1 00:00:04,480 --> 00:00:12,440 Speaker 1: Welcome to tech Stuff, a production from iHeartRadio. Hey there, 2 00:00:12,480 --> 00:00:16,320 Speaker 1: and welcome to tech Stuff. I'm your host Jonathan Strickland. 3 00:00:16,320 --> 00:00:19,919 Speaker 1: I'm an executive producer with iHeart Podcasts and how the 4 00:00:19,960 --> 00:00:24,400 Speaker 1: tech are you? You know, tech startups are a risky thing. 5 00:00:24,880 --> 00:00:27,440 Speaker 1: There are certainly unicorns out there, you know. There are 6 00:00:27,440 --> 00:00:30,960 Speaker 1: these companies that get incredible buzz and support and hit 7 00:00:31,000 --> 00:00:34,360 Speaker 1: a billion dollars valuation and it propels them monopath that 8 00:00:34,520 --> 00:00:38,519 Speaker 1: inevitably leads to either an IPO or an acquisition and 9 00:00:38,840 --> 00:00:41,400 Speaker 1: huge payouts for the folks who's stuck with it. But 10 00:00:41,680 --> 00:00:46,320 Speaker 1: those are actually the exceptions to the rule most startups. 11 00:00:46,360 --> 00:00:51,440 Speaker 1: The vast majority of startups will fail, and a few 12 00:00:51,520 --> 00:00:55,000 Speaker 1: will fail in their first year. Somewhere around ten percent 13 00:00:55,040 --> 00:00:57,520 Speaker 1: of all startups fail in the first year. According to 14 00:00:57,560 --> 00:01:00,400 Speaker 1: at least some sources, as many as ninety or even 15 00:01:00,480 --> 00:01:03,560 Speaker 1: ninety one percent of startups fail in the long run, 16 00:01:03,720 --> 00:01:05,880 Speaker 1: and it might take several years for that to happen, 17 00:01:06,080 --> 00:01:09,600 Speaker 1: but it does happen. Maybe the business plan never worked out. 18 00:01:09,840 --> 00:01:14,200 Speaker 1: Maybe whatever the company was providing people just weren't seeking. 19 00:01:14,680 --> 00:01:18,800 Speaker 1: Maybe external factors beyond anyone's control were to blame. Maybe 20 00:01:18,840 --> 00:01:21,680 Speaker 1: the only common factor among all the businesses that went 21 00:01:21,760 --> 00:01:25,319 Speaker 1: bust is that, you know, they all fizzled out. So 22 00:01:25,560 --> 00:01:28,360 Speaker 1: I thought it would look back to last year, which 23 00:01:28,440 --> 00:01:30,840 Speaker 1: was twenty twenty three for those of you listening from 24 00:01:30,959 --> 00:01:33,800 Speaker 1: the future, and I thought i'd talk about some of 25 00:01:33,840 --> 00:01:37,600 Speaker 1: the startups that failed that year. Now, these weren't companies 26 00:01:37,640 --> 00:01:41,160 Speaker 1: that necessarily launched in twenty twenty three. In fact, none 27 00:01:41,200 --> 00:01:44,679 Speaker 1: of the ones I'm talking about launched that year, but 28 00:01:44,760 --> 00:01:49,240 Speaker 1: they did die in twenty twenty three. In one case, 29 00:01:49,640 --> 00:01:54,240 Speaker 1: it only became mostly dead. So let's dive in. First up, 30 00:01:54,320 --> 00:01:57,080 Speaker 1: let's talk about a business that actually was around longer 31 00:01:57,120 --> 00:02:00,000 Speaker 1: than a decade before it failed in twenty twenty three. 