June 24, 2024 • 38 mins
From cybersecurity companies to a business that provided telehealth services for pets, we look at some of the tech startups that had to close up shop in 2023.
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Speaker 1 (00:04):
Welcome to tech Stuff, a production from iHeartRadio. Hey there,
and welcome to tech Stuff. I'm your host Jonathan Strickland.
I'm an executive producer with iHeart Podcasts and how the
tech are you? You know, tech startups are a risky thing.
(00:24):
There are certainly unicorns out there, you know. There are
these companies that get incredible buzz and support and hit
a billion dollars valuation and it propels them monopath that
inevitably leads to either an IPO or an acquisition and
huge payouts for the folks who's stuck with it. But
those are actually the exceptions to the rule most startups.
(00:46):
The vast majority of startups will fail, and a few
will fail in their first year. Somewhere around ten percent
of all startups fail in the first year. According to
at least some sources, as many as ninety or even
ninety one percent of startups fail in the long run,
and it might take several years for that to happen,
but it does happen. Maybe the business plan never worked out.
(01:09):
Maybe whatever the company was providing people just weren't seeking.
Maybe external factors beyond anyone's control were to blame. Maybe
the only common factor among all the businesses that went
bust is that, you know, they all fizzled out. So
I thought it would look back to last year, which
was twenty twenty three for those of you listening from
(01:30):
the future, and I thought i'd talk about some of
the startups that failed that year. Now, these weren't companies
that necessarily launched in twenty twenty three. In fact, none
of the ones I'm talking about launched that year, but
they did die in twenty twenty three. In one case,
it only became mostly dead. So let's dive in. First up,
(01:54):
let's talk about a business that actually was around longer
than a decade before it failed in twenty twenty three.
This also makes you wonder at what point you stop
using the word startup to describe a business and then
instead use phrases like established business. I guess most folks
say a startup graduates after not after surviving a certain
amount of time. It's not like after X number of
(02:16):
years you're no longer a startup. Instead, the metric appears
to be growing to a certain scale, like once you
hit a certain scale, you're no longer a startup. That
seems weird to me because sometimes unicorns scale up way
faster than others, but they don't manage to get established,
and so I think startup would still be an applicable term.
(02:39):
But what do I know? All right? So the businesses
I wanted to mention first off, because there's a pair
of them that both were owned by the same company
were Cloud Nordic and A Zero, So these were two
cloud services companies, both of which were owned by a
holding company called Cerdica Holding. Certica Holding also owned a
(03:02):
cybersecurity company called netquestaps more on that in a second.
And all of these businesses were located out of Denmark,
so that means that there's going to be names that
I'm going to butcher because I don't speak Danish and
I have no familiarity with any Norwegian language. So that's
(03:22):
just a precursor for what's about to happen. Anyway, the
various companies that were under Certica Holding had been operating
as successful businesses for several years, but all of that
would change on Friday, August eighteenth, twenty twenty three. That's
when some ransomware hackers infiltrated systems belonging to A zero
(03:44):
and Cloud Nordic and locked away essentially all of their
customer data, like made it impossible for Cloud Nordic or
A zero to access any of that customer information. And
to be fair, I should say that that's not exactly
when the hackers necessarily infiltrated the systems, it's when they
executed their attack. They had probably actually exploited the systems
(04:07):
a week earlier, but every single zero and every single
one belonging to the company's customers was removed from their access.
And as far as I can tell, the identity of
the ransomware hackers has never been disclosed, which is a
little bit strange. It's possible that the information can be
found on some Danish cybersecurity site and I simply couldn't
(04:30):
find it, maybe because Google's usefulness has arguably become less
so over years. There are a lot of people who
say that Google is essentially ruined at this point, and
maybe I should switch to other web search tools than Google.
But I couldn't find a lot of sources, even in
Denmark that really went into detail about this. So I'm
(04:55):
not saying the ransomware hackers were never identified. I'm just
saying I couldn't fin the information about that. But apparently
they did strike it pretty much the perfect time. So
Certica Holding was in this process of moving systems from
one data center to another. The hackers had apparently already
penetrated company systems leading up to this transition, and the
(05:18):
actual moving gave them access to pretty much all corporate
systems across the board, so it was a total nightmare.
A zero and cloud Nordick admitted that they couldn't and
wouldn't respond to ransomware demands. So apparently the hackers demanded
money that exceeded the company's access to funds. They could
not pay the ransom even if they wanted to, and
(05:39):
they said they didn't want to, which is honestly the
right answer generally speaking, because paying off ransoms just encourages
more ransoms down the road. If you show that this
is a viable way to make millions of dollars, of
course more attacks will follow because there's the incentive to
do it. If nobody pays the ransom. Eventually, any hacker
(06:00):
that's doing this for the money at the very least
is going to stop doing ransomware attacks because it won't
be effective. It'll be a waste of time for ransomware
hackers who are doing this for some sort of perceived cause.
It could be a different story, right if you're doing
something because you have a personal grudge against the company,
or you believe in some philosophy that targets the company
(06:22):
as an enemy, then maybe you would go through the
trouble of attacking with ransomware even if you weren't going
to get paid out at the end of the day.
There are some other factors in this story that make
it sound at least a little shady to me, like
it raises some red flags. But customers started to receive
notifications that their data was inaccessible. It was caput, it
(06:45):
was gone. Cloud Nordic began to restore servers like web
servers and email servers, so customers would have access to
their domains and their email servers again. But then everything
that had been on those servers was gone. It was
all blank slate, starting from square one. In the real world,
this would be kind of like you come home and
(07:07):
you see that your house or apartment building or whatever
is totally gone. You still have access rights to the
land where the building had stood, but you have nothing there.
You would be forced to rebuild, and just imagine your
company and all of your web presence is wiped out.
So the two companies A zero and Cloud Nordick went
(07:28):
to the rather extraordinary length of advising customers to actually
port their accounts to other providers, which signaled that these,
these providers, these cloud companies A zero and Cloud Nordick,
were not long for this world. If you're telling your customers, hey,
you need to go find a different provider, chances are
you're not sticking around very long. One company that popped
(07:49):
up as an alternative to Cloud Nordic was called Rocky Nordic.
Rocky Nordic exists to this day, but you know what,
it didn't exist, or at least, the website for Rocky
Nordic didn't exist until August twenty second, twenty twenty three.
So the attack happened August eighteenth, twenty twenty three. So
(08:10):
just a few days after this ransomware attack that Cloud
Nordick was hit by Rocky Nordic, the website launches, which
seems a little strange right now. If I were the
fringe theory type, I might start to think that someone
over at Cloud Nordic had scrambled to create a new
company that also was not saddled with the reputation of
(08:32):
having lost every single scrap of customer data to hackers.
And here's a very weird coincidence, y'all. The owner of
Rocky Nordic, according to various CVR registers, is Casper Tikiob
or Tikub. Again, I don't speak Danish, so I'm butchering
the name, but he's the chairman of the board for
(08:54):
Rocky Nordic. He was also a co founder of both
A zero and Cloud Nordic, and look at that. The
Rocky Nordic website talks about how safe and secure their
service is, which is kind of interesting. Also, by the way,
if you try to navigate to the old Cloud Nordic site,
you get redirected to Rocky Nordic, which is also kind
(09:16):
of interesting. Anyway, the damage was done to A zero
and Cloud Nordic customers. The company claimed it wouldn't be
able to compensate customers for the loss of that data either.
