How to Build a $350M Company
Bryan Atwood was Co-founder and VP of Product at MoPub, now the largest mobile advertising platform in the world which was bought by Twitter for $350M in September 2013. He got his M.S. in Electrical Engineering at UC Berkeley before working at both Hitachi and Google.
We sat down with him to get his take on how to build a successful company.
When you started MoPub, how long did it take you to get initial traction?
When we started the company, we had a working prototype that Jim Payne (co-founder/CEO) had built and that the three of us (me, Jim and Nafis) used on our personal apps. The first task was to rewrite and productionalize the ad server, and we launched it publicly at the end of our incubator program. By that time we had a handful of small customers.
In terms of traction from there, we really built it up incrementally. We couldn’t just go to the top tier apps and have them sign on (although we tried many times!), so we started with the small companies, and used them as references for the next tier. We eventually worked up to the big apps, but it took building our customer base one layer at a time based on our reputation and product improvements.
What is more important for a startup - your team or your product? Why?
For us it was absolutely both. In terms of team, we were one of the only companies in the ad serving space where the founders came from the publishing side and our backgrounds were all in engineering. We were able to really understand publisher problems and also had the ability to build the best product and team around solving those problems.
On the product side, the number one priority was to never have errors or downtime for any reason. Our customers will be the first to tell you that we didn’t always achieve that, but we prioritized a solidly built product above everything. And it was just better than the competition because of that simple product focus.
How did MoPub set itself apart from other businesses in the advertising space?
We prioritized several things at the time but in retrospect one of the most important things we did was focus on ad serving for iOS and Android mobile apps and disregarded all other platforms. This let us build the best mobile app ad server and without having to spend resources elsewhere. We hit the mobile ad wave at the perfect time, when the big guys weren’t paying attention (Facebook is now making ~$2.5B per quarter on mobile ads) and the smaller guys were stuck supporting older phones or mobile web or other distractions.
Probably the next most important thing for us was that we prioritized the publisher experience over everything. It’s why we named the company MoPub, for “Mobile Publisher”. Other ad companies made most of their money from advertisers, and it can really make it difficult to serve the publisher fairly if you don’t have their best interest in mind. We felt if we made the best publisher platform that we would get the most publishers, and then the advertisers would follow (they did).
Once we had the publisher base, we were able to launch the first real-time bidding exchange for mobile apps, which was a way for us to profit off of the advertisers in the exchange instead of off of the ad server business. We then had a fundamentally different and far more profitable business model than companies that were just doing ad serving.
What are some ways companies can prove their value?
That’s hard to have a generic response, but one of the things that helped us early on was taking a lot of organizational cues from Google, in particular the OKR system used there and taken from Andy Grove at Intel (see “High Output Management”).
We then broke the company down to three primary metrics (number of ad impressions, revenue, and headcount). Then all of our quarterly goals for the company, teams and individuals were scoped around those metrics. The basic thought process was that all of your tasks and goals had to contribute to one of those things, and anything else was dropped. It is a simple way to help prioritize effort and helped us stay focused on building the best product and company in our industry.
When (if at all) should companies take investment?
It really depends on the industry and also the goals of the individuals at the company. For us, we had a major time constraint (mobile ads were happening now) and we felt it was a winner-take-all industry with several established competitors.
With that in mind, we didn’t have time to grow organically so we needed cash to start building a team. We used the first round to build an extremely strong engineering team because we felt like if we failed we could at least be “acqui-hired”. The second round was mainly for building out our sales, support and operations teams. At this point, we really felt like we had to capture the market and needed outside funding to achieve that.
I should point out that our investors provided far more value than just money. We might have gotten better financials with other investors, but the firms and individuals we partnered with provided crucial advice and assistance along the way. That should be a another key factor when deciding to take investment.
The downside of taking funding is that it puts you on a track to either go public or be acquired (unless you have a very special and rare investor). Some companies don’t want to have any pressure whatsoever to have to go down that path and should try to self-fund in that case.
Who starts the acquisition conversation, the company or buyer?
For MoPub, we had several offers for acquisition along the way but we always felt like we had more to achieve by being independent. That said, even from the start we knew that an IPO would be a difficult proposition. Ad tech companies just don’t do well on the public market. We also felt that an ad server and RTB (real-time bidding) marketplace needed to be part of a company with a larger story. Twitter came along at the right time and both sides felt like we could make a better impact on mobile ads by partnering.
I think even for companies that are ready to call it a day and need to find a buyer, they are still “not for sale” from an optics standpoint. Usually an external bank or investor will start hitting up potential buyers and then conversations start so that it never looks like it came from the selling company.
What is the most important thing to bring to that discussion?
Another tough question. For us, it was the ability to remain independent if the deal wasn’t right (we had lined up another fundraising round just in case) or even better is to have multiple buyers. On the other side of the coin, you have to also believe that partnering will make a better, stronger company as a result.
Bryan is currently working as an advisor and engineer at Bitmatica as we build out Dashtab.
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