32 00:02:00,080 --> 00:02:02,400 Speaker 1: This also makes you wonder at what point you stop 33 00:02:02,520 --> 00:02:05,680 Speaker 1: using the word startup to describe a business and then 34 00:02:05,880 --> 00:02:10,280 Speaker 1: instead use phrases like established business. I guess most folks 35 00:02:10,320 --> 00:02:14,120 Speaker 1: say a startup graduates after not after surviving a certain 36 00:02:14,120 --> 00:02:16,640 Speaker 1: amount of time. It's not like after X number of 37 00:02:16,720 --> 00:02:20,760 Speaker 1: years you're no longer a startup. Instead, the metric appears 38 00:02:20,800 --> 00:02:24,280 Speaker 1: to be growing to a certain scale, like once you 39 00:02:24,360 --> 00:02:26,880 Speaker 1: hit a certain scale, you're no longer a startup. That 40 00:02:27,040 --> 00:02:31,440 Speaker 1: seems weird to me because sometimes unicorns scale up way 41 00:02:31,600 --> 00:02:35,639 Speaker 1: faster than others, but they don't manage to get established, 42 00:02:35,960 --> 00:02:39,639 Speaker 1: and so I think startup would still be an applicable term. 43 00:02:39,680 --> 00:02:43,040 Speaker 1: But what do I know? All right? So the businesses 44 00:02:43,080 --> 00:02:46,200 Speaker 1: I wanted to mention first off, because there's a pair 45 00:02:46,240 --> 00:02:49,280 Speaker 1: of them that both were owned by the same company 46 00:02:49,720 --> 00:02:53,560 Speaker 1: were Cloud Nordic and A Zero, So these were two 47 00:02:53,760 --> 00:02:57,320 Speaker 1: cloud services companies, both of which were owned by a 48 00:02:57,400 --> 00:03:02,160 Speaker 1: holding company called Cerdica Holding. Certica Holding also owned a 49 00:03:02,240 --> 00:03:06,720 Speaker 1: cybersecurity company called netquestaps more on that in a second. 50 00:03:07,040 --> 00:03:10,400 Speaker 1: And all of these businesses were located out of Denmark, 51 00:03:10,600 --> 00:03:13,000 Speaker 1: so that means that there's going to be names that 52 00:03:13,120 --> 00:03:17,400 Speaker 1: I'm going to butcher because I don't speak Danish and 53 00:03:18,400 --> 00:03:22,840 Speaker 1: I have no familiarity with any Norwegian language. So that's 54 00:03:22,960 --> 00:03:26,760 Speaker 1: just a precursor for what's about to happen. Anyway, the 55 00:03:26,840 --> 00:03:32,280 Speaker 1: various companies that were under Certica Holding had been operating 56 00:03:32,360 --> 00:03:35,320 Speaker 1: as successful businesses for several years, but all of that 57 00:03:35,360 --> 00:03:39,839 Speaker 1: would change on Friday, August eighteenth, twenty twenty three. That's 58 00:03:39,840 --> 00:03:43,920 Speaker 1: when some ransomware hackers infiltrated systems belonging to A zero 59 00:03:44,040 --> 00:03:47,680 Speaker 1: and Cloud Nordic and locked away essentially all of their 60 00:03:47,680 --> 00:03:53,080 Speaker 1: customer data, like made it impossible for Cloud Nordic or 61 00:03:53,080 --> 00:03:57,160 Speaker 1: A zero to access any of that customer information. And 62 00:03:57,200 --> 00:03:59,320 Speaker 1: to be fair, I should say that that's not exactly 63 00:03:59,360 --> 00:04:03,040 Speaker 1: when the hackers necessarily infiltrated the systems, it's when they 64 00:04:03,120 --> 00:04:07,320 Speaker 1: executed their attack. They had probably actually exploited the systems 65 00:04:07,320 --> 00:04:10,800 Speaker 1: a week earlier, but every single zero and every single 66 00:04:10,840 --> 00:04:16,680 Speaker 1: one belonging to the company's customers was removed from their access. 