That essentially the customer agreement made with these companies essentially
said the companies would not be at fault for any
loss of data. So Cloud Nordic and A zero quickly disappeared. Also,
(09:39):
net questaps the information security company would disappear. That was
the other one that was held by the same holding company.
Also interesting that an information security company wasn't able to
do more in the face of a ransomware attack that
affected its sister companies. How about that? Now, there are
other companies called Netquest out there. Just to be clear,
(10:01):
So if you were to like, oh, I want to
read up more about this, you need to make sure
you're looking at the right net Quest, because there are
a couple of other companies called Netquest that are not
this one. There's in fact a net Quest here in
the United States that provides threat detection for stuff like
state backed hacker attacks and that kind of thing, like
really serious potential threats. So that's not the same company.
(10:26):
I say that because at least one of the sources
I was looking at while I was researching this made
the mistake of equating the net Quest that was part
of this other holding company with that one. They are
not the same. That's a different organization entirely. So that
is the sad tale of a family of companies that
were wiped out due to external forces. Honestly, I'm surprised
(10:49):
I couldn't find more information about this When I was searching,
you know, I read a lot of translated articles because
again I can't write, read, or write in Danish. But
I would have expected at least a few deeper to
investigate how the company's handled or failed to handle, the
fallout of this situation that led up to them just
shutting down, as well as the questionable origins of Rocky Nordic.
(11:12):
I feel like having that jump up so quickly as
an alternative, and it was founded by one of the
co founders of the companies that had been affected by
the ransomware attacks, you know, that just seems like it's
something that needs to be investigated a little bit. Maybe
everything is just as it seems on the surface, everything's
on the up and up, and you know, there's nothing
really questionable here, But I feel like it almost feels
(11:35):
like an attempt to continue business as usual and shirking
off the reputation of a company that failed to protect
customer data to like the most extreme degree possible. It's
like if you were running a game and you realize, oh, no,
this game has totally gone off the rails. I'm just
(11:56):
gonna quit. Now start a new game, call it something else,
and hope that nobody questions me about it, like that's
what it feels like to me, and it may not
be that. Again, this is my opinion. It's how I feel,
how the red flags are popping up in my mind.
And there may even be perfect answers for all of this,
and I just couldn't find it in my research. So
(12:18):
I want to be totally fair here. Okay, let's take
a quick break. When we come back, we'll talk about
some more flops in twenty twenty three. We're back, so
how about we focus on a failed startup in which
(12:40):
all the details of that failure are Fuzzy. That's my
cute way to introduce the sad story of Fuzzy, a
telehealth site for pets, really for pet owners. Pets are
notoriously bad at operating apps. Fuzzy introduced apps for pet
owners and on demand telemedicine appointments. Before that, though, Fuzzy
(13:01):
actually offered customers the chance to book physical vet visits,
so they were working with actual veterinary offices and kind
of serving as a booking agency for those. But that
particular business approach proved to be too difficult to scale,
so in twenty twenty and in twenty twenty one, the
(13:21):
company would change course to focus more on telemedicine. Customers
would pay a fee of fifteen dollars per month, and
in return, they would have access to various like telehealth
appointments and a few other services. Zubin Bette, whose name
I'm sure I'm also mispronouncing, founded Fuzzy back in twenty sixteen.
By twenty twenty three, the company had raised more than
(13:44):
eighty million dollars in various investment rounds. But on Thursday
June fifteenth, twenty twenty three, the company abruptly shut down.
And when I say abruptly, I do mean it was fast. Now.
Employees reported that they had not been paid since the
end of May, so something was clearly up right, and
(14:04):
some employees might have already had an inkling that things
were going south in a hurry. There were also other
employees who reported that they encountered some difficulties when trying
to use company provided medical insurance and to use the
various insurance benefits, that they were running into issues with processing.
(14:25):
So obviously there were problems that were already evident even
before the company officially shut down. But the shutdown was
so sudden that a lot of high ranking folks at
the company had no idea that it was happening, and
they were just as shocked as anyone else. So, according
to the news site Coverager, Zubin Bette's LinkedIn and Twitter
(14:46):
profiles were both taken offline. Now they have since been restored,
because I saw both of them while I was researching
this episode. So I don't want to suggest that he
just you know, ghosted the entire world and hid away
because this business that he founded had failed. Initially, that
might have been the case, because again that's what Coverager
(15:07):
was saying, but when I did the search, they both
popped up, so you know, it could have been a
knee jerk reaction. I know that if I had a
business that failed pretty spectacularly, especially one that had raised
like forty million dollars the year before, like a year
and a half before, I would be tempted to just
(15:27):
go and hide too. I'm actually tempted to go and
hide most days, and I don't have something like that
that happened to me. So I'm not blaming him at
all if that was his initial reaction, but I don't
know for a fact that that was his reaction at all.
I just know that it was reported that way, but
now it appears that all that information is back up online.
(15:48):
It sounded like the company had owed a great deal
of money to its creditors and it just hit a
point where money was going out faster than it could
come in, even with these large investments in on occasion.
But it had been like a year and a half
since the last round of investment funding, so I think
it was just a critical case of a company running
(16:09):
out of all that investment money and not generating enough
revenue to sustain itself. The news site sf gate suggested
a potential link between the failure of the Silicon Valley
Bank with Fuzzy going off to the Rainbow Bridge. To
use a analogy as a reminder, the Silicon Valley Bank
collapsed due to a number of reasons, including inflation and
(16:33):
high interest rates, which then discouraged various companies and individuals
from taking out loans. There were a lot of other
factors that contributed to the bank's failure. To go into
all of those would take a full episode by itself,
and honestly, it probably would be best reserved for a
totally different type of podcast like a financial podcast. Silicon
(16:54):
Valley Bank was and now is again, although it's a
totally different entity than it was before. But it was very,
very important in the tech industry. Like it was a
bank that catered to startups and to venture catalysts and
other investors. So it was a big deal. And I
do remember when this failure actually happened, because the news
(17:16):
broke while I was waiting to board a flight to Austin,
Texas for south By Southwest in twenty twenty three, and
a bunch of tech executives were supposed to be well.
They were on that flight, and I started seeing them
all look at their notifications on their phone and start
to sweat really, really hard as the money that they
(17:38):
counted on was suddenly getting harder for them to get
access to. It was a really dramatic moment that I witnessed,
just because I happened to be in the right place
at the right time to see it, at least on
a small scale of folks who were waiting for a
flight from Atlanta to Austin, Texas. Anyway, it's possible that
Silicon Valley banks collapse exacerbated problems that already existed at Fuzzy.
(18:03):
Maybe if SVB had remained solvent, Fuzzy would still be
around today, But it sounds to me as though the
scaling problems were a real issue and that the odds
were stacked against Fuzzy even before the failure of Silicon
Valley Bank. Now, not all startup failures are the end
(18:23):
of the story entirely, so let me set the next scene.
