What a way to start off 2008! First, we are honored with a number of awards (more on this later)… And today, we at the the Rubicon Project announced that we have raised $21 million in total financing (see press announcement). We are very excited, as this is a huge vote of a confidence for the company from investors. It’s not everyday that a company that has been around for only 8 months secures this much money. It seems crazy that it’s been that short of a time. If you look at the company in terms of product, customer traction and performance, it might look like a company that’s been around for years. More than 3,000 websites have signed up for our service and we’ve optimized over 4 billion ads in the past 13 weeks following our beta launch. Our customers have seen anywhere from a 33% to a 300% lift in revenue using our service (while doing a lot less work). It’s clear that the demand is strong, now we need to deliver for the 1+ million sites on the Internet that make money by selling ad space. This new funding will help us move faster and more aggressively.
So, how did it happen? Well, it all started with a trip to Hawaii…
A few months after starting the Rubicon Project, I received an invitation to a conference called The Lobby. The invitation-only conference, meant to be a meeting of the minds for the Who’s Who in technology was organized by David Hornik a venture capitalist with August Capital. At the time, I was right in the the thick of the Rubicon Project’s development. The company was still in “secret-ninja” mode and we weren’t talking about what we were doing. In fact, we didn’t have plans to talk about what we were doing until we launched the beta, which was originally expected to be January, 2008. Being that I wouldn’t be able to talk about my current experiences, my first reaction was to not go to the conference. My wife, Rita and my co-founder, Craig convinced me that I should go as I had plenty of experiences and insights to share from my previous companies. Plus, Rita and I tossed around the idea of staying the weekend following the conference to turn it into a mini-vacation, seeing as how we hadn’t taken one in a while and it was long overdue.
I felt guilty by the prospect of leaving the team for a whole week! Especially since the team was pulling all-nighters, sleeping in the office trying to get the product launched. I am very metrics and ROI driven and I just couldn’t convince myself of how this conference was going to benefit the company, being that we were being quiet about our plans. How was I going to justify going to Hawaii while they were all working so hard?
Well, after accepting the invitation, we ended up launching our beta product far ahead of our original plan. The launch happened 2 weeks before the conference. Now, at least I was going to be able to talk about what we’re doing. But, the launch brought on a massive amount of unexpected demand. 500 websites signed up for our service in the very first day, a target that we had set for April of 2008 (6 months later) and hundreds continued to sign up by the day. We were massively understaffed. I faced a decision of going to Hawaii or staying to help the company chase the incoming demand. My co-founder, Craig, who’s motto is “brut force it”, said “Go, Addante! We’ve got it covered. I know you and I know that you’ll find some way to extract value from it.”
So, I went to Hawaii, feverishly checking my blackberry and calling my assistant Mallory to make sure everything was OK… Everything was fine; the team, as they always do, found a way.
One of the days at the conference, we were grouped into teams. One of my teammates was Raj Kapoor of Mayfield Fund. Mayfield was one of the very few top venture capital firms that I didn’t already have a relationship with. Raj, the founder/CEO of Snapfish, was a young guy that seemed to be very smart and had a lot of energy. We instantly hit it off and spent most of the day talking about building companies and the online advertising space. We also spent a lot of time talking about the Rubicon Project. I was trying to pick his brain and get feedback, he was trying to learn more about the space. It was a great conversation that lasted about 6 hours on and off.
