Welcome to our second edition of Failing Upward! We spoke with Liz Zalman, co-founder and CEO of Media Armor (acquired by Nomi) and the database security SaaS company strongDM, where she recently closed a $3M round.
We talked about how weak sales despite a game-changing product made her drastically rethink the product-development process the second time around. Note that this interview has been edited for length and clarity.
Keyvan Firouzi: Can you start by telling us a bit about your career, specifically your experience as an entrepreneur?
Liz Zalman: Sure. The very first time I started a company was in college. I started an eBay-based consignment business, making money on commission. After I graduated, I built it up for about four or five years into something sustainable. Then around 2005, I decided I needed a change.
KF: What did you change?
LZ: I started working for someone. I took a job as an account manager for a company called Dotomi. That company did remarketing—the banner ads that follow you around with the things that you last looked at.
KF: So what happened after working for them?
LZ: I started my own company called Media Armor with a former colleague who was working at JumpTap. The idea was that there was an opportunity to build, essentially, DART for mobile; ad verification for smartphone display. After playing with the idea for a little while, I decided to quit Dotomi and focus on it full-time. I got in my car and drove to Boston, where I slept on his floor on an air mattress for a month while he and I got to work.
We formally launched in late 2009, raised some money, built a business, and were eventually acquired by Nomi in January of 2014.
KF: Great, so let’s start by going back. If you could talk to Liz before founding Media Armor, what advice would you give her?
LZ: I would probably tell her that she should listen more. I think arrogance is a big thing with entrepreneurs, and it’s really hard to hold it in check. Particularly when you’re younger, or when you’re doing your first startup, you think you know how to do things better than everybody else. You probably do—or you wouldn’t be doing it and people wouldn’t be giving you money—but at a certain point, the fact of the matter is, you’re building a business. You either need growth with respect to users or customers, or you need revenue if you’re selling something that should make money. Arrogance needs to be balanced by pragmatism.
KF: Was there a time where, had you listened or been more humble, things would’ve worked out differently?
LZ: Well, arrogance can also rear its head during product development, and in not listening to your customers. Every single entrepreneur that you’ll talk to is going to say that you have to listen to your customers. I actually didn’t. I said I did, but I didn’t.
At Media Armor, the product roadmap was 0% defined by customers. It was what we wanted, and where we thought the industry should be going, etc. If you’re going to have a company, and you want to build something great, not just build a piece of technology, but build a business—and those are two different things and they’re two different goals—then you need to listen to people. You don’t need to take their advice, but you need to listen. Listen to your customers, and then take it to heart. And then make the decision. Don’t just make the decision based upon your own mindset.
KF: Can you give an example of a time at Media Amor when a customer told you something and you didn’t listen, or you built a product feature because you wanted to but nobody cared about it?
LZ: At Media Armor we did cross-device consumer profiles. We knew who you were on any device that you owned—like your customer status: if you were new, existing, a repeat purchaser—and we could track your cross-device activity, whether it was a website visit, receipt of an email, seeing an ad, making a purchase, or buying in-store. Anything that you were doing as it related to a brand that we worked with was tied directly to you. That’s really cool, and even today, it’s not happening like we did it.
So we built that, and then the question was, “What do you do with it?” All of a sudden we had all this insight that CMOs had always wanted, but how do you act on it? It’s this very sort of “pie-in-the-sky,” 360 degree customer profile type thing, and nobody knew what to do with it. And that was our job, right? We should’ve figured out how to do that.
KF: Ok, let’s switch gears a bit from product and talk about money. Had either of you raised money prior to Media Armor, or was that the first time?
LZ: That was the first time.
KF: Were there things you could’ve done differently that would’ve been better?
LZ: There are always things that you can do differently. The thing is, when you raise money for the first time you have no idea what’s going on. I don’t care how many people you talk to. I had been around the process at Dotomi and had advisors who had been around and through the process, but you’re just a first-timer and people are taking a risk on you. So, I think the thing that you have to get over is the credibility hurdle. How do you get people to believe in what you’re building, given that you have no track record?
If you ask any investor if they would put money in a first-time entrepreneur or an entrepreneur who had previously failed, they would go with the failed one every time. That’s because they’re a known quantity. They know they’re going to stick it out; they know that, theoretically, they’ve learned from their mistakes, that they’re going to listen to their Board, etc. An investor’s job is to derisk everything as much as possible.
Going back, I think I would’ve reframed my approach: instead of talking about why our product was so revolutionary and why they should believe in it, I would instead have convinced them why they should give money to two first-timers.
We sort of failed the first time we went out to raise. We ended up raising $250,000 on a convertible note, but we were trying to raise a bigger round. The note happened because we needed more proof points before larger VCs would be willing to take the plunge, so we ended up just raising from friends and family. I think maybe two angel investors were a part of that round. From that quarter million and some more work, we were able to raise a Series A from VC funds.