It's the spring of twenty fourteen, and you are Keith Alexander,
the four star general and former director of the United
States National Security Agency, or NSA, and you've just had
a heck of a couple of years after denying multiple
(18:45):
times that your agency was collecting information on American citizens,
because you know, the NSA is really supposed to be
focused on foreign intelligence threats. Then a contractor named Edward
Snowden has revealed to the world that, whoopsie Daisy, the
NSA kind of was collecting data on Americans after all,
at least to the extent of, you know, who Americans
(19:06):
were calling and who was calling Americans and like a big,
massive record of all of those phone calls. So yeah,
you kind of were collecting information about American citizens, even
though you were saying you weren't. So then you go
and you retire from that gig and you're looking to
launch something new. That knew something in twenty fourteen is
a cybersecurity company, and you call it IronNet. It launches
(19:30):
on May Well in May of twenty fourteen, and Keith
Alexander's involvement and the company's reputation among investors encouraged a
lot of initial enthusiasm, so over time the company would
raise more than four hundred million dollars in funding. In
twenty twenty one, the plan was to take the company public,
(19:51):
but not through the traditional initial public offering or IPO route.
So the IPO, as I said, is the traditional way
to take a privately held company to become a publicly
traded one. You go through a whole bunch of different steps.
You work with underwriters, you work with regulators, and you
come up with an initial stock price for your company
(20:12):
as well as the number of shares that you're going
to issue to a stock market, and the market kind
of takes care of the rest. And if you're really lucky,
people are super jazzed about your company, and the stock
price goes up because demand is going up, and you
end up raising a huge amount of capital that you
can then invest into the business and then scale things
because now you've got all this cash at your disposal.
(20:36):
But there's an alternative to the IPO, which I would
call the old standby. It's known as the special purpose
acquisition company or SPAC spack approach. This involves investors creating
a shell company that doesn't do anything like it doesn't
produce anything, no products, no services, nothing. It just exists
(21:00):
for the purposes of going public and then being used
to acquire some other company, like a private company. And
at that point the acquired private company becomes part of
a public holding company and boom, you got yourself a
publicly traded company now, which sounds a bit wild, right,
Like you're bypassing all the IPO stuff in order to
(21:21):
be able to take this private company public. It's a
workaround which sounds like it shouldn't be allowed, but it
totally is allowed. Spacks have become really popular in recent years.
They sidestep a lot of tricky hurdles that you have
to overcome if you're taking a privately held company public
the traditional way. Sometimes companies fail to go to a
(21:42):
full IPO. That's happened a few times, so a SPAC
is one way to kind of sidestep all that. Now,
I've got a lot of cynical opinions about SPACs, but
I also have to admit that I am not at
all educated about this kind of stuff. My reticence could
only be based off my ignorance. It could be that
I'm just completely off base because I don't understand it properly.
(22:04):
But it still does seem kind of questionable to me. However. Anyway,
in twenty twenty one, iron Net would go public through
a SPAC acquisition. Less than a year later, in June
twenty twenty two, iron Net would go through a reorganization
and would downsize. It laid off around seventeen percent of
its workforce, which is kind of crazy, Like, you know,
(22:27):
here's a company that had raised hundreds of millions of
dollars in investments, then managed to go public through a
SPACK acquisition, and now just a year later, is downsizing.
Tech Crunch's Carly page included a quote from IronNet spokesperson
Joseph P. Deppa the Third that said, quote, the workforce
(22:47):
reduction is part of a broader plan to streamline our operations.
For higher efficiency, to reduce overall expenses and preserve cash,
and to set iron Net up for rationalized growth going forward.
End quote. So it sounds like despite that influx of
cash from investments and from going public, iron Net was
hitting hard times, which is weird, right because we're also
(23:09):
talking about a time when cybersecurity threats were definitely on
the rise, like from twenty twenty to today, Like you've
seen just such a dramatic rise in cybersecurity threats, particularly
nation backed cybersecurity threats. You would think that a company
headed by a former director of the NSA would actually
(23:31):
be doing business like gangbusters, like they'd be able to
scale easily, you would think based upon just the reputation
of the people involved and the factors that were present
at that time. But that's not what was going on.
Iron Net was not doing well. According to Zach Whittaker,
also of tech Crunch, iron Net had fewer than one
(23:53):
hundred corporate customers in twenty twenty two. The company worded
it a little differently in a statement from Alexander that
read quote, we encountered unexpected headwinds in our transactional business
this quarter. To contain costs, we are undertaking a further
restructuring of the company with the support of our new CFO,
(24:15):
Cameron four. We have decided to forego a call with
management this quarter until we are better able to communicate
on our progress end quote, which almost sounds like we
don't want to talk to you all till we can
get our story straight. In July twenty twenty three, Alexander
was shown the door. Now, this was all part of
a larger strategy to take the company private again. Remember
(24:37):
it had only been public for like less than a
year at this point. Linder Zicher who was chosen as
the person who would step in from the investor. She
was a big wig over at the main investor C five.
She would become the new CEO of this beleaguered cybersecurity
company for day to day operations. By this point, Ironnet's
(24:59):
stock with down to a measly twenty one cents per share.
When the SPAC first acquired iron Net in twenty twenty one,
the stock was trading at more than thirteen dollars per share,
so down to twenty one cents was a huge decline.
Iron Net would go through some serious slimming even at
the board level. The strategy included a requirement that iron
(25:19):
Net's board of directors would need to slim down to
just seven folks, three of whom would be determined by
that venture capital firm C five. And a couple of
months after that, in October of twenty twenty three, iron
Net went dark. All staff were let go. The company
filed for bankruptcy. However, it would end up being only
mostly dead. In February twenty twenty four, iron Net would
(25:43):
sputter to life again, emerging from Chapter eleven bankruptcy and
restructured as a privately held company. Well, iron Net do
better the second time around? Beats me? But golly, I
bet folks who invested in the company before it went
into bankruptcy are really regretting that decision because that one
was a monumental failure leading up to the relaunch. Right, so,
(26:10):
rough times, I'm curious about other things that happened at
that company. I saw kind of vague mentions of mismanagement,
and it does sound like that would have had to
have been part of it, right, Like, you know, how
do you have a company that's getting hundreds of millions
of dollars in investment and then is going public end
(26:31):
up having that same issue where you have to reorganize
like twice in a year due to issues like that
does suggest there's some mismanagement going on, But I didn't
find a lot of details, so I'm going to keep
looking to see if I can learn more about what
actually happened to this cybersecurity company, because there's got to
be more to the story than that. But in the meantime,
(26:53):
we're going to take a quick break. When we come back,
I've got one more failure I want to talk about
for this episode before we things up. I plan on
doing a second episode of failures from twenty twenty three
because there were a bunch of them and this is
just a small sample. But first, let's take another quick
break to thank our sponsors. Okay, so we're back. Get
(27:23):
ready for stating the obvious moment, right, The pandemic really
did a big old whammy on businesses. Now, some businesses
like Quibi stumbled really hard, and you could at least
partly blame the pandemic for that. Now, there are plenty
of people who say that Quibi was doomed to fail,
whether the pandemic had happened or not. If you don't
(27:45):
remember Quibi that was a short form video streaming platform.
The original idea was that this would be something you
would watch on your mobile device, like your phone, and
that it was designed so that you could watch videos
either in portrait or landscape mode, you would get a
slightly different experience depending on how you were holding your phone,
and that all the content on Quibi would be designed
(28:08):
to be digestible in short stents, so like even a
full length film would be divided into like ten minute chapters,
so that you could watch it whenever you had time.
And you know, you wouldn't necessarily sit down to watch
full length films or television episodes in one sitting. It
was more like, oh, throughout the day, you might watch
(28:29):
a little bit now and a little bit later, and
that kind of thing. But Quibi famously blazed out of
control in its first year of existence, where it overspent.
