster round on the premise of bringing an Amazon-style recommendation engine to retail sites and, ultimately, to content and media sites. Who wouldn't think that’d be successful?

Dave Jakubowski: At this point, I was General Manager of AdCenter at Microsoft. I was brought in from the outside when Microsoft wanted to get serious about search. I'd been in the ecosystem, so I knew who Paul Martino and Chris Law were by name.

Peterson: If you read a headline about Aggregate Knowledge, you would have assumed we had some beautiful, hipster office built with all the amenities that Silicon Valley could provide. But if you met Paul, you’d realize he's a Philadelphia guy that bootstraps everything. He was like, here's your seat. It's used. You’ll forget about that stain.

Jakubowski: Venture capital friends would ping me while doing their diligence on technologies and companies. Aggregate Knowledge would come up every now and then. They were pretty hot stuff.

Peterson: I went from having 50 people on my team at Mercury Interactive to having a team that was one strong. I went right back to writing brochures and trying to figure out how the color printer worked. I never did figure out how the color printer worked.

Jakubowski: One of my close friends, a venture capital guy named Ashu Garg, called me one day to ask a bunch of questions about Aggregate Knowledge. He said, "You really should meet Paul. You two would get along well." That never went anywhere.

Peterson: The expectations around Aggregate Knowledge were off the charts. I remember going to this mobile tech conference, and there was a panel of pundits talking about when mobile would become “real.” This was in 2007, before the iPhone. One of the panelists said, “Well, there'll be a lot of companies taking a leap into this space, but there's only one company for sure that'll be going IPO, and that's Aggregate Knowledge."

Paul: When you're a hot shit company, the people from fancy companies show up. They all call you up looking for a job.

Peterson: This hot shit company could do no wrong at the time. It was a pretty phenomenal start. The outside world saw this do-no-wrong startup. But the inside world was this pragmatic, tie-up-your boots, Philly-driven place where nothing matters other than what the results are. There was no bullshitting each other. We talked straight. We got it done.

Chris Law and Dave Peterson at an AK Christmas Party

Lesson 3: Hire world-class people when you have the prestige to do so,but be careful not to hire “front runners,” the people who run the for exits first.

Chapter 4: Why Do You Give a Shit How it Works?

Peterson: You could count every logo that might need Aggregate Knowledge. We put them up on a wall. Some people would look at that as a giant opportunity. But what happens after all those logos put this technology on their websites?

Chris: People started asking questions that had nothing to do with the value being provided. In a meeting with MTV, someone asked me, "What's the difference between the Bayesian filtering algorithm that this company's using versus what you're doing?"

I'm sitting there thinking, why do you give a shit how it works?! To me, that was a big warning that something was wrong in our market.

Paul: We had 18 months of everything going perfectly, and suddenly, no one's renewing their annual contracts. Or, they wanted to renew at a lower cost. And there were a whole bunch of competitors.

Peterson: Our immediate reaction was to stay scrappy and keep working.

Paul: At first, we assumed the problem was the usual stuff. We must be making execution errors, or we hired the wrong salesperson. Our shit didn't stink—it couldn’t be the product! Well, it was the product. The lightweight approach we took was too easy to replicate once we showed everybody how to do it.

Peterson: We went from putting that recommendation engine on Overstock to talking about how to preserve the 16 accounts we still had. It wasn’t about growth anymore. It was about preserving the business.

Chris: We had to go to the board and say, hey, this isn’t working, just after raising a bunch of money.

Paul: As the calendar flipped over to '08, I knew that the problem was deep. I went into the February ‘08 board meeting and told Randy Komisar that it wasn’t working. "Okay, Martino,” he said. “Go solve the problem. You’ve got six months."

Chris: We had to retool the organization if we were going to do this. What does that mean? Well, draw up your list of who you're going to let go, so that we have enough runway to go make it through this thing.

Paul: The “oh shit” moment for Aggregate Knowledge happened almost a full year before the economy went to crap. The fact that it happened a little bit before the entire world fell off a cliff is key to the rest of the story.

Lesson 4: If your customer asks a question that doesn’t make sense to you, don’t dismiss it.

Figure out what’s changing in your market before it’s too late, and you’re screwed.

