Startup Survival: The EXPO Story

The best part about working with startup companies is the fact that life is never boring.  By definition, startups are risky, exciting and nothing if not ever-changing.  It’s quite easy to get sucked into the dream world of the big success stories - the Zyngas and Twitters and Facebooks of the world - without fully appreciating the hard work and effort that takes place within thousands of other startups which never have a billion dollar exit. 

Yet, as anyone who has worked with startups knows, it’s the moments when things aren’t going as planned which can define an entrepreneur’s legacy.  In my opinion it’s impossible to be a truly successful entrepreneur without coming face to face with the reality that failure is a very likely outcome.  For some founders, this reality comes swiftly and with excessive force, quite often resulting in startup death. But then there are cases in which a founder stares down failure and refuses to let it win, even when the bank account or every single fiber of rational thought suggests that success is not an option. 

I had the distinct pleasure of working with Bill Hildebolt, founder of NYC-based EXPO,  over the last few years including a period of time in 2008 and 2009 when it seemed very likely that EXPO would be just another random VC-backed company in the startup deadpool.  As the company’s commercial lender and a debt holder, this presumed reality was scary to say the least.  Yet, through a series of calculated, intelligent, and inspiring actions, Bill and the EXPO team were able to rise from the proverbial ashes and find themselves in a position today as a thriving, profitable enterprise with a growing staff and client base and a bright future ahead. 

The EXPO story is not well known, but it should be.  It’s a story about perseverance and integrity under pressure.  It’s a story about the entrepreneurial spirit and a refusal to let a company die.  It’s a story worth sharing, which is why I asked Bill to do so through a series of questions and responses which tell many of the lessons learned along the way - lessons which are no doubt instructive to entrepreneurs everywhere. 

Bill, you are a founder of EXPO, which has been around for more than a few years.  Can you give us some of the background on how the company got started and the original vision for EXPO?

I started the company in 2004 with my wife, Daphne, who was coming out of media. I was coming out of finance. We thought those were interesting and complementary skill sets with which to attack the opportunity. The concept at the highest level was that product research, which had already been transformed by the internet with the advent of text reviews and a wealth of other “frictionless” product information, would go through a secondary revolution with ubiquitous on-demand video. At 80,000 feet we were exactly right - spot on geniuses. At 5,000 feet, the original idea to execute on that vision was completely wrong. As other smarter people have said, “the idea is nothing. Execution is everything.” And our timing was atrocious. Kind of a double whammy.

How did you finance EXPO in the beginning?  What was the process of raising the first venture round for the company?

Initially we were financed by angels. They were – and are – incredibly supportive of the journey we’ve been on. Still, we recognized that we were going through a major pivot a couple of years in and we would need to be venture backed to realize that vision so we went out to raise venture capital. It was a pretty typical process, with the major challenge being the transition between being angel and venture backed. I think going from angels to VCs has gotten easier in the last five years as angels have gotten more sophisticated and VCs have gone earlier stage. That’s been a great thing for the industry because class warfare between shareholders can tear a young company apart. Circa 2006, there were still some raw memories from the first crash. In any event, we were successful and we went with Masthead and Prism out of Boston and DFJ Gotham out of New York. They were responsive to the needs of the company and, within reason, the angels. We didn’t intend it to be this way, but it was a good litmus test of the relationship. They’ve been thoughtful, responsive stewards of the business ever since. 

We hear all the time about “pivots” - points in time when companies change direction and strategy.  What were some of the pivots during the growth of EXPO?  Would you say that the overall vision for the company changed over time?

Having been an entrepreneur for a few years now, I believe the truism that every technology start-up pivots. That said, I also believe successful entrepreneurs start with an idea that they are passionate about. So it’s somewhat paradoxical: to be a successful entrepreneur, you need to be passionate about an idea. But to have a successful company, you have to throw that idea out and do something different. I think this goes a long to explaining the failure rate at start-ups and also why you see so many founders leave relatively early in a company’s development.

We’re unrecognizable from the original company. We’ve had major pivots and an infinite number of minor strategic shifts. The first major pivot was that we actually started as a cable network. At the time of founding in 2004, it looked like on-demand cable might take off as a way to consume video content. And we got great support from the cable operators to pursue that path. But the viewership just wasn’t there and so we shifted to online. That allowed us to make the second major pivot which was toward user generated content. We became, as far as we know, the first company in the world to invite consumers to upload user generated video product reviews. This was at the same time that YouTube was working on just making it easy for consumers to upload any kind of video and so, frankly, we didn’t realize how cutting edge we were by taking such a narrow approach.

The final major pivot had to do with our client base. After we had shifted to user generated content, we were so dedicated to the idea of authentic content that we couldn’t figure out how to work with manufacturers. We were afraid that they would taint our community and mission. And circa 2007, they would ask a lot of questions like, “but what if there’s a negative video? Can we take it down?” This will sound arrogant but the answer ended up being to only work with the very best brands and the strongest companies, like Procter & Gamble and LG Electronics. They understood that to have credibility with consumers it had to be done the right way and, moreover, their products were good enough that the only challenge was getting people talking. Not about what they would say. In retrospect, there’s a lesson here which is that we saw a barrier where there really wasn’t one. I see this tendency a lot - to accept the world as it is and see barriers where they may not truly exist. Entrepreneurs succeed by changing the world. If you see barriers and limitations, the likelihood of that happening falls dramatically.