It spent way too much on production and securing content.
And also you had the pandemic hit, so people weren't
out and about with their smartphones anymore, they were staying
(28:51):
at home. But again there were those who were saying
that even if the pandemic hadn't happened, Quibi probably would
not have succeeded. That it was just a bad idea
from the beginning. But there were other companies, other services
that would do quite well, largely due to the pandemic.
I mean, Zoom saw a meteoric rise in importance because
(29:12):
of the restrictions that the world was working under. And
you know, when you have so much of the world
under lockdown and all meetings have to be virtual, a
tool like Zoom is obviously going to do very well well.
One company that initially did well under the circumstances of
the pandemic was a live streaming service company called Mandolin.
(29:34):
In fact, it was the pandemic that inspired Mandolin's co
founders to create the company. Mandolin launched on June first,
twenty twenty. Now, when I read that, I assumed that
this was actually going to be the story about a
company that began as an idea that formed a year
or two in advance, right like maybe twenty eighteen, twenty nineteen,
(29:55):
and that it kind of incubated for months and months
before it finally launched in the summer of twenty twenty.
But I was wrong. Mandolin's earliest days are traced to
just a month before it launched in May twenty twenty.
That's incredible. That's an insane ramp up. Co founders Steve Caldwell,
(30:17):
Mary Kay Hughes, and Robert Mitis saw opportunity where otherwise
things were really looking pretty bleak. Obviously, the pandemic would
have an enormous impact on live performances. Venues had to
shut down, Artists had nowhere to go to play, Audiences
had nowhere to go to listen. So enormous companies that
had built empires on managing live events were suddenly shackled
(30:41):
and in a holding pattern, and no one was sure
how long this was going to last. This created a
heck of an opportunity for entrepreneurs. A live streaming service
catering specifically to live music would have no better shot
at gaining mind share than in the early days of
the pandemic. I mean, they were already platforms out there
that could do this, but they weren't necessarily dedicated for
(31:06):
live music. Right like you could do it on Twitch,
you could do it on YouTube. There were solutions out there,
but one that was specifically built to cater to the
live music community. That was something that was seen as
an opportunity. The business minds behind Mandolin secured partnerships with
venues like City Winery, so they even had venue sponsored
(31:28):
livestream events where you're virtually attending a City Winery show.
They became the backbone for digital only online festivals, and
the leaders of the business stressed that the company's success
wasn't only dependent upon the unfortunate lockdown situation, that the
music industry as a whole was ripe for disruption for
(31:50):
a multitude of reasons, and to some extent I agree
with them. I do think the live music industry in
general is ripe for disruption. We're certainly seeing a lot
more pushback against the traditional live music industry, especially here
in the United States, with companies like ticket Master being
(32:10):
challenged by the US government saying that they're operating as
a monopoly, essentially that they're using anti competitive practices to
lock down venues and artists into agreements where Ticketmaster has
control of all the different elements in that vertical stack.
We're seeing that happen now. So I agree that the
live music industry as a whole is ripe for disruption. However,
(32:35):
I'm not sure that Mandolin was doing as much as
the creators of the company were boasting about Now, Mandolin's
operations received both financial investment and critical acclaim in those
few years where it existed. Investors poured several million dollars
into the company, and in twenty twenty one, Pollstar named
(32:57):
Mandolin the best streaming platform fast Come. He would follow
suit and named Mandolin the most innovative music company in
the world in twenty twenty two, and just a year later,
Mandolin would cut its strings and shut down. Obviously, some
things changed in those years between the company's launch in
twenty twenty and shutting down in twenty twenty three. For
(33:19):
one thing, the severity of the pandemic was in decline,
and you had a lot more folks going out to
live venues, and live venues were opening back up again.
Now there was a lot of shuffling going on in
the live venue space. You had some folks and companies
that were getting out of the business or had failed entirely,
and other companies got into it, and Mandolin tried to
(33:40):
navigate those changes as well, but found it challenging to
do so so. For one thing, Mandolin introduced a feature
called Live Plus in twenty twenty one, as Variety would report.
This was really a suite of features that included quote
a plethora of digital choices before, during, and after show,
(34:00):
from ticket sales to meet and greet or after party
add ons to the show, to ordering food and merch
online without waiting in line, to getting access at home
to replays of shows that are filmed live end quote.
I can totally dig on that. Like one thing I
tend to do when I go to a live show
is I'm always tempted to scoop up an album by
(34:23):
the artists I'm watching, particularly if the album happens to
be Vinyl. But it can be a real hassle getting
in line at the end of a show. And I
can definitely see the value proposition of a service like
that where you've got essentially like a virtual line queue
or whatever. But for the business side of things, well
that's a bit more opaque to me. So apparently the
(34:43):
idea was that venues would opt into supporting this feature.
So presumably there would be some sort of compensation for that, right,
like the venue would pay a certain amount of money,
maybe like a recurring fee on a yearly or monthly basis,
to be part of this service. Whether that would actually
generate enough revenue to sustain the company in the long run.
(35:04):
I can't say, but at the time Mandolin had raised
nearly twenty million investments and then on top of that,
had these revenue generation strategies. In twenty twenty two, the
company launched a couple of new products called fan Pages
and Fan Navigator. These were not geared to live music audiences.
These were geared to the actual musicians. So Fan Navigator
(35:27):
would give musical acts access to aggregated data about fans.
Fan Pages would include a tool that would collect data
from fans in the first place, and presumably acts would
then be able to take this information and then make
something useful out of it. Perhaps they could use it
to plan out new merch launches, or maybe make ideas
(35:50):
for new tours, that kind of thing. But despite all
these efforts, Mandolin wasn't able to stick around once folks
started to go back to live venues again. Company's website
had a message that read quote, we are sad to
announce that, after three incredible years of connecting artists and
fans more authentically through digital experiences, we are officially closing
(36:12):
down our product and business operations end quote, and they
said that the final day of operations would be April
twenty first, twenty twenty three, and another live streaming music
platform called Sessions also shut down, this one much earlier
in twenty twenty three. Like Mandolins, Sessions launched in twenty twenty.
In fact, it launched first. It launched in April twenty twenty,
(36:33):
right in the very beginning of the pandemic. The former
CEO of Pandora was the founder for this company, and
rumors about its demise began to circulate in late twenty
twenty two. So I didn't really think it quite made
the cut for this episode for you know, startups that
failed in twenty twenty three. But you know, the fate
of Sessions really did show that Mandolin was not unique
(36:58):
in this issue. A lot of companies that had been
well positioned to provide products and services during the pandemic
failed to remain relevant once those conditions changed, right like
once people started to leave their homes again. And this
was something that was bigger than just startups. Obviously, we
saw lots and lots of companies start to hold layoffs
(37:19):
in the months that followed lockdowns, opening up because these
companies had invested big time in ramping things up during
the pandemic, and then didn't need those larger staff bases
once the pandemic conditions changed. So we didn't just see
startups but affected by this. We saw massive companies like
(37:43):
big tech companies obviously continued to hold massive layoffs year
over year. And that's just a taste of some of
the tech startups that failed last year. I'll bring more
of those to you later this week, but for now,
I hope you are all well, and I'll talk to
you again really soon. Tech Stuff is an iHeartRadio production.