Chapter 5: Firing Yourself

Paul: The opportunists from fancy companies started jumping ship in mid-2008. I call these people “front runners,” and that is not a compliment. When shit hits the fan, they're the first people to run for the doors. That was one of the most painful lessons I learned along the way.

Chris: Even though people were jumping ship, we still had to make cuts. Paul asked us all to come back to him with a list, but it was too superficial. "You don't get it," he said. "You're not understanding the situation. We need to really make some big changes here to survive."

Paul: By the time the fourth or fifth “front runner” came in, I didn't want to hear it anymore. I felt betrayed. Yes, I let them down, and they could argue that my leadership was to blame. I thought I had hired people who were going to row the boat with me. After the frontrunners all fled, Chris, Peterson, and I were left in the trenches.

Peterson: Most of my scary moments hit me at about 2:00 am. On one of those nights, I asked myself: If Paul Martino, Chris Law, and the board of directors were making the decision to hire a CMO, would they hire me today? I knew what the answer was: absolutely not.

The kind of problems that I solved didn't exist anymore. The assignment changed. Deep down, I knew it. But there was a culture at Aggregate Knowledge that bound the core crew together. Loyalty is not enough when you’ve got to keep a business viable during tough times. I didn't want the kindness and the loyalty factor to be the reason I stayed on payroll.

Paul: We needed to pivot ASAP. But how? To what? We were just burning capital and still had too many people.

Peterson: I took a long drive up to Ocean Beach. I sat there and watched the seagulls and the waves crash for over an hour. I was watching these people running by and realized the problem isn't big enough that they care. This problem existed with me, and I felt like I just needed to have a conversation with Martino directly. I picked up the phone and I called him.

So much was at stake. Did I fail in my career? Would I create hardship for my family? And what the hell was I going to do?

Paul: Peterson was like, look, Martino, you’ve got to go find a new business. This discovery thing that I did all the positioning for is great but there is no real market for it. So, what are you doing with a marketing executive? You don't even know what your new product's going to be. He put himself on the list of people to be laid off. It took a lot of courage and integrity. Who lays themself off like that?

Peterson: It was time for me to turn in the badge and gun and move on. And I’d support the company and team as best as I could, because I was a shareholder. And there was no love lost. I didn't want to put Paul in a position where he had to make a hard decision. It was a big lesson to learn.

Chris: Dave Peterson had come out and said, hey, I don't think you need me here. That was a wakeup call. Everybody loved Peterson. Everybody knew he did a ton for the company. If the company didn’t need him, what about me being the head of product?

Peterson: That's what I believe people are dealing with today during the Coronavirus pandemic. They're in this moment of wondering, did the assignment change? Would I hire this team today? And if the answer is no, then the CEO and leadership team have the toughest decisions of their lives ahead.

Lesson 5: Be honest with yourself and your team—not just about you what you are good or bad at, but about the reality of your company’s situation and your available options.

Chapter 6: The Luckiest Call Ever

Paul: In September of 2008, as we’re doing our planning meeting for 2009 at the Days Inn in San Mateo, the global economy is crumbling. Lehman Brothers had just folded. Everyone was talking about bank bailouts and another Great Depression. Millions of people were about to lose their homes, jobs, and savings, if they hadn’t already. In the middle of this shitshow, here we are trying to save a startup that had a broken business model and no prospect of raising additional capital. We just went from 86 people to 18 over the course of two layoffs.

Chris: We had an intuition that our next move was in the marketing space, because marketers would spend 10x what the IT people that we were selling to would spend. And the scrutiny was 10 times lower.

Jakubowski: I decided to leave Microsoft because it was mayhem, and Bill Gates was gone. I moved to Orange County to work with a company called Specific Media. We went from $70 or $80 million to $200 million in nine months.

Paul: We realized our technology needed to be used in the ad space as opposed to in the retail and media space. Chris Law figured this out. There was a whole universe of ad buying and ad targeting, and our stuff was perfect for it. But neither of us were ad guys.

Jakubowski: Everything was melting down in Orange County. I vividly remember going to a house party, and this dude pulled up in a white Rolls-Royce. Later that night, I saw the guy and said, "Hey, you pulled up in front of me in that Rolls-Royce."

"Oh, yeah, I just bought it," he said. What the hell does this guy do? He went on, "I’ve got to file for bankruptcy in six months, so it doesn't matter.”

It was disgusting. I'm a taxpayer, and he's driving a Rolls-Royce that I'm paying for.

