Prepared for Purdue Entrepreneurship
Certificate Program
Team Analysis & Discussion
Spring
2007 © Hank Feeser
From: http://www.geoffclendenning.com/ePod_story.htm
Summary: Geoff Clendenning most recently held the position of co-founder and CEO of ePod Corp., a provider of interactive marketing services and technology. As CEO, Geoff secured $21 million in venture funding from leading U.S. venture capital firms, including: Brand Equity Ventures, Macromedia Ventures, i-Hatch, XDL Capital and U.S.Trust (Schwab). Over an 18-month period Geoff grew ePod into a leading provider of interactive marketing services and technology, securing deals with DoubleClick, Macromedia, CDNOW, NBCInternet, IBM, and Columbia-TriStar Interactive.
Born in Oxford England, Geoff grew up in Ottawa, Canada and attended Lisgar Collegiate high school prior to completing his BAH in Economics and Biology at Queen's University.
Prior to launching ePod, Geoff served as a senior consultant at iNautics Inc., a strategic management-consulting firm specializing in Web marketing. Before iNautics, he was a sales consultant at AureCom Systems Inc., where he was responsible for business deals including the deployment of a nation-wide information service for Canadian businesses.
Story: The
original concept behind ePod first took shape in Ottawa, Canada over a series
of lunch meetings at a popular local lunch spot. Similar to myself, Jeff Ungar,
the co-founder and CTO of ePod, had built a successful consulting practice and
was looking to take on a new challenge. The year was 1996 and the
"internet revolution" was just beginning to pick up steam.
DoubleClick and Yahoo had launched their IPOs and the venture capital craze was
in its infancy. The Internet was revolutionizing the world and I was determined
to participate. So with money raised from family and friends, we quit our
consulting jobs and stepped onto a roller coaster that would take us from
Ottawa to New York through many dizzying highs, gut wrenching lows and even a
few loop-to-loops along the way.
With limited access to venture capital funding in Canada, ePod's
beginnings were humble compared to the highly capitalized startups commonplace
south of the border in 1997. We spent the first two years conserving capital
and developing our technology with a small team of three programmers, a graphic
designer, Jeff and myself. By the spring of 1999 we had secured our first round
of venture financing from the one venture capital firm providing startup
capital to internet companies in Canada at the time.
After a lengthy closing period during which I learned how to apply
the entrepreneurs' age-old art of credit card financing, we finally had $1
million in the bank. Having successfully struggled to the summit of Canada's
venture capital market I did what any good Canadian would do, moved the company
to the U.S. I knew moving to New York was critical to our success, it would
give us access the U.S. capital markets, veteran advertising executives and of
course the tidal wave of hype that was expanding the dot com bubble beyond all
expectations.
Moving from Toronto to New York City during the Internet boom was
like turning onto a six lane super freeway from a quite country road. If you
didn't step on the gas hard and fast you'd soon find another car driving
straight up your tail pipe. The catch phrase "first mover advantage"
was all the rage at trendy New York meet and greets. The mandate for an internet
startup, "get big fast", get to that million dollar quarter and then
cash out with a big IPO. In 1999 companies like TheGlobe.com had set the stage
by posting unprecedented first days gains on their IPO.
The first item on the New York agenda was to hire some high priced
U.S. talent, instantly doubling the company's burn rate. With talent on board I
soon realizated that New York ran on money, and $1 million was merely a drop in
a very large bucket. So it was again time to raise money and that meant mixing
it up with the sharks in New York.
The waters were full of them, it seemed like everyone and anyone
could become a Venture Capitalists and they all wanted a piece of the action.
By the fall of 1999 the feeding frenzy was on. Hundreds of startups were vying
for millions of dollars and Venture Capitalists were tripping over one another
to get into the best deals. Because we were under funded in our first round in
Canada, we needed to raise money fast. Supply was not the problem, time was. We
had a great product and a lot of interest from customers, we needed to move
fast - remember the company with "first mover advantage" would win
all the marbles. My plan was to quickly close a bridge round of financing that
would allowed us to move forward with customers while closing our second round
of financing.
At this point I learned another one of those lessons that can only
be attributed to real world experience. Money never makes things easier,
raising more money brings with it as many problems as it solves. I also learned
that closing a financing deal always takes longer than you expect and you
should expect it to take a very long time. I finally closed our bridge round of
financing on December 24th, 1999 hours before flying to London, England to
visit my family for Christmas.
I returned to New York for the millennium celebration to face the
fear of a worldwide computer melt down. The hype around the "millennium
bug" had reached a frantic level. Thousands of people had surrounded
themselves with bottled water and army rations; hunkering down in basement
shelters prepared for the impending doom. Much to everyone's relief and in some
cases annoyance nothing happened, the world did not explode. In hindsight
however, the doomsayers may have been right, the Internet bubble was stretched
to the limit and would surprise everyone by bursting just a few months later.
For ePod the next step was to move forward aggressively and raise
a second round of financing. By February we were crisscrossing the country
bouncing between New York, San Francisco, Boston and Los Angeles. By March the
pitch was refined, the message clear and we were in full attack mode,
unfortunately the stock market was in full retreat. On the road our days
consisted of pitching Venture Capitalists in the morning followed by lunch at a
local restaurant to watch the NASDAQ do its best impression of a ski slope and
a steep one at that. Nevertheless we raised the money, and after another period
of extended negotiation and a lengthy closing we banked $15.5 million in June
2000.