(38:10):
For more podcasts from iHeartRadio, visit the iHeartRadio app, Apple Podcasts,
or wherever you listen to your favorite shows.
Welcome to tech Stuff, a production from iHeartRadio. Hey there,
and welcome to tech Stuff. I'm your host Jonathan Strickland.
I'm an executive producer with iHeart Podcasts and how the
tech are you? You know, tech startups are a risky thing.
(00:24):
There are certainly unicorns out there, you know. There are
these companies that get incredible buzz and support and hit
a billion dollars valuation and it propels them monopath that
inevitably leads to either an IPO or an acquisition and
huge payouts for the folks who's stuck with it. But
those are actually the exceptions to the rule most startups.
(00:46):
The vast majority of startups will fail, and a few
will fail in their first year. Somewhere around ten percent
of all startups fail in the first year. According to
at least some sources, as many as ninety or even
ninety one percent of startups fail in the long run,
and it might take several years for that to happen,
but it does happen. Maybe the business plan never worked out.
(01:09):
Maybe whatever the company was providing people just weren't seeking.
Maybe external factors beyond anyone's control were to blame. Maybe
the only common factor among all the businesses that went
bust is that, you know, they all fizzled out. So
I thought it would look back to last year, which
was twenty twenty three for those of you listening from
(01:30):
the future, and I thought i'd talk about some of
the startups that failed that year. Now, these weren't companies
that necessarily launched in twenty twenty three. In fact, none
of the ones I'm talking about launched that year, but
they did die in twenty twenty three. In one case,
it only became mostly dead. So let's dive in. First up,
(01:54):
let's talk about a business that actually was around longer
than a decade before it failed in twenty twenty three.
This also makes you wonder at what point you stop
using the word startup to describe a business and then
instead use phrases like established business. I guess most folks
say a startup graduates after not after surviving a certain
amount of time. It's not like after X number of
(02:16):
years you're no longer a startup. Instead, the metric appears
to be growing to a certain scale, like once you
hit a certain scale, you're no longer a startup. That
seems weird to me because sometimes unicorns scale up way
faster than others, but they don't manage to get established,
and so I think startup would still be an applicable term.
(02:39):
But what do I know? All right? So the businesses
I wanted to mention first off, because there's a pair
of them that both were owned by the same company
were Cloud Nordic and A Zero, So these were two
cloud services companies, both of which were owned by a
holding company called Cerdica Holding. Certica Holding also owned a
(03:02):
cybersecurity company called netquestaps more on that in a second.
And all of these businesses were located out of Denmark,
so that means that there's going to be names that
I'm going to butcher because I don't speak Danish and
I have no familiarity with any Norwegian language. So that's
(03:22):
just a precursor for what's about to happen. Anyway, the
various companies that were under Certica Holding had been operating
as successful businesses for several years, but all of that
would change on Friday, August eighteenth, twenty twenty three. That's
when some ransomware hackers infiltrated systems belonging to A zero
(03:44):
and Cloud Nordic and locked away essentially all of their
customer data, like made it impossible for Cloud Nordic or
A zero to access any of that customer information. And
to be fair, I should say that that's not exactly
when the hackers necessarily infiltrated the systems, it's when they
executed their attack. They had probably actually exploited the systems
(04:07):
a week earlier, but every single zero and every single
one belonging to the company's customers was removed from their access.
And as far as I can tell, the identity of
the ransomware hackers has never been disclosed, which is a
little bit strange. It's possible that the information can be
found on some Danish cybersecurity site and I simply couldn't
(04:30):
find it, maybe because Google's usefulness has arguably become less
so over years. There are a lot of people who
say that Google is essentially ruined at this point, and
maybe I should switch to other web search tools than Google.
But I couldn't find a lot of sources, even in
Denmark that really went into detail about this. So I'm
(04:55):
not saying the ransomware hackers were never identified. I'm just
saying I couldn't fin the information about that. But apparently
they did strike it pretty much the perfect time. So
Certica Holding was in this process of moving systems from
one data center to another. The hackers had apparently already
penetrated company systems leading up to this transition, and the
(05:18):
actual moving gave them access to pretty much all corporate
systems across the board, so it was a total nightmare.
A zero and cloud Nordick admitted that they couldn't and
wouldn't respond to ransomware demands. So apparently the hackers demanded
money that exceeded the company's access to funds. They could
not pay the ransom even if they wanted to, and
(05:39):
they said they didn't want to, which is honestly the
right answer generally speaking, because paying off ransoms just encourages
more ransoms down the road. If you show that this
is a viable way to make millions of dollars, of
course more attacks will follow because there's the incentive to
do it. If nobody pays the ransom. Eventually, any hacker
(06:00):
that's doing this for the money at the very least
is going to stop doing ransomware attacks because it won't
be effective. It'll be a waste of time for ransomware
hackers who are doing this for some sort of perceived cause.
It could be a different story, right if you're doing
something because you have a personal grudge against the company,
or you believe in some philosophy that targets the company
(06:22):
as an enemy, then maybe you would go through the
trouble of attacking with ransomware even if you weren't going
to get paid out at the end of the day.
There are some other factors in this story that make
it sound at least a little shady to me, like
it raises some red flags. But customers started to receive
notifications that their data was inaccessible. It was caput, it
(06:45):
was gone. Cloud Nordic began to restore servers like web
servers and email servers, so customers would have access to
their domains and their email servers again. But then everything
that had been on those servers was gone. It was
all blank slate, starting from square one. In the real world,
this would be kind of like you come home and
(07:07):
you see that your house or apartment building or whatever
is totally gone. You still have access rights to the
land where the building had stood, but you have nothing there.
You would be forced to rebuild, and just imagine your
company and all of your web presence is wiped out.
So the two companies A zero and Cloud Nordick went
(07:28):
to the rather extraordinary length of advising customers to actually
port their accounts to other providers, which signaled that these,
these providers, these cloud companies A zero and Cloud Nordick,
were not long for this world. If you're telling your customers, hey,
you need to go find a different provider, chances are
you're not sticking around very long. One company that popped
(07:49):
up as an alternative to Cloud Nordic was called Rocky Nordic.
Rocky Nordic exists to this day, but you know what,
it didn't exist, or at least, the website for Rocky
Nordic didn't exist until August twenty second, twenty twenty three.
So the attack happened August eighteenth, twenty twenty three. So
(08:10):
just a few days after this ransomware attack that Cloud
Nordick was hit by Rocky Nordic, the website launches, which
seems a little strange right now. If I were the
fringe theory type, I might start to think that someone
over at Cloud Nordic had scrambled to create a new
company that also was not saddled with the reputation of
(08:32):
having lost every single scrap of customer data to hackers.
And here's a very weird coincidence, y'all. The owner of
Rocky Nordic, according to various CVR registers, is Casper Tikiob
or Tikub. Again, I don't speak Danish, so I'm butchering
the name, but he's the chairman of the board for
(08:54):
Rocky Nordic. He was also a co founder of both
A zero and Cloud Nordic, and look at that. The
Rocky Nordic website talks about how safe and secure their
service is, which is kind of interesting. Also, by the way,
if you try to navigate to the old Cloud Nordic site,
you get redirected to Rocky Nordic, which is also kind
(09:16):
of interesting. Anyway, the damage was done to A zero
and Cloud Nordic customers. The company claimed it wouldn't be
able to compensate customers for the loss of that data either.