Chris: It was a painful time. I was the head of product and had built a lot of the things that we were selling in this recommendation space. Nobody else was an expert on this. And suddenly, I have to go figure out advertising, which I knew nothing about. As we talked to different ad agencies, it became clear that I was the wrong guy to head up product.

Paul: We were near the end of our rope when we got the luckiest phone call in the history of the company. The guy said, "Hi, my name is John Donahue. I am the Head of Technology at Omnicom.”

"Omnicom? What's that?" I asked.

He explained to me what a media holding agency is because I didn't even know what it is. “So, you got my name from who?"

"Well,” he said, “you used this product from Aster Data Systems, and I’m thinking about whether I should use it.”

John Donahue of Omnicom, who initiated the lucky phone call

Jakubowski: At Specific Media, we were taking the display business and making it just as ROI driven as search. Search was going crazy during the downturn because everybody could measure the dollars in and dollars out. We were doing the same thing at Specific Media for display.

Paul: Donahue tells me about why he’s interested in Aster Data. He’s got this idea about how to figure out attribution. If you look at an ad and then later buy the product, what ads did you see that would lead to your purchase? I thought about it and said, "Well, that's actually what we do. We did it to figure out what product you should buy. But if I know why you should buy the product, I should be able to produce these attribution reports for you.”

So, I say to him, "Will you get back on the phone in a week with my product guy?" Chris Law got on the phone with Donahue, and they ran through the use case. We realized we could do that with our eyes closed. That's actually what our technology was built for. We literally built a Ferrari for that business, unbeknownst to ourselves, because we didn't know that business existed.

Jakubowski: After growing Specific Media, it was time to build my own company. My experience in the underbelly of the internet had pulled me deep into analytics. I had an idea and began to hunt for a team.

Paul: Randy Komisar didn't understand my customer, so I needed an ad guy on the board. I called Steve Katelman, Omnicom’s business development guy, who was John Donahue’s business counterpart. I asked him to join the board. "I'm honored,” he said. “Let me ask my boss."

His boss was John Nelson, CEO of Omnicom. Nelson called me into his office. I thought this was about getting approval for Steve to become a board member.

Instead, he said, "Paul, listen. I'm going to tell you something, and you need to hear it from me. Your customers aren't going to like you."

"What does that mean?"

“They're not your kind of people. The way you talk and what you do is going to scare the shit out of them."

I was their nightmare come true: a fast talking, smarty pants kid who thinks he knows how to change their business.

Jakubowski: I called Ashu, the guy who was always talking about Paul Martino, and explained that I just quit Specific Media but knew exactly what I wanted to do. If this market is going to get big, display needs to have analytics. You have to measure it just the way that you do search. But it's much harder because the cardinality and the scale is several orders of magnitude larger than it is in search. I need to meet database people who have attacked this problem in a different way.

Paul: Nelson said, "Listen, I'm not going to let Steve Katelman join your board." I'm all pissed off. This guy just told me I'm no good as a CEO and that I rub my customers the wrong way. Then he said, "No, I need to be the board member. The only way you can have somebody from Omnicom on the board is if I take the board seat."

I quickly went from insulted and pissed off to elated and said, “Okay, you get the board seat.”

Thank god John's on the board because he's the only guy who understands our customers. He is our customer.

Jakubowski: After I tell Ashu my idea, he jumps in. "Remember that guy I told you about? Paul Martino?"

"Yeah, of course."

"Well,” said Ashu, “he's figured out a way to database the internet. I don't exactly know what that means, but word on the street is that they have a process to do it bigger and better than anybody else has ever done it. You’ve got to meet him."

Paul: A few days later, I realized that John Nelson was right. I’ve got to find my replacement. I am not qualified to run this company. I'm a terrible spokesman for it. It's a customer I don't understand.

Lesson 6: (A) Take advantage of your lucky break, and (B) Stay alive long enough to get it

Chapter 7: Aggregate Knowledge Was Screwed, and the Recession Saved It

Paul: In February 2008, the board said we had 6 months to figure it out. Six months later was August of 2008. If we had to turn in our homework then, the company would have been over. But since the world was falling off a cliff, we accidentally got another six months. By then, everyone had written us off.