My education as a internet CEO continued, during these
negotiations I quickly learned that everything has a price and timing is
everything. Unfortunately for us we faced challenges on both fronts. The mood
in the venture capital market was already starting to shift; the rapid drop in
the NASDAQ had unnerved the community and for very legitimate reasons deal
terms stiffened. For us it was better to do a tougher deal than no deal at all,
and that's exactly what we did. In the end we did better than most considering
the venture capital markets would be shut to new Internet startups altogether
in less than six months.
I now had the money and the people in place to really grow the
business. As long as the online advertising market remained healthy and growing
ePod was well positioned to win. We were getting great press; we had just
closed a distribution deal with DoubleClick and we had deals with CDNOW and a
number of other dot-com clients. This however, is where the issue of timing
came in. By the fall of 2000 the bottom was about to drop out of the
advertising market, crippling Internet icons Yahoo and DoubleClick in the
largest advertising slump in 10 years.
This prompted the mood in the venture capital community shifted
once again. The mantra "get big fast" was out, replaced by a new
mantra "get profitable fast". Not surprising, switching a company
from "get big fast" to "get profitable fast" is not a
simple task, it's analogous to retraining a sprinter to become a marathon
runner. To do so requires some fundamental changes, lose the bulk, pace your
stride and conserve energy for the grueling run ahead. Unfortunately for a
company this means conserving capital, and in the high tech world conserving
capital means layoffs. So like many CEOs I made a tough decision, determined to
refocus the company I laid off 25% of the staff.
By January 2001 the cuts were behind us and we had refocused the
company to sell our services and technology to blue chip customers. No more
dot-com customers. The advertising market was changing rapidly as click-through
rates dropped below 0.5%. Advertisers and publishers were prepared like never
before to experiment with new technologies, desperation was near and they where
prepared to try anything that promised to increase sagging click-through rates.
By the end of January we had advertisers like IBM, Gateway and Entertainment
Weekly and publishers like Hoovers.com, DoubleClick and StarMedia using ePod's
technology. Unfortunately for us, it was about this time that the online
advertising industry went into free fall, along with the telecom, chip, and
computer industries.
Panic ensued, orders were either delayed or cancelled, contracts
that had been in the pipeline for weeks evaporated over night. Revenues
plunged, and when revenues plunge Venture Capitalists get uncomfortable. Chaos
had gripped the venture capital community; the clenching sound of Venture
Capitalists reacting to the change in market conditions was almost audible. For
many Venture Capitalists the mantra changed once again from "get
profitable fast" to "get out fast". For ePod, too much had gone
wrong to fast, the "get out fast" mantra was ringing loud and clear
in the ears of our venture capital backers.
In the end each board member was motivated to maximize their own
return on investment, and given the prevailing market conditions it was
impossible to meet the venture partners desire for instant profitability. The
board voted to cease operations, sell the assets of the company and return the
remaining working capital to the venture partners.
Although regrettably ePod is no longer operating, it's technology
has lived on, and perhaps we helped shape the future of online advertising by
pushing the boundaries beyond the banner. StarMedia the leading web portal in
Central and South America acquired ePod's technology in April 2001 and will
soon launch a series of ePod ad units across its web properties later this
year.
The Players:
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Entrepreneurial by nature, Geoff's experience building two
interactive-marketing companies has taught him that hiring good people and
empowering them with decision-making powers is the key to building a
successful organization. Prior to launching ePod, Geoff served as a founder
and senior consultant at iNautics Inc., a strategic management-consulting
firm specializing in Web marketing. Before founding iNautics, Geoff was a
sales consultant at AureCom Systems Inc. where he was responsible for business
deals including the deployment of a nation-wide information service for
Canadian businesses. Geoff is a recognized expert in the interactive marketing field.
He has appeared on CNN and has been featured in articles in the Wall Street
Journal, Business 2.0, Industry Standard, ADWEEK, CNET and more. He has
spoken at numerous events, including AdTech New York and Affiliate Solutions.
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Prior to that he spent four years as a consultant with Andersen
Consulting. His development projects include a payroll system for 240,000
Canadian government employees, a multimedia information and catalog system
for computer retail stores, and many others. Jeff co-founded ePod Corp.
primarily to absorb his copious creative energy. In his diminishing spare
time, Jeff runs, plays squash, and studies New York City subway maps. |
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Michael came to ePod from United Media, the syndication and
licensing company for such well-known characters as Snoopy and Dilbert. As
United Media’s general manager of online services, Michael established a
network of branded Web sites (Comics.com, Snoopy.com, Dilbert.com), doubled
United Media’s Web traffic and its online revenues. Prior to that, as
director of development for ABC-TV's new media group, Michael extended ABC’s
brand into software publishing, online services and the Web. Michael began
his career at Walt Disney Imagineering, where he produced interactive
pavilions for Euro Disney and Epcot Center. Born in St. Louis, Michael is a life-long Cardinals fan even
though he has lived in New York City off and on for 16 years, demonstrating
his belief that perseverance is as important as flexibility. |
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