67 00:04:16,960 --> 00:04:19,120 Speaker 1: And as far as I can tell, the identity of 68 00:04:19,200 --> 00:04:22,520 Speaker 1: the ransomware hackers has never been disclosed, which is a 69 00:04:22,520 --> 00:04:26,400 Speaker 1: little bit strange. It's possible that the information can be 70 00:04:26,520 --> 00:04:30,880 Speaker 1: found on some Danish cybersecurity site and I simply couldn't 71 00:04:30,920 --> 00:04:37,640 Speaker 1: find it, maybe because Google's usefulness has arguably become less 72 00:04:37,640 --> 00:04:39,520 Speaker 1: so over years. There are a lot of people who 73 00:04:39,520 --> 00:04:42,760 Speaker 1: say that Google is essentially ruined at this point, and 74 00:04:42,880 --> 00:04:46,320 Speaker 1: maybe I should switch to other web search tools than Google. 75 00:04:46,640 --> 00:04:50,719 Speaker 1: But I couldn't find a lot of sources, even in 76 00:04:50,839 --> 00:04:55,039 Speaker 1: Denmark that really went into detail about this. So I'm 77 00:04:55,040 --> 00:04:58,680 Speaker 1: not saying the ransomware hackers were never identified. I'm just 78 00:04:58,760 --> 00:05:02,640 Speaker 1: saying I couldn't fin the information about that. But apparently 79 00:05:03,040 --> 00:05:05,599 Speaker 1: they did strike it pretty much the perfect time. So 80 00:05:05,720 --> 00:05:09,159 Speaker 1: Certica Holding was in this process of moving systems from 81 00:05:09,200 --> 00:05:13,480 Speaker 1: one data center to another. The hackers had apparently already 82 00:05:13,520 --> 00:05:17,560 Speaker 1: penetrated company systems leading up to this transition, and the 83 00:05:18,080 --> 00:05:22,040 Speaker 1: actual moving gave them access to pretty much all corporate 84 00:05:22,080 --> 00:05:24,680 Speaker 1: systems across the board, so it was a total nightmare. 85 00:05:24,960 --> 00:05:28,120 Speaker 1: A zero and cloud Nordick admitted that they couldn't and 86 00:05:28,279 --> 00:05:33,440 Speaker 1: wouldn't respond to ransomware demands. So apparently the hackers demanded 87 00:05:34,040 --> 00:05:37,400 Speaker 1: money that exceeded the company's access to funds. They could 88 00:05:37,440 --> 00:05:39,680 Speaker 1: not pay the ransom even if they wanted to, and 89 00:05:39,720 --> 00:05:42,440 Speaker 1: they said they didn't want to, which is honestly the 90 00:05:42,520 --> 00:05:47,080 Speaker 1: right answer generally speaking, because paying off ransoms just encourages 91 00:05:47,120 --> 00:05:49,599 Speaker 1: more ransoms down the road. If you show that this 92 00:05:49,800 --> 00:05:53,000 Speaker 1: is a viable way to make millions of dollars, of 93 00:05:53,040 --> 00:05:56,800 Speaker 1: course more attacks will follow because there's the incentive to 94 00:05:56,839 --> 00:06:00,680 Speaker 1: do it. If nobody pays the ransom. Eventually, any hacker 95 00:06:00,720 --> 00:06:02,760 Speaker 1: that's doing this for the money at the very least 96 00:06:03,000 --> 00:06:05,880 Speaker 1: is going to stop doing ransomware attacks because it won't 97 00:06:05,920 --> 00:06:09,160 Speaker 1: be effective. It'll be a waste of time for ransomware 98 00:06:09,240 --> 00:06:12,480 Speaker 1: hackers who are doing this for some sort of perceived cause. 99 00:06:12,720 --> 00:06:14,760 Speaker 1: It could be a different story, right if you're doing 100 00:06:14,800 --> 00:06:18,560 Speaker 1: something because you have a personal grudge against the company, 101 00:06:18,800 --> 00:06:22,640 Speaker 1: or you believe in some philosophy that targets the company 102 00:06:22,640 --> 00:06:25,040 Speaker 1: as an enemy, then maybe you would go through the 103 00:06:25,200 --> 00:06:28,720 Speaker 1: trouble of attacking with ransomware even if you weren't going 104 00:06:28,800 --> 00:06:30,480 