Seed to Scale: towards a $30M round for Integral Ad Science
I hate high capital intensity, yet here I am celebrating a $30 million (thirty) for Integral Ad Science led by the excellent August Capital with my beloved CEO telling Techcrunch "we did not have to raise". So what gives ?
The wedge: narrow, but unique
I invested in Integral (f.k.a. Adsafe Media) in 2010, a mere 3 years ago. At the time Adsafe had almost no revenues and a narrow if unique value proposition: page-level brand safety for display advertising. The company marketed itself as "the standard for brand safety online". What it did have was the very unique ability to do page-level content analysis in near-real time and effectively redirect ad calls before they even got served.
The gorilla at the time was a company called DoubleVerify, known for "aggressive" marketing tactics and systematic publisher bashing (cfr. this article: "going after competitors’ clients by firing off emails to agencies featuring incriminating screenshots of their clients’ brands in undesirable places").
I don't think anyone gave us much of a chance and everyone thought we'd be sold for our people and tech within two years.
What no one could do though, is rank pages for content verification in (near) real-time. DoubleVerify could do after-the-fact audit, but they could not do prevention.
What you need to get going in the early days of a B2B startup is a wedge, and I felt we had that. People were spending on ad safety now, and soon they would be needing all the other stuff we could do with a page level content engine.
Step 1 : Build the team
Adsafe was started by some discrete adtech executives who acted as the "eminence grise" behind the company and were joined early by Eric Paley from FounderCollective (David Frankel and Eric have a good nose for finding the good ones) and a bunch of notable NY angels. They assembled an initial team, some of which are still around today (David Hahn, Bryan St John), some of which are not (our super "launch" CEO Helene Monat) and started building prototypes. By early 2010 they had some beta clients in the form of large trading desks, some early revenues and seemed to have enough differentiation against DoubleVerify to take the bet.
Off we went.
My second month with the company was an epic "oh shit" moment. We had been talking to our lead commercial exec about becoming CEO, and he abruptly left (giant blanket drawn over whole series of events). We lost our head of sales for personal reasons. With a vacuum in leadership, the company was fighting itself instead of the market.
Somehow though, we managed to sell. Revenues were going up and we broke $100K in December. Early days but at least we had clients. Now all we needed was a CEO.
We retained Gary Constance at Daversa to run a proper search, which we kicked off in December. Boy, these guys are expensive. Biting the bullet on the fees left me with a sickening feeling. Gary sought to reassure me : "Fred, Make no mistake I will land you guys a rockstar".
I first met Scott Knoll in February. Eric and I were chatting over this and I am pretty sure the intro came from our fantastic non-exec Don Epperson. Don is also the person who delivered the Atlas intro, so way to go on adding value :-) We did not close him until April. It was interesting to me that I had so many doubts early in the process on a person that turned to be one of the best hires I've been involved with.
Two learnings for me in that search:
- Reach for the stars - with Gary's help, we went after some people we had no hope in hell of landing, and a bunch we got to sit down at the table. We saw an amazing field of strong candidates, even if in the end it's the internal candidate that turned out to be the best.
- Leadership comes in many flavors - Scott undersells to a fault. He's thoughtful, understated. Not your classic New York adtech "rockstar" :-) I always liked him but I definitely had to suspend disbelief too. I did not anticipate in interviews the truly excellent leader we got.
Once Scott was in, internal strife pretty much vanished. We kept on adding talent to the team, and we kept on selling. Today, after a careful exercise of team building, we have one of the broadest and deepest teams in the Atlas Venture portfolio.
Step 2 : earn your stripes
Adsafe is not a company that over-promised, or simplified its marketing message in the pursuit of sales (looking at you, DoubleVerify). Adsafe is not a company that had a pretty interface but limited tech chops (looking at you, AdXpose / Comscore - you get what you pay for). We were flawed, but our product worked, did unique stuff, and our focus on keeping all our clients happy was relentless. As a result, revenue grew fast. Marquee accounts were won. Top accounts realized we weren't going to be roadkill of the great adtech superhighway, but were here to stay. It was time to grow up.
Step 3 : broaden the scope
Growing up in our case meant expanding out of the ad safety ghetto and leveraging our unique real-time tech to do more for our clients. The revised platform offering looks like this: we can be the company that helps you measure / understand / enforce media quality across all of digital advertising.
It came with a new name: out with Adsafe Media, and in with Integral Ad Science (yes, we like our data science).
In practice, this means adding to brand safety and covering all aspects of "Media Quality". Was my ad seen ? Was it seen by the right people ? In a location I care about ? Was it actually in view ? Was there click fraud involved ? Were there ad collisions ?
From the narrow world of brand safety to the very strategy problem of Media Quality / advertising quality. Suddenly a real-time pre-bid actionable set of analytical tools around making sure your ad dollars are well spent ... looks a lot more strategic, doesn't it ?
Step 4 : Scale
In B2B, you scale when you know your processes are ready and working and when you know how many months before your sales guys are going to hit quota. See this Quora thread on "what's involved in a startup scaling". We were lucky to have predictability on pretty much all the elements we need for scale, and soon we decided to go for it.
The first stage was to broaden the scope. We were lucky to be joined by Ben Dahl at Pelion (check them out) in a $10M Series C. We also decided to launch our international activities and had a great first year in the UK.
Revenues went up dramatically, with great reference customers. What next ?
Step 5 : scale harder
Something weird happened in 2013 : we hit our numbers. Startups never hit their numbers. And we got profitable (huh ? a profitable adtech company ?). And we kept on winning marquee accounts away from competition.
The debate we had at the board was the following: is our opportunity really large at this stage ? Yes. How much do we need to address it properly: $5-8M. If we had $15M in the bank could we use intelligently ? Yes. If we had $25M in the bank could we use it intelligently ? We don't know yet but we have strong hypotheses that we could. So let's go big.
We had inbound from a number of firms and decided to capitalize on that. The first call was with August Capital. Howard Hartenbaum knew Scott from a previous company, and was actually one of my key reference calls when we hired Scott. Within a few weeks these guys were ready to strike. They won the deal by being fast, by "getting" our market and simply by being nice and normal people to deal with. Welcome Eric Calrborg and Tripp Jones.
Ours to lose
The adtech market is relentless. There are a number of reasons why we can still fail. I have been in the field long enough to know that tens of millions in annual revenues does not equate success.
What I am proud about nonetheless, is that we built a sustainable company on sound principles : a careful and systematic team build, an unwavering focus on customer success, a gradual expansion of product capabilities and a humble and realistic way of communicating our capabilities to the market.