It’s April of '09 now, and the economy is still a freaking mess. Layoffs and foreclosures are in full swing, and the stock market just hit its lowest point a few weeks ago. In a few months, unemployment is going to hit 10 percent. But I’m calling around to find my replacement. I reach Ashu Garg who says, "Martino, I know exactly who you need now that you know you want to replace yourself. His name is Dave Jakubowski.”

Jakubowski: Ashu introduced us by email. Paul and I had a five-minute phone call on a Friday around six o’clock at night. The next morning, Paul got on a plane and flew down to Orange County. We met at Houston's right outside of the airport.

Paul: I tell Jakubowski what the problem is. I built this Ferrari, but I don't know how to finish the product.

Jakubowski: I said, "I think you have one big problem. I'm happy to tell you, but I don't want to offend you."

“No, no, no,” Paul said, “You can tell me anything." This is where we really started gelling.

Well, I explained, you sell into the cost center, and we're in a downturn, so everything is going to be cut. Look at my business, in contrast. What I want to do is show everybody where the profit centers are. The minute they turn the lights on, they get to see all the places that they should be spending ad money or not. I'm going to go show them where to cut. So as things get tighter, my business gets better.

“Well, why don't you come do your idea with me?" Paul said.

Paul: Jakubowski is skeptical. He thinks I'm a typical founder, and this is all for show. Maybe he thinks I want to put him in a job briefly and then fire him and take the company back the way Steve Jobs did.

Jakubowski: I look Martino dead in the eye and say, "Hey, I'm really flattered. I think that's great. But this is mine, I'm going to do it, and I'm going to go be the CEO. There's no room for debate about this."

Paul said, "Well, you could be the CEO."

Paul: I had the right product. I had a lot of the right team members. Jakubowski would solve the rest of the problem.

Jakubowski: We’d had one conversation on the phone. "You don't want that," I said.

"No, no, no, I do."

"Look, Paul, you're a very well-known guy in Silicon Valley. You're not going to want to step aside and let me take this over."

"It's going to take a bit of work, but I have this whole other thing I'd rather be working on."

I didn't believe him.

Paul: It's now five o'clock on Saturday, and I come home the happiest I've been in a year or two. Not only do I have a new business, I know who I need to run it.

Jakubowski: We schedule another call where Paul says, "What if you came to Silicon Valley and met with Randy Komisar, who's on our board? Do you know who Randy Komisar is?"

And I'm like, I know who fucking Randy Komisar is. You don't have to explain Randy Komisar to me at all. I'll get on a plane just to go meet with Komisar.

Chris: After meeting Jakubowski, Paul comes back and says, "I found our guy."

Jakubowski: Paul and I are both brutally honest to a point that it gets us in trouble. And that's why we got along so well. We think it's fun. So, I got on the plane and met with Komisar. I walked him through the business that I was trying to do. All along, I’m thinking that my job is to get Komisar to buy my idea. The hell with Paul. I want Randy to fund my idea. Never in a million years did I think that Paul was serious about leaving as CEO.

Paul: I knew it was just pure execution at that point. Get Randy to let me hire Jakubowski. Get him in for six months. Get him comfortable. Transition this.

Jakubowski: After two hours going through this stuff with Paul and Randy, they go away and have a 10-minute conversation. They come back, and Randy says, "Yeah, we think you should be the CEO."

I’m not buying it. "Look, you guys don't want me,” I said. “There's not going to be enough equity. You guys have already raised all this money. It's probably going to require a recapitalization. Kleiner Perkins is never going to sign off on that."

All I'm doing is throwing out the most absurd shit to stress test this thing. And the two of them just looked at each other and they're like, no, we understand why you would say that. It's going to take some doing but we'll have your back on that.

Chris: Within five minutes of meeting Jakubowski, I'm like, yep, this is our guy. He just had the right level of vision and confidence. I asked him a couple of questions, and the rest of the hour I'm just selling, saying here's why this is going to be a great opportunity.

Jakubowski: This can't be happening. I finally realize Paul is serious about this but still don’t think he’s going to hand over his company. But boom, there's the piece of paper. Offer, transition period, equity, the whole nine yards. He's not fucking around.

Paul: My biggest fight with Jakubowski for those first six months was getting him to believe that I wanted him to be successful. I kept telling him, "The only way I'm going to be successful as the chairman of the company is if you're successful as CEO." And literally every time I said it to him, his eyes would roll.