That essentially the customer agreement made with these companies essentially
said the companies would not be at fault for any
loss of data. So Cloud Nordic and A zero quickly disappeared. Also,
(09:39):
net questaps the information security company would disappear. That was
the other one that was held by the same holding company.
Also interesting that an information security company wasn't able to
do more in the face of a ransomware attack that
affected its sister companies. How about that? Now, there are
other companies called Netquest out there. Just to be clear,
(10:01):
So if you were to like, oh, I want to
read up more about this, you need to make sure
you're looking at the right net Quest, because there are
a couple of other companies called Netquest that are not
this one. There's in fact a net Quest here in
the United States that provides threat detection for stuff like
state backed hacker attacks and that kind of thing, like
really serious potential threats. So that's not the same company.
(10:26):
I say that because at least one of the sources
I was looking at while I was researching this made
the mistake of equating the net Quest that was part
of this other holding company with that one. They are
not the same. That's a different organization entirely. So that
is the sad tale of a family of companies that
were wiped out due to external forces. Honestly, I'm surprised
(10:49):
I couldn't find more information about this When I was searching,
you know, I read a lot of translated articles because
again I can't write, read, or write in Danish. But
I would have expected at least a few deeper to
investigate how the company's handled or failed to handle, the
fallout of this situation that led up to them just
shutting down, as well as the questionable origins of Rocky Nordic.
(11:12):
I feel like having that jump up so quickly as
an alternative, and it was founded by one of the
co founders of the companies that had been affected by
the ransomware attacks, you know, that just seems like it's
something that needs to be investigated a little bit. Maybe
everything is just as it seems on the surface, everything's
on the up and up, and you know, there's nothing
really questionable here, But I feel like it almost feels
(11:35):
like an attempt to continue business as usual and shirking
off the reputation of a company that failed to protect
customer data to like the most extreme degree possible. It's
like if you were running a game and you realize, oh, no,
this game has totally gone off the rails. I'm just
(11:56):
gonna quit. Now start a new game, call it something else,
and hope that nobody questions me about it, like that's
what it feels like to me, and it may not
be that. Again, this is my opinion. It's how I feel,
how the red flags are popping up in my mind.
And there may even be perfect answers for all of this,
and I just couldn't find it in my research. So
(12:18):
I want to be totally fair here. Okay, let's take
a quick break. When we come back, we'll talk about
some more flops in twenty twenty three. We're back, so
how about we focus on a failed startup in which
(12:40):
all the details of that failure are Fuzzy. That's my
cute way to introduce the sad story of Fuzzy, a
telehealth site for pets, really for pet owners. Pets are
notoriously bad at operating apps. Fuzzy introduced apps for pet
owners and on demand telemedicine appointments. Before that, though, Fuzzy
(13:01):
actually offered customers the chance to book physical vet visits,
so they were working with actual veterinary offices and kind
of serving as a booking agency for those. But that
particular business approach proved to be too difficult to scale,
so in twenty twenty and in twenty twenty one, the
(13:21):
company would change course to focus more on telemedicine. Customers
would pay a fee of fifteen dollars per month, and
in return, they would have access to various like telehealth
appointments and a few other services. Zubin Bette, whose name
I'm sure I'm also mispronouncing, founded Fuzzy back in twenty sixteen.
By twenty twenty three, the company had raised more than
(13:44):
eighty million dollars in various investment rounds. But on Thursday
June fifteenth, twenty twenty three, the company abruptly shut down.
And when I say abruptly, I do mean it was fast. Now.
Employees reported that they had not been paid since the
end of May, so something was clearly up right, and
(14:04):
some employees might have already had an inkling that things
were going south in a hurry. There were also other
employees who reported that they encountered some difficulties when trying
to use company provided medical insurance and to use the
various insurance benefits, that they were running into issues with processing.
(14:25):
So obviously there were problems that were already evident even
before the company officially shut down. But the shutdown was
so sudden that a lot of high ranking folks at
the company had no idea that it was happening, and
they were just as shocked as anyone else. So, according
to the news site Coverager, Zubin Bette's LinkedIn and Twitter
(14:46):
profiles were both taken offline. Now they have since been restored,
because I saw both of them while I was researching
this episode. So I don't want to suggest that he
just you know, ghosted the entire world and hid away
because this business that he founded had failed. Initially, that
might have been the case, because again that's what Coverager
(15:07):
was saying, but when I did the search, they both
popped up, so you know, it could have been a
knee jerk reaction. I know that if I had a
business that failed pretty spectacularly, especially one that had raised
like forty million dollars the year before, like a year
and a half before, I would be tempted to just
(15:27):
go and hide too. I'm actually tempted to go and
hide most days, and I don't have something like that
that happened to me. So I'm not blaming him at
all if that was his initial reaction, but I don't
know for a fact that that was his reaction at all.
I just know that it was reported that way, but
now it appears that all that information is back up online.
(15:48):
It sounded like the company had owed a great deal
of money to its creditors and it just hit a
point where money was going out faster than it could
come in, even with these large investments in on occasion.
But it had been like a year and a half
since the last round of investment funding, so I think
it was just a critical case of a company running
(16:09):
out of all that investment money and not generating enough
revenue to sustain itself. The news site sf gate suggested
a potential link between the failure of the Silicon Valley
Bank with Fuzzy going off to the Rainbow Bridge. To
use a analogy as a reminder, the Silicon Valley Bank
collapsed due to a number of reasons, including inflation and
(16:33):
high interest rates, which then discouraged various companies and individuals
from taking out loans. There were a lot of other
factors that contributed to the bank's failure. To go into
all of those would take a full episode by itself,
and honestly, it probably would be best reserved for a
totally different type of podcast like a financial podcast. Silicon
(16:54):
Valley Bank was and now is again, although it's a
totally different entity than it was before. But it was very,
very important in the tech industry. Like it was a
bank that catered to startups and to venture catalysts and
other investors. So it was a big deal. And I
do remember when this failure actually happened, because the news
(17:16):
broke while I was waiting to board a flight to Austin,
Texas for south By Southwest in twenty twenty three, and
a bunch of tech executives were supposed to be well.
They were on that flight, and I started seeing them
all look at their notifications on their phone and start
to sweat really, really hard as the money that they
(17:38):
counted on was suddenly getting harder for them to get
access to. It was a really dramatic moment that I witnessed,
just because I happened to be in the right place
at the right time to see it, at least on
a small scale of folks who were waiting for a
flight from Atlanta to Austin, Texas. Anyway, it's possible that
Silicon Valley banks collapse exacerbated problems that already existed at Fuzzy.
(18:03):
Maybe if SVB had remained solvent, Fuzzy would still be
around today, But it sounds to me as though the
scaling problems were a real issue and that the odds
were stacked against Fuzzy even before the failure of Silicon
Valley Bank. Now, not all startup failures are the end
(18:23):
of the story entirely, so let me set the next scene.