Speaker 1: to get paid out at the end of the day. 105 00:06:31,080 --> 00:06:34,000 Speaker 1: There are some other factors in this story that make 106 00:06:34,080 --> 00:06:37,040 Speaker 1: it sound at least a little shady to me, like 107 00:06:37,080 --> 00:06:40,440 Speaker 1: it raises some red flags. But customers started to receive 108 00:06:40,520 --> 00:06:44,960 Speaker 1: notifications that their data was inaccessible. It was caput, it 109 00:06:45,040 --> 00:06:49,120 Speaker 1: was gone. Cloud Nordic began to restore servers like web 110 00:06:49,160 --> 00:06:52,680 Speaker 1: servers and email servers, so customers would have access to 111 00:06:52,720 --> 00:06:56,239 Speaker 1: their domains and their email servers again. But then everything 112 00:06:56,279 --> 00:06:59,680 Speaker 1: that had been on those servers was gone. It was 113 00:06:59,720 --> 00:07:04,600 Speaker 1: all blank slate, starting from square one. In the real world, 114 00:07:04,880 --> 00:07:07,320 Speaker 1: this would be kind of like you come home and 115 00:07:07,360 --> 00:07:10,240 Speaker 1: you see that your house or apartment building or whatever 116 00:07:10,400 --> 00:07:13,520 Speaker 1: is totally gone. You still have access rights to the 117 00:07:13,600 --> 00:07:17,160 Speaker 1: land where the building had stood, but you have nothing there. 118 00:07:17,200 --> 00:07:20,440 Speaker 1: You would be forced to rebuild, and just imagine your 119 00:07:20,640 --> 00:07:24,400 Speaker 1: company and all of your web presence is wiped out. 120 00:07:24,880 --> 00:07:28,440 Speaker 1: So the two companies A zero and Cloud Nordick went 121 00:07:28,480 --> 00:07:32,120 Speaker 1: to the rather extraordinary length of advising customers to actually 122 00:07:32,240 --> 00:07:36,840 Speaker 1: port their accounts to other providers, which signaled that these, 123 00:07:36,960 --> 00:07:40,520 Speaker 1: these providers, these cloud companies A zero and Cloud Nordick, 124 00:07:40,560 --> 00:07:43,880 Speaker 1: were not long for this world. If you're telling your customers, hey, 125 00:07:43,920 --> 00:07:46,440 Speaker 1: you need to go find a different provider, chances are 126 00:07:46,480 --> 00:07:49,640 Speaker 1: you're not sticking around very long. One company that popped 127 00:07:49,720 --> 00:07:53,800 Speaker 1: up as an alternative to Cloud Nordic was called Rocky Nordic. 128 00:07:54,280 --> 00:07:57,440 Speaker 1: Rocky Nordic exists to this day, but you know what, 129 00:07:58,120 --> 00:08:01,280 Speaker 1: it didn't exist, or at least, the website for Rocky 130 00:08:01,320 --> 00:08:06,200 Speaker 1: Nordic didn't exist until August twenty second, twenty twenty three. 131 00:08:06,600 --> 00:08:10,440 Speaker 1: So the attack happened August eighteenth, twenty twenty three. So 132 00:08:10,560 --> 00:08:13,640 Speaker 1: just a few days after this ransomware attack that Cloud 133 00:08:13,680 --> 00:08:17,920 Speaker 1: Nordick was hit by Rocky Nordic, the website launches, which 134 00:08:17,920 --> 00:08:21,200 Speaker 1: seems a little strange right now. If I were the 135 00:08:21,400 --> 00:08:24,800 Speaker 1: fringe theory type, I might start to think that someone 136 00:08:24,840 --> 00:08:28,080 Speaker 1: over at Cloud Nordic had scrambled to create a new 137 00:08:28,160 --> 00:08:32,360 Speaker 1: company that also was not saddled with the reputation of 138 00:08:32,400 --> 00:08:38,200 Speaker 1: having lost every single scrap of customer data to hackers. 