Jakubowski: I hadn't told my wife what was going on, but now that I had the offer, it was time to sit down with her. "You want to move to the Bay Area?" I asked.

She said, "God, yes. I can't wait to get out of here."

We were going to lose our shirt on the house, but so what? We sold it close to the bottom and moved to Silicon Valley. By the way, she was eight months pregnant, so we had to move fast.

Ashu, the VC who introduced me to Paul, called from Hillsboro, which is where I live now. He was standing in front of a rental house and sent me a picture of it. "I’ll put down the deposit if you want the house," he said. And I did. Never been there, never seen it. Didn't know the neighborhood. He sent a picture from the outside, not the inside. We moved in a week later.

Lesson 7: The Recession saved our asses. Let that sink in as you think about the current Coronavirus crisis. You have at least one or two quarters to go fix what is broken in your business with no one paying attention to you. The spotlight is gone. Those nagging things you know you need to fix—GO DO IT NOW. No one cares about you right now. Let that be a tool for you to use!

Chapter 8: When You’re Not in Charge of Your Own Startup

Paul: Dave Jakubowski came in and had to tell Chris his baby was really ugly.

Chris: It tore me up. We built this thing for three years before that, and we're just going to gut it and put someone else in charge? Emotionally, that was a roller coaster. I had a lot of guilt around not being able to pivot the product faster. I should've seen this coming. I should have done more to help. There was a lot of insecurity around whether I should stay and whether I was even helping.

Jakubowski: I'll never forget my first day. I signed the papers, but nobody knew, with the exception of Paul and Chris, that I would transition into CEO.

I walked through the door, and there's a reception desk straight ahead. Cindy, who is now a dear friend of mine, is sitting at it. As far as I can see, she’s the only woman there. The rest is this hodgepodge of 15 or so dudes playing foosball and throwing darts.

The place is a dump. There's shit on the floor. There's a blue and yellow hippopotamus that rocks back and forth. The place is a disaster. What the fuck did I just do?

Chris: We brought in a bunch of new folks who knew what they were doing, like Pascal Bensoussan, who ended up running product. Perry Nussbaum came in to head up sales. We were all following Jakubowski's lead. From my perspective, anything he needs, let's go help him get that. As founders of the company, that was our job—to make sure the transition worked in the middle of a damn recession.

Jakubowski: One of the first really, really hard things I had to do was figure out Chris. He's not going to want to stick around, but Chris is very talented and knows the company in a way that I never could. I needed somebody to run the operations around the existing business. Because remember, we had to change the wheels on a moving train. I needed somebody who could keep those operations going and keep servicing clients while we built a whole new product in parallel.

Chris: I started doing sales, which was totally outside my comfort zone. But I needed to step away from the product side because we had a new person in charge. I would just be getting in his way. There were definitely thoughts of leaving, but I had this tremendous sense of responsibility. I couldn’t walk away without making sure we were on a good path.

Jakubowski: Without Chris, it could not have been successful. And I'll be forever grateful to Chris for signing on for that deal with me. If Paul and Chris had not been completely transparent, 1,000% supportive, it would have been over. We had to be brutally honest at every step, and a lot of it sucked.

Chris: I didn't know anything about ads, but I was working for our chief revenue officer, Perry, as a sales guy. I went from a founder and head of product to the sales guy getting on planes to New York and LA. I just tried to learn, and Perry made me do things that I had never been comfortable doing in my life.

I was supposed to be the guy in front of Skechers telling them, look, I know the last ad campaign that you ran with us didn't have the outcome that you wanted, but here are the spots where it really did work. And here's why you should double down with this instead of cutting us. Perry said, "Chris, don't come back unless you've had that conversation with them."

"Perry, I don't know…If I were on the other side of this..."

And he said, "You're not on the other side of this. Get in there and get that deal done."

Jakubowski: We're getting ready to do the recap just like we architected with Randy the day that I flew up from Orange County. Paul was transitioning me to CEO, so he could turn his attention to what is now Bullpen Capital.

Paul: I had Komisar’s permission to hire Jakubowski on an interim basis for six months. But convincing Komisar to let him come on as the CEO was a harder problem. When it was time to promote Jakubowski after six months, he had to interview with the “The Coach,” Bill Campbell.