It's the spring of twenty fourteen, and you are Keith Alexander,
the four star general and former director of the United
States National Security Agency, or NSA, and you've just had
a heck of a couple of years after denying multiple
(18:45):
times that your agency was collecting information on American citizens,
because you know, the NSA is really supposed to be
focused on foreign intelligence threats. Then a contractor named Edward
Snowden has revealed to the world that, whoopsie Daisy, the
NSA kind of was collecting data on Americans after all,
at least to the extent of, you know, who Americans
(19:06):
were calling and who was calling Americans and like a big,
massive record of all of those phone calls. So yeah,
you kind of were collecting information about American citizens, even
though you were saying you weren't. So then you go
and you retire from that gig and you're looking to
launch something new. That knew something in twenty fourteen is
a cybersecurity company, and you call it IronNet. It launches
(19:30):
on May Well in May of twenty fourteen, and Keith
Alexander's involvement and the company's reputation among investors encouraged a
lot of initial enthusiasm, so over time the company would
raise more than four hundred million dollars in funding. In
twenty twenty one, the plan was to take the company public,
(19:51):
but not through the traditional initial public offering or IPO route.
So the IPO, as I said, is the traditional way
to take a privately held company to become a publicly
traded one. You go through a whole bunch of different steps.
You work with underwriters, you work with regulators, and you
come up with an initial stock price for your company
(20:12):
as well as the number of shares that you're going
to issue to a stock market, and the market kind
of takes care of the rest. And if you're really lucky,
people are super jazzed about your company, and the stock
price goes up because demand is going up, and you
end up raising a huge amount of capital that you
can then invest into the business and then scale things
because now you've got all this cash at your disposal.
(20:36):
But there's an alternative to the IPO, which I would
call the old standby. It's known as the special purpose
acquisition company or SPAC spack approach. This involves investors creating
a shell company that doesn't do anything like it doesn't
produce anything, no products, no services, nothing. It just exists
(21:00):
for the purposes of going public and then being used
to acquire some other company, like a private company. And
at that point the acquired private company becomes part of
a public holding company and boom, you got yourself a
publicly traded company now, which sounds a bit wild, right,
Like you're bypassing all the IPO stuff in order to
(21:21):
be able to take this private company public. It's a
workaround which sounds like it shouldn't be allowed, but it
totally is allowed. Spacks have become really popular in recent years.
They sidestep a lot of tricky hurdles that you have
to overcome if you're taking a privately held company public
the traditional way. Sometimes companies fail to go to a
(21:42):
full IPO. That's happened a few times, so a SPAC
is one way to kind of sidestep all that. Now,
I've got a lot of cynical opinions about SPACs, but
I also have to admit that I am not at
all educated about this kind of stuff. My reticence could
only be based off my ignorance. It could be that
I'm just completely off base because I don't understand it properly.
(22:04):
But it still does seem kind of questionable to me. However. Anyway,
in twenty twenty one, iron Net would go public through
a SPAC acquisition. Less than a year later, in June
twenty twenty two, iron Net would go through a reorganization
and would downsize. It laid off around seventeen percent of
its workforce, which is kind of crazy, Like, you know,
(22:27):
here's a company that had raised hundreds of millions of
dollars in investments, then managed to go public through a
SPACK acquisition, and now just a year later, is downsizing.
Tech Crunch's Carly page included a quote from IronNet spokesperson
Joseph P. Deppa the Third that said, quote, the workforce
(22:47):
reduction is part of a broader plan to streamline our operations.
For higher efficiency, to reduce overall expenses and preserve cash,
and to set iron Net up for rationalized growth going forward.
End quote. So it sounds like despite that influx of
cash from investments and from going public, iron Net was
hitting hard times, which is weird, right because we're also
(23:09):
talking about a time when cybersecurity threats were definitely on
the rise, like from twenty twenty to today, Like you've
seen just such a dramatic rise in cybersecurity threats, particularly
nation backed cybersecurity threats. You would think that a company
headed by a former director of the NSA would actually
(23:31):
be doing business like gangbusters, like they'd be able to
scale easily, you would think based upon just the reputation
of the people involved and the factors that were present
at that time. But that's not what was going on.
Iron Net was not doing well. According to Zach Whittaker,
also of tech Crunch, iron Net had fewer than one
(23:53):
hundred corporate customers in twenty twenty two. The company worded
it a little differently in a statement from Alexander that
read quote, we encountered unexpected headwinds in our transactional business
this quarter. To contain costs, we are undertaking a further
restructuring of the company with the support of our new CFO,
(24:15):
Cameron four. We have decided to forego a call with
management this quarter until we are better able to communicate
on our progress end quote, which almost sounds like we
don't want to talk to you all till we can
get our story straight. In July twenty twenty three, Alexander
was shown the door. Now, this was all part of
a larger strategy to take the company private again. Remember
(24:37):
it had only been public for like less than a
year at this point. Linder Zicher who was chosen as
the person who would step in from the investor. She
was a big wig over at the main investor C five.
She would become the new CEO of this beleaguered cybersecurity
company for day to day operations. By this point, Ironnet's
(24:59):
stock with down to a measly twenty one cents per share.
When the SPAC first acquired iron Net in twenty twenty one,
the stock was trading at more than thirteen dollars per share,
so down to twenty one cents was a huge decline.
Iron Net would go through some serious slimming even at
the board level. The strategy included a requirement that iron
(25:19):
Net's board of directors would need to slim down to
just seven folks, three of whom would be determined by
that venture capital firm C five. And a couple of
months after that, in October of twenty twenty three, iron
Net went dark. All staff were let go. The company
filed for bankruptcy. However, it would end up being only
mostly dead. In February twenty twenty four, iron Net would
(25:43):
sputter to life again, emerging from Chapter eleven bankruptcy and
restructured as a privately held company. Well, iron Net do
better the second time around? Beats me? But golly, I
bet folks who invested in the company before it went
into bankruptcy are really regretting that decision because that one
was a monumental failure leading up to the relaunch. Right, so,
(26:10):
rough times, I'm curious about other things that happened at
that company. I saw kind of vague mentions of mismanagement,
and it does sound like that would have had to
have been part of it, right, Like, you know, how
do you have a company that's getting hundreds of millions
of dollars in investment and then is going public end
(26:31):
up having that same issue where you have to reorganize
like twice in a year due to issues like that
does suggest there's some mismanagement going on, But I didn't
find a lot of details, so I'm going to keep
looking to see if I can learn more about what
actually happened to this cybersecurity company, because there's got to
be more to the story than that. But in the meantime,
(26:53):
we're going to take a quick break. When we come back,
I've got one more failure I want to talk about
for this episode before we things up. I plan on
doing a second episode of failures from twenty twenty three
because there were a bunch of them and this is
just a small sample. But first, let's take another quick
break to thank our sponsors. Okay, so we're back. Get
(27:23):
ready for stating the obvious moment, right, The pandemic really
did a big old whammy on businesses. Now, some businesses
like Quibi stumbled really hard, and you could at least
partly blame the pandemic for that. Now, there are plenty
of people who say that Quibi was doomed to fail,
whether the pandemic had happened or not. If you don't
(27:45):
remember Quibi that was a short form video streaming platform.
The original idea was that this would be something you
would watch on your mobile device, like your phone, and
that it was designed so that you could watch videos
either in portrait or landscape mode, you would get a
slightly different experience depending on how you were holding your phone,
and that all the content on Quibi would be designed
(28:08):
to be digestible in short stents, so like even a
full length film would be divided into like ten minute chapters,
so that you could watch it whenever you had time.
And you know, you wouldn't necessarily sit down to watch
full length films or television episodes in one sitting. It
was more like, oh, throughout the day, you might watch
(28:29):
a little bit now and a little bit later, and
that kind of thing. But Quibi famously blazed out of
control in its first year of existence, where it overspent.