The conference ended. Rita and I were going to begin the mini-vacation part of our trip. Raj had an invited us to go snorkeling before he left; along with Heather Harde (Rita’s former co-worker at Fox and now the CEO of TechCrunch) and Ted Rheingold and John Vars the founders of Dogster. Raj and I spent a few more hours talking about the Rubicon Project, then he said “Are you looking to raise venture capital?” I said, “not right now, we’re focused on our customers and doing a great job for them, trying to catch up with the demand.” A lot of investors had been reaching out to us after our beta launch. I continued, “fund raising would be a distraction and we don’t need the money.” While on the snorkeling boat, Raj asked Heather and the Dogster founders about the challenges of monetizing their ad space. Their responses supported exactly the problem that we’re solving at the Rubicon Project. Raj told me to give them “the pitch”, so I did — in my bright yellow swim trunks, a snorkel on my head and eating goldfish crackers. We’ve all heard of “elevator pitches” before, but this was taking it to a whole new level…
Raj said, “Look, I know the space. I’m aware of the problem. I just did some real-time due diligence. Come in and pitch my partners, it will only take one hour of your time.” He committed to making a fast decision after the meeting and asked that, in return, I agree to an exclusive conversation with them for just a couple of days (until I returned to the mainland for the meeting). Normally, I would never agree to such an arrangement. But, Raj seemed to be a stand up guy and I liked his style. I also figured that I was going to be in Hawaii and wouldn’t have much time to talk to anyone else anyway. It turned out that while I was in Hawaii, the word on the Rubicon Project was spreading fast — and when I returned to my inbox, it was flooded with emails from investors. But, I was committed to honoring my verbal agreement with Raj.
The rest is history… We ended up agreeing to a deal with Raj and Mayfield within a week (it actually closed in December). I felt a strong connection and great energy from the entire partnership at Mayfield. It was clear that they knew the online advertising space very well, especially having invested in companies such as Revenue Science, AdKnowledge and Consorte Media. I thought that they would be a great complement to our existing investor, Clearstone Venture Partners, who had the original vision to believe in the company and the team. Clearstone, especially Sumant Mandal and David Stern (our board members), has been incredible to work with. Their support has been instrumental to the success of the company.
As part of the deal, we wanted to carve out part of the round for strategic investors. We ended up bringing in IDG Ventures Asia, Stanford, Berkeley and Matt Coffin, the former CEO and founder of LowerMyBills.com. Matt was one of the biggest advertisers on the Internet and one of DoubleClick’s biggest customers. IDG will help us with international expansion. Stanford and Berkeley will be helpful with recruiting efforts.
All in all, we are very excited about this next step. We are solving a massive, massive problem for the online advertising industry. Raising $21 million is a big commitment, both to our investors and to the team. We decided to take in the additional capital because we have a big vision and the market has shown that it’s very supportive of that vision. To date, more than 3,000 websites have signed up for our beta. We’ve grown the team to more than 40 people. The product has been performing very well for our customers, as such, all of the inbound demand has been word of mouth. And, the team is executing with fire and tenacity. Momentum is on our side and personally, a big part of our decision was driven by the need to move fast and never slow down. So, that’s exactly what we’re going to do!
As you know, I always like to wrap a lesson into every one of my posts. In this case, I have to tell you that if it wasn’t for the confidence in my team, there would be no way I could have afforded the time to go to Hawaii at such critical time. Another lesson, I suppose, is that not everything has to be about metrics and ROI (team: if you are reading this, please feel free to forget I just said that). Sometimes it’s just about taking advantage of an opportunity that presents itself to you. That’s one part of the lesson… the second part is to make sure you have a good “snorkeling pitch” to go with your “elevator pitch”! =)
By the way, in case you were wondering how the mini-vacation went. Well… as luck would have it, when we got back from snorkeling 9 fires were started on the island and we had to evacuate. Serves me right for taking a day off, lesson learned!
As a side note, that video I created on building companies in Los Angeles versus Silicon Valley was made for The Lobby conference. Not sure if that factored into Raj’s decision. But, it’s great to see the divide between Nor. Cal and So. Cal closing. More and more venture capitalists from Silicon Valley are coming to Los Angeles to find innovation. This funding announcement is good for Los Angeles and it’s great for the online advertising industry, a space that’s been lacking innovation for some time now.
OK, I gotta get back to work now…
PS – And more good news to share… We have been so fortunate and are very thankful… Due to your strong support, we won the Twiistup “Best Showoff” award (the event hosted by Perez Hilton and Shira Lazaar), and we were selected as one of the top 100 private companies by AlwaysOn and finally, were also picked as a finalist for the Price Waterhouse Coopers Entretech Award. I’ll be in NYC this week presenting at the AlwaysOn OnMedia conference before our press/media tour — if you’re going, I’ll see you there!