He was shitting his pants before the interview. I swear to god, I've never seen Jakubowski worried in my life except for that one moment. Afterward, I got on the phone with Campbell because I needed to find out what he thought of Jakubowski. This was a big deal. Bill could kibosh all the plans that I was daydreaming about for the last year.

"Martino,” he said, “you found a polish kid from Buffalo. Hire him.” Click. That was the whole conversation. There was no, "Hi. How are you doing?" or "When does he start?"

So I called Jakubowski. “You got the job,” I said. “And you got really high praise from Campbell." Explaining why this is high praise from Bill Campbell is a whole book unto itself. [If you want to hear the lessons from Bill Campbell, listen to our No Bull podcast.]

Lesson 8: Either step away when your time’s up, or step into a new role. You can’t hold onto a familiar, comfortable role once you’ve tapped someone else to lead. Your new job is to do whatever they need.

Chapter 9: Shuttering One Business, Starting Another

Chris: We ended up closing a big deal with Verizon, and we got a new office space in San Mateo. It was an open area. This was the Dave Jakubowski vision of what the office should be. The cube walls were gone. It was a much more modern, nice-looking place.

Jakubowski: It took 18 months before we were in the clear. We made the decision to go to the biggest client that Aggregate Knowledge had and shut off their business. That meant that we were fully transitioned on to the new business and we didn't need the old one anymore.

Chris: You never imagined telling a customer that you've worked with for years, hey, I'm really sorry, but we're not in that business anymore. We're doing Y now instead of X.

The customers are like, well I was depending on you for X. We have a contract that says that you're going to do X for us. What do you mean, you're going to do this other thing instead!?

Paul: My job was to make Jakubowski successful. If he wanted to tell me to ‘F’ off in a board meeting, there'd be a part of me going, "Good. Good work."

Chris: In 2012, I told Jakubowski it was time for me to go. And he said, “No, no, no, you can't go."

"No, really, I'm past my expiration date.”

But the answer was still no. “The deals that you helped close, Chris, are the ones that renew."

Because I have a product bent, I want people to use it. If you're not using it every day, I feel a little dead inside. I kept pushing my customers to engage with it. That's what kept them wanting to renew.

I said, "Okay, I'll do that, but that's not really what I'm great at. There are surely better people than me.” And we worked out a deal where I would stick around to help find my successor.

Jakubowski: We were signing clients, we were growing. It was a startup all over. It had all of the usual problems, but all of the signals were good. We shut off that remaining part of the business and transitioned the people who were maintaining it on to the new business.

Chris: Economically, it made no sense for me to stay. I wasn't getting a bunch more stock. And we were still a startup, so I wasn't getting big bucks or anything out of that. The reason I stuck around was because I really loved what Jakubowski was doing with the company, and I was learning a lot.

Paul: Pretty much no venture deals got done between August of '08 and April of '09, when Jakubowski joined us. That’s why the six extra months we bought ourselves were so important. On November 1st, 2009, we signed our new financing with OVP out of Seattle. Jakubowski was officially the CEO, and I was the chairman. That financing saved the company. If we had needed to raise money any earlier, we would have been out of business.

Lesson 9: You survived. Now grow market share on the backside of the crisis. And get another quarter or two of runway. Just because you pivoted, that doesn’t mean you’ll have revenue flooding in.

Chapter 10: From Great Recession to the Coronavirus

Chris: The important thing for Aggregate Knowledge was Paul's ability to act decisively and call the ball early. He got in front of the issue. The board never asked us to do this. Paul figured it out, he went to the board, and said that we’ve got to change. That gave everybody so much more confidence. By the time the board comes to you and says, "We have a problem," you're toast.

Jakubowski: The very first thing that I think saved Aggregate Knowledge was intellectual honesty. Paul and Chris had started that process before I got there, and it was part of the culture until the day we sold. At a time like this, you have to be intellectually honest with yourself about what is likely to happen.

Peterson: The situation that you're in doesn't dictate the outcome. But what you do in that situation will dictate a lot about the people that you're going to surround yourself with over the decades that follow. I just believe that acting with integrity can lead to good things. That was the case for most of the folks coming out of Aggregate Knowledge.

Chris: I felt some internal resistance to change. "Paul,” I remember saying, “do we really have to do it this fast? Maybe a couple more months will change the data coming in, and maybe things will turn around?" But eventually, I realized that this is our reality. There’s no looking back.

