Tuesday Oct 5, 2010 by Keith Cline - Founder, VentureFizz
We are very excited to have the CTO & Co-Founder of ScanScout as our guest this week on Octane! ScanScout is a video advertising platform company located in Boston that was just ranked by Silicon Alley Insider as the 81st most valuable digital startup in the world!!
As a first time entrepreneur, Steven and his Co-Founder, Waikit Lau were successful in raising capital from legendary angel investor, Ron Conway and later secured a Series A round of funding from General Catalyst. This interview provides a lot of useful information for enterpreneurs in terms of raising funding, building a company in Boston, product evolution, building a team, etc.
VF: What is ScanScout?
SL: We solve the tough problems brand advertisers face when they move their messages online. Our Video+ Brand Performance Platform allows brand marketers to advertise online with the safety and transparency that they have come to expect offline. In addition, the platform offers performance and insights not available offline. We operate a next-generation ad network powered by our platform.
VF: Who are your typical customers and how does ScanScout generate revenue?
SL: We have customers on two sides. On one side, our customers are brand agencies and marketers (Fortune 500) looking to get their message out online and at same time looking for insights on who is engaging most with their message. On the other side, our customers are publishers looking to monetize their content. Agencies and marketers pay us for running their campaigns and generating strategic insights. Our platform figures out where to run the ads to maximize impact toward the marketer’s goal. We keep a cut and pass the rest to publishers.
VF: What was your background before co-founding ScanScout?
SL: I went to college at MIT where I did research on speech recognition. After MIT I went to SpeechWorks where I got to apply my speech recognition research in a number of different roles. For the first few years, I was a “start-up within a start-up” partnering with a business guy to set up our offices throughout Asia. Then I returned to Boston to manage a team responsible for R&D for Asian languages. It was a tremendous growth experience for me to have the opportunity to wear so many different hats as the company grew and went thru a successful IPO. After 6 years at SpeechWorks, I went on to Bose, then short stints at a couple start-ups, before starting ScanScout.
VF: How did you and Waikit Lau come up with the idea of ScanScout and eventually take the leap of faith to start the company?
SL: Waikit and I go way back to our college days at MIT. We kept in touch after, and in 2005 we were both really motivated to start a company. He was just finishing business school at HBS, and I frankly wanted to relive the early days of SpeechWorks when it was a ton of fun to be pushing something cool no one has done before. We looked for areas where there was a market need and where we had expertise. We started off doing audio mining for rich media content online (podcasts etc). We had early successes but to Waikit’s credit, he found the market opportunity would not be very interesting (ie too small). But, that exercise made Waikit realize that video would soon be big (this was 8 months before YouTube launched), and we set out to build a video monetization platform for brand marketers. That turned out to be the winner - iterate until you get it right!
VF: According to our records, your initial angel investment came from First Round Capital, Ron Conway, and Georges Harik. How did you initially get introduced to these investors, as all three are located outside of Boston?
SL: We wanted investors that could really help build the business regardless of geography, and Ron Conway is a natural target. Waikit knew Chris Dixon (founder of SiteAdvisor, Hunch, Founder Collective) from his days at Bessemer, and Ron had backed Chris at SiteAdvisor. Chris made an intro (hopefully putting in a good word for us!), we did the pitch to Ron, and rest is history. Once Ron signed on, that opened up opportunities with others that Ron often invests with. Despite mostly being in the west coast, our angel backers have been very helpful. Ron was very active in the company early on and helped us land many of the early executives. This is proof that your network is one of your most important assets.
As an aside, we thought about putting the company in the west coast given our early backers. But, Ron gave us some wise advice: “put the company where you can get the best people”. My network was 99% in the east coast, and at that time the biggest risk for the company was hiring the right initial employees. We stayed in Boston, hired the best problem solvers I knew from my past, and that was the right decision. Our 3rd employee (after Waikit and myself) Pete Martin is now our VP of Engr. Our 5th employee Dr. Tadashi Yonezaki now heads our core technology. It would have been much riskier heading west and competing for people there. And, Boston has a lot to offer for start-ups as well (talent, capital, community) - it’s not just about Silicon Valley.
VF: Approximately, how long did it take from raising your angel round to your first round of funding from General Catalyst?
SL: It took about a year. We used the angel money to build version 1 of our platform and to go out to talk to advertisers and publishers about their problems. We really understood their pain points and created a MRD/PRD for the v2.0 platform that led to our first round of institutional funding from GC. We had several options but GC was a natural fit for us given their knowledge and focus on the online video ecosystem.
VF: Startups typically need to pivot and evolve their business model over time, especially as customers start to use the product. Can you provide some advice or lessons learned to entrepreneurs on pivoting while keeping your business moving forward at the same time?
SL: I agree it is critical to be able to adapt the product and company to latest market needs. To that end, it is critical to be talking to clients at every opportunity possible. These should be focused conversations designed to solicit specific feedback, not generic spray-and-pray conversations that waste everyone’s time. Use these conversations to validate the product at every step of the process, from concept to spec to alpha all the way to GA. I have never had a customer meeting that didn’t get me a useful data point.
VF: What have been the biggest challenges in terms of building out your team? What have you done to overcome these challenges?
SL: Hiring is Hard. There are areas you can test, but even with the best screening process you never really know until the employee starts and you can see them in action making decisions and dynamics with the rest of the team is clear. The biggest lesson I’ve learned is to always evaluate ways to average up, but be fair and always let employees know where they stand.