KF: What did you learn along the way that enabled you to close the deal? Where there any differences in your approach?
LZ: Every single pitch is an opportunity to refine your pitch. If you look at the first pitch deck versus 20 in, it’s completely different. I would use meetings from people I knew were going to say no just to identify what the objections would be and to bake them into the deck for the people that I really wanted to raise from. You’re essentially product developing your fundraising deck.
KF: It sounds like framing the value of the product for people was a major issue for Media Armor. If you could go back, would you have started to think about how to sell the product, whether to an investor or a customer, earlier?
LZ: I now think about product development completely differently than I did then. If I had to do it all over again, I would not have built anything. I would have first called 100 marketers and asked, “What will you buy?” Then I would have aggregated the results and built a product that some number of them would've bought.
KF: That’s different than some advice that is tossed around among entrepreneurs. For example, there’s the Henry Ford quote where he essentially said that if he’d asked people what they wanted, they would’ve asked for faster horses. How do you reconcile the idea that customers should drive the product with the idea that entrepreneurship comes from a good idea nobody else had or was able to execute on?
LZ: So if we take the Ford example—let’s say Ford went out and interviewed 100 humans, and they all came back and said, “I want a faster horse.” The next question I would’ve asked was, “How much more money are you willing to pay for a faster horse? Are you willing to pay me double for a genetically engineered faster horse?” And if the answer is “yes,” I would’ve genetically engineered a faster horse. That might be the right way to think about it, or not. Ford made a lot of money.
I think there are two types of entrepreneurship. There’s the classical entrepreneurship, which is the story of Media Armor: two people who thought they could build something fundamentally different and better. Then there’s the other type of entrepreneurship that is “I don’t care what I sell.” I could sell wood cutting boards, but if they’re going to make me $100 million, then I’m going to sell those wood cutting boards, and they’re going to be the best cutting boards you’ve ever seen and I’m going to love selling you those cutting boards.
So I think the question is, what type of entrepreneur are you? At Media Armor, I was the former. At strongDM, the difference is I’m still very passionate about what I’m doing, the problem we’re solving has personally and professionally plagued me for 15 years, but I’m not married to it.
If somebody tells me, “This is great, but this other thing is better and, and I will pay 10x more for it,” that to me is a more powerful indicator of where the market is going and where we need to be than me living and dying on a mattress on a floor to do something that I think is right.
KF: That makes sense. Now let’s talk about strongDM. You said that strongDM started in a different place than it is now. Could you talk about what caused you to change tack in your current direction?
LZ: By training I’m an analyst, and I would argue that as an analyst, 80-90% of your time is spent making sure the data look good before you can actually do anything with it. Traditionally, data gets logged into databases, which essentially have a set of rules that tell you what “type” of information is allowed. Why couldn’t you use that to know, when the information is being logged, if it’s good or bad? Why wait until way downstream for a human to look at it? So we built something to address that.
At the same time that we started product development, we also started doing interviews with hundreds of people. We asked them to talk about pains that they had at work to make sure we were tailoring what we thought we should build to what people were actually saying. At the end of this process, we had built some product, but not enough people were paying—and that was interesting. We had to take a step back and ask, did they really want this product, or is there something else going on?
What it turned out was happening was that there was no one owner of data quality in most organizations today, and there was no line item in the budget for it. If nobody owned it and there was no budget for it, how were you supposed to sell it?
KF: That’s interesting. I know data quality is a huge problem, but I’ve never thought about who owns it. So what did you do next?
LZ: We went back through all of our product development interviews, and we wrote down everything that everyone was complaining about. We tried to roll it out into a higher level order, and then rank them based upon the amount of effort it would take to build an MVP, then started selling them. We built a product a week, and the only metric was, “How many copies of this can you sell?”
If something was starting to work, we would maybe refine it, and then try to sell it again the next week. When we got to the idea the we have today, it was night and day. We sold 28 copies in three weeks. It was insane.
KF: It seems like you have a lot of contacts. When you started did you have this many contacts or potential clients that would get on the phone with you? What advice would you give to someone who doesn’t have that rolodex of people?
LZ: Nobody starts out with that rolodex. I certainly didn’t. If you’re an entrepreneur, you hustle. Your entire job is to go and meet people, right? You’re going to meet people to give you money, you’re going to meet people to be your clients, you’re going to meet people to work for you, and you’re going to meet people to partner with. That’s the advice: go out there and talk to people.
KF: Did you realize that fairly early on?
LZ: I think that everything in life—everything—is based on relationships, and I’ve thought that from when I was very young. To me, that’s it. You never know when somebody can help you; you never know who knows whom. You just never know.
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