Jakubowski: When things are good, the scrutiny of decision-making and the forcible evaluation of value melts away. We get lazy. And we find all kinds of reasons to justify whatever we’re doing. Recessions and downturns bring absolute clarity, very quickly, to things that have value and things that don't have value. When things are bad, like right now, every decision matters.

Peterson: Be really sober about who you need on the team and why. Just because you need to make hard decisions with your team, or be the one who leaves, it doesn't say anything about you and your skills. Those don't change. It's just the situation that changed.

Chris: Look, it's going to be fucking hard. Everything just changed on you. With very little information, you have to make some really hard decisions about what you're going to do to preserve your company. I think sticking your head in the sand and saying, oh, it's all going to be fine, is a terrible answer.

Paul: You are an entrepreneur. You are built for risk and uncertainty. It's only in risk and uncertainty that you can unseat the big incumbent you're going after. So, if you're nervous and scared, you better get over it, or you better find a new job because entrepreneurship is not your job.

Peterson: This crisis is real. It will have a beginning, middle, and end, and if it doesn't, then we're all screwed anyway. If you spend a lot of time manufacturing things in your head, though, those things become real. You need perspective, you need good people around you that you can trust, that have walked through other fires. Keep your head and do the fundamentally right things, and you'll get through it. You don't know where you're going to land.

Lesson 10: Don’t wait and see. Don’t assume things will correct themselves. Don’t chalk it up to something beyond your control. Call the ball early when stuff is broken and needs to get fixed.

You’re Up

In hindsight, everything worked out for the Aggregate Knowledge crew.

After resigning in 2008, Dave Peterson found a new job just before economic shit hit the fan. He became CMO at Coverity, a code analysis and testing company, which was acquired by Synopsys in 2014.

In 2011, Peterson left Coverity to launch Play Bigger, an advisory firm that helps companies do category design—the exact skill that had made him so valuable at Aggregate Knowledge. By the way, Peterson has become a familiar face around the Bullpen office. He shows up to our Fullpen meetings (the original Shark Tank) to drill entrepreneurs about their marketing strategy.

Under Dave Jakubowski, Aggregate Knowledge became the top predictive analytics platform for advertising agencies and brand marketers. Neustar, one of the biggest ad tech players, acquired Aggregate Knowledge in 2013.

Dave Jakubowski (right) celebrating the acquisition of AK by Neustar

After the acquisition, Jakubowksi went on to lead analytics and data at Facebook. In 2019, he co-founded Ureeka, a mentorship community for small businesses. Right now, they are coaching entrepreneurs through the turbulence of COVID-19.

True to his word, Chris Law stuck with Aggregate Knowledge until he found his replacement. And then he took a break. Claw thought he’d run through the items on his bucket list—like organizing all of his photos. That didn’t happen.

Claw realized that what he loves doing is building things. After a lot of convincing from friends, he decided he’d try out life inside a behemoth. He is now a senior product manager at Google.

As for me, I wasn’t bullshitting Jakubowski. Once it was clear that I wasn’t the right person to run Aggregate Knowledge, I started planning my next move: Bullpen Capital. And surprise, we are investors in Ureeka, Jakubowski’s new company.

Claw, Peterson, Jakubowski, and I know it is a mess out there. We were once in your shoes. On paper, it might look like everything went just dandy. We started a company and sold it. But as you can see, it wasn’t a smooth journey. Even before the economy melted down, we went into “cockroach mode” to save the company. And if not for the Recession, investors might have pulled the plug on us before we had a chance to pivot.

When things can’t seem to get any worse, you gain the freedom to make bold moves. Right now, you have a chance to fix everything wrong with your company without the usual scrutiny, attention, and judgment. No one cares what you’re up to right now, and that might be your competitive edge—if you can make your capital last.

And like Jakubowski said, the thing that probably saved our asses was intellectual honesty. Once we faced up to reality and took responsibility, everything fell into place.

Now, you’re up. This is going to be rough. There will be hard decisions to make. And these next few months could define the next several decades of your life (so no pressure). Survive and thrive, go do it again, and then teach the next generation of entrepreneurs how to do it, too.

If you're an entrepreneur, you were made for this. And we are rooting for you.

-Paul

Bullpen Capital

The Leader in Post-Seed Funding

Paul Martino

Written by

Bullpen Capital

The Leader in Post-Seed Funding