It spent way too much on production and securing content.
And also you had the pandemic hit, so people weren't
out and about with their smartphones anymore, they were staying
(28:51):
at home. But again there were those who were saying
that even if the pandemic hadn't happened, Quibi probably would
not have succeeded. That it was just a bad idea
from the beginning. But there were other companies, other services
that would do quite well, largely due to the pandemic.
I mean, Zoom saw a meteoric rise in importance because
(29:12):
of the restrictions that the world was working under. And
you know, when you have so much of the world
under lockdown and all meetings have to be virtual, a
tool like Zoom is obviously going to do very well well.
One company that initially did well under the circumstances of
the pandemic was a live streaming service company called Mandolin.
(29:34):
In fact, it was the pandemic that inspired Mandolin's co
founders to create the company. Mandolin launched on June first,
twenty twenty. Now, when I read that, I assumed that
this was actually going to be the story about a
company that began as an idea that formed a year
or two in advance, right like maybe twenty eighteen, twenty nineteen,
(29:55):
and that it kind of incubated for months and months
before it finally launched in the summer of twenty twenty.
But I was wrong. Mandolin's earliest days are traced to
just a month before it launched in May twenty twenty.
That's incredible. That's an insane ramp up. Co founders Steve Caldwell,
(30:17):
Mary Kay Hughes, and Robert Mitis saw opportunity where otherwise
things were really looking pretty bleak. Obviously, the pandemic would
have an enormous impact on live performances. Venues had to
shut down, Artists had nowhere to go to play, Audiences
had nowhere to go to listen. So enormous companies that
had built empires on managing live events were suddenly shackled
(30:41):
and in a holding pattern, and no one was sure
how long this was going to last. This created a
heck of an opportunity for entrepreneurs. A live streaming service
catering specifically to live music would have no better shot
at gaining mind share than in the early days of
the pandemic. I mean, they were already platforms out there
that could do this, but they weren't necessarily dedicated for
(31:06):
live music. Right like you could do it on Twitch,
you could do it on YouTube. There were solutions out there,
but one that was specifically built to cater to the
live music community. That was something that was seen as
an opportunity. The business minds behind Mandolin secured partnerships with
venues like City Winery, so they even had venue sponsored
(31:28):
livestream events where you're virtually attending a City Winery show.
They became the backbone for digital only online festivals, and
the leaders of the business stressed that the company's success
wasn't only dependent upon the unfortunate lockdown situation, that the
music industry as a whole was ripe for disruption for
(31:50):
a multitude of reasons, and to some extent I agree
with them. I do think the live music industry in
general is ripe for disruption. We're certainly seeing a lot
more pushback against the traditional live music industry, especially here
in the United States, with companies like ticket Master being
(32:10):
challenged by the US government saying that they're operating as
a monopoly, essentially that they're using anti competitive practices to
lock down venues and artists into agreements where Ticketmaster has
control of all the different elements in that vertical stack.
We're seeing that happen now. So I agree that the
live music industry as a whole is ripe for disruption. However,
(32:35):
I'm not sure that Mandolin was doing as much as
the creators of the company were boasting about Now, Mandolin's
operations received both financial investment and critical acclaim in those
few years where it existed. Investors poured several million dollars
into the company, and in twenty twenty one, Pollstar named
(32:57):
Mandolin the best streaming platform fast Come. He would follow
suit and named Mandolin the most innovative music company in
the world in twenty twenty two, and just a year later,
Mandolin would cut its strings and shut down. Obviously, some
things changed in those years between the company's launch in
twenty twenty and shutting down in twenty twenty three. For
(33:19):
one thing, the severity of the pandemic was in decline,
and you had a lot more folks going out to
live venues, and live venues were opening back up again.
Now there was a lot of shuffling going on in
the live venue space. You had some folks and companies
that were getting out of the business or had failed entirely,
and other companies got into it, and Mandolin tried to
(33:40):
navigate those changes as well, but found it challenging to
do so so. For one thing, Mandolin introduced a feature
called Live Plus in twenty twenty one, as Variety would report.
This was really a suite of features that included quote
a plethora of digital choices before, during, and after show,
(34:00):
from ticket sales to meet and greet or after party
add ons to the show, to ordering food and merch
online without waiting in line, to getting access at home
to replays of shows that are filmed live end quote.
I can totally dig on that. Like one thing I
tend to do when I go to a live show
is I'm always tempted to scoop up an album by
(34:23):
the artists I'm watching, particularly if the album happens to
be Vinyl. But it can be a real hassle getting
in line at the end of a show. And I
can definitely see the value proposition of a service like
that where you've got essentially like a virtual line queue
or whatever. But for the business side of things, well
that's a bit more opaque to me. So apparently the
(34:43):
idea was that venues would opt into supporting this feature.
So presumably there would be some sort of compensation for that, right,
like the venue would pay a certain amount of money,
maybe like a recurring fee on a yearly or monthly basis,
to be part of this service. Whether that would actually
generate enough revenue to sustain the company in the long run.
(35:04):
I can't say, but at the time Mandolin had raised
nearly twenty million investments and then on top of that,
had these revenue generation strategies. In twenty twenty two, the
company launched a couple of new products called fan Pages
and Fan Navigator. These were not geared to live music audiences.
These were geared to the actual musicians. So Fan Navigator
(35:27):
would give musical acts access to aggregated data about fans.
Fan Pages would include a tool that would collect data
from fans in the first place, and presumably acts would
then be able to take this information and then make
something useful out of it. Perhaps they could use it
to plan out new merch launches, or maybe make ideas
(35:50):
for new tours, that kind of thing. But despite all
these efforts, Mandolin wasn't able to stick around once folks
started to go back to live venues again. Company's website
had a message that read quote, we are sad to
announce that, after three incredible years of connecting artists and
fans more authentically through digital experiences, we are officially closing
(36:12):
down our product and business operations end quote, and they
said that the final day of operations would be April
twenty first, twenty twenty three, and another live streaming music
platform called Sessions also shut down, this one much earlier
in twenty twenty three. Like Mandolins, Sessions launched in twenty twenty.
In fact, it launched first. It launched in April twenty twenty,
(36:33):
right in the very beginning of the pandemic. The former
CEO of Pandora was the founder for this company, and
rumors about its demise began to circulate in late twenty
twenty two. So I didn't really think it quite made
the cut for this episode for you know, startups that
failed in twenty twenty three. But you know, the fate
of Sessions really did show that Mandolin was not unique
(36:58):
in this issue. A lot of companies that had been
well positioned to provide products and services during the pandemic
failed to remain relevant once those conditions changed, right like
once people started to leave their homes again. And this
was something that was bigger than just startups. Obviously, we
saw lots and lots of companies start to hold layoffs
(37:19):
in the months that followed lockdowns, opening up because these
companies had invested big time in ramping things up during
the pandemic, and then didn't need those larger staff bases
once the pandemic conditions changed. So we didn't just see
startups but affected by this. We saw massive companies like
(37:43):
big tech companies obviously continued to hold massive layoffs year
over year. And that's just a taste of some of
the tech startups that failed last year. I'll bring more
of those to you later this week, but for now,
I hope you are all well, and I'll talk to
you again really soon. Tech Stuff is an iHeartRadio production.
(38:10):
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Hosts And Creators
Oz Woloshyn
Karah Preiss
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