Bottom line, if I’m honest, there’s nothing about the company that resembles what we originally thought and that’s mildly embarrassing. But I love what we’ve become so much more than what we were trying to be. That’s the exciting part about being an entrepreneur.

As EXPO grew, what were the main challenges you faced?  How did you handle needing to raise additional capital and were you able to raise follow on financing?

We’ve had the typical challenges. Getting the people right is so hard. For the longest time, I dismissed other entrepreneurs who seemed obsessed with their team and team dynamics. Then it started to dawn on us the damage that could be caused even by someone who was a fine performer but a negative personality. First you start to realize that it’s a cancer in the organization and then you realize it’s causing a cancer in yourself that you aren’t dealing with it. So, we learned to deal with those situations, swiftly and surgically. Now, if you work at EXPO, you can have a certain pride because it means you’re very good at what you do. Otherwise, you’re gone.

Capital raising hasn’t been my favorite part. I think others are able to look at it as a milestone and marker of success, but to me it’s just a necessary step to reaching the real milestones which are all operational. Part of the issue has also been that we’ve tended to hit the market during capital markets downturns. So, there’s been a fair amount of running as lean as we thought we could. Now that the markets are hot, we’re profitable and getting ready to go back out - so hopefully this time it will be a lot more fun.

There was a point in time during the financial meltdown of 2008 and 2009 when EXPO was fairly thin on liquidity and you really had to make tough decisions as a founder and leader of the company.  Can you walk us through that period of time and how you were able to survive?

Ah, you should be an investigative reporter digging in like that, although you do have inside information! Yes, that was a difficult time and emblematic of how financial crises can destroy otherwise healthy companies. The story is that we needed to raise capital and the appropriate time to go out, based on our operational progress, was right as the markets went into freefall. As for many others, it was like watching all of your hopes and dreams crumble before your eyes.

Still, we had a banker and the support of the board and out we went into the teeth of the storm. Not surprisingly, it was rough sledding and so we stretched and clawed and did everything we could to stretch our existing capital. Finally, we found an interested investor - a big public, “family run” media company. Like all strategic deals, diligence took awhile but it all went very well. Until they – opportunistically looking at the markets – recut the deal. It was pretty nasty stuff but we were down the path without a lot of great options and so we agreed. Then they stretched us out further. Finally, when we were essentially bankrupt, they pulled out during a call which had been scheduled to set the closing date. Even including my ten years in finance working with dozens of companies as an investor and advisor, it was the most disgraceful act I’ve ever witnessed in business. And so I learned that sometimes instead of reading about a guy who gets hit by a bus, the bus hits you.  

In any event, we were dead. We couldn’t make the next payroll, despite the fact that we were doubling revenues right through the storm. Daphne and I locked ourselves in a conference room and just said, “This is ridiculous. We’ve come this far and now we have to shut it down? No effing way.” So, we hatched a plan that basically involved everyone - us as founders, the employees, the angels, the VCs and Square 1 Bank. It was a crazy plan that had a 1 in a 1000 chance of getting done. That said, I had lived through the crash in 2000 and so had a pretty good grasp on what it took to pull it off. That experience was invaluable and allowed us to not only survive but to set the stage for the company to thrive. Make no mistake, though, it was a coordinated effort as any one constituency bailing would have killed it.

I’m being a little light on the details for probably obvious reasons, but the principles for surviving this type of situation are: 1) act decisively, 2) act quickly, 3) be transparent, 4) involve everyone, and 5) get advice from unvinvolved 3rd parties even if you think you know exactly what you’re doing.

After making it through that crisis time, what is different about EXPO today?  What do you see as the biggest challenges and opportunities for the business?

Going through that crisis made us more conservative, no doubt about it. If anything, today I spend a lot of time coaching myself and the team to be more aggressive, but at the same time that conservatism has made us efficient and strong.

The biggest challenge going forward is definitely to maintain and accelerate growth. As fast as we’re growing, given the premise of a technology start-up, the primary question we ask ourselves is, “how can we grow even faster?”  We leave unsaid the resource constraints we’ve put on ourselves which of course have an enormous braking effect that sometimes gets forgotten. For example, as some comparable companies are now filing to go public, we’re realizing the staggering losses they are posting; the amount of capital they are burning through to achieve that growth. I’m not taking anything away from them….the organizational capability to grow even while burning through capital is non-trivial. But rapid growth with pinpoint efficiency is a hard balance to pull off.

I can’t Bill enough for his honestly and candor in telling the EXPO story - there’s a lot of great stuff in there for entrepreneurs of all stages.  And at the end of the day, the thing that stands out for me above all else is the fact that Bill practiced what he’s preaching here – he was decisive, acted quickly, and was always transparent – traits which are appropriate for all of us who are involved in the startup community.