139 00:08:38,480 --> 00:08:41,720 Speaker 1: And here's a very weird coincidence, y'all. The owner of 140 00:08:41,800 --> 00:08:46,959 Speaker 1: Rocky Nordic, according to various CVR registers, is Casper Tikiob 141 00:08:47,360 --> 00:08:51,720 Speaker 1: or Tikub. Again, I don't speak Danish, so I'm butchering 142 00:08:51,760 --> 00:08:54,640 Speaker 1: the name, but he's the chairman of the board for 143 00:08:54,840 --> 00:08:58,920 Speaker 1: Rocky Nordic. He was also a co founder of both 144 00:08:58,960 --> 00:09:02,400 Speaker 1: A zero and Cloud Nordic, and look at that. The 145 00:09:02,520 --> 00:09:05,880 Speaker 1: Rocky Nordic website talks about how safe and secure their 146 00:09:05,960 --> 00:09:09,360 Speaker 1: service is, which is kind of interesting. Also, by the way, 147 00:09:09,400 --> 00:09:12,520 Speaker 1: if you try to navigate to the old Cloud Nordic site, 148 00:09:12,600 --> 00:09:16,400 Speaker 1: you get redirected to Rocky Nordic, which is also kind 149 00:09:16,400 --> 00:09:19,720 Speaker 1: of interesting. Anyway, the damage was done to A zero 150 00:09:19,840 --> 00:09:23,000 Speaker 1: and Cloud Nordic customers. The company claimed it wouldn't be 151 00:09:23,040 --> 00:09:26,120 Speaker 1: able to compensate customers for the loss of that data either. 152 00:09:26,480 --> 00:09:31,120 Speaker 1: That essentially the customer agreement made with these companies essentially 153 00:09:31,120 --> 00:09:33,440 Speaker 1: said the companies would not be at fault for any 154 00:09:33,600 --> 00:09:38,920 Speaker 1: loss of data. So Cloud Nordic and A zero quickly disappeared. Also, 155 00:09:39,559 --> 00:09:44,520 Speaker 1: net questaps the information security company would disappear. That was 156 00:09:44,559 --> 00:09:47,319 Speaker 1: the other one that was held by the same holding company. 157 00:09:47,520 --> 00:09:51,200 Speaker 1: Also interesting that an information security company wasn't able to 158 00:09:51,240 --> 00:09:53,880 Speaker 1: do more in the face of a ransomware attack that 159 00:09:54,000 --> 00:09:58,079 Speaker 1: affected its sister companies. How about that? Now, there are 160 00:09:58,360 --> 00:10:01,360 Speaker 1: other companies called Netquest out there. Just to be clear, 161 00:10:01,640 --> 00:10:03,640 Speaker 1: So if you were to like, oh, I want to 162 00:10:03,679 --> 00:10:05,839 Speaker 1: read up more about this, you need to make sure 163 00:10:05,840 --> 00:10:08,640 Speaker 1: you're looking at the right net Quest, because there are 164 00:10:08,760 --> 00:10:11,680 Speaker 1: a couple of other companies called Netquest that are not 165 00:10:12,040 --> 00:10:14,400 Speaker 1: this one. There's in fact a net Quest here in 166 00:10:14,400 --> 00:10:18,120 Speaker 1: the United States that provides threat detection for stuff like 167 00:10:18,240 --> 00:10:21,120 Speaker 1: state backed hacker attacks and that kind of thing, like 168 00:10:21,520 --> 00:10:26,200 Speaker 1: really serious potential threats. So that's not the same company. 169 00:10:26,840 --> 00:10:29,360 Speaker 1: I say that because at least one of the sources 170 00:10:29,360 --> 00:10:31,760 Speaker 1: I was looking at while I was researching this made 171 00:10:31,760 --> 00:10:35,400 Speaker 1: the mistake of equating the net Quest that was part 172 00:10:35,400 --> 00:10:38,679 Speaker 1: of this other holding company with that one. They are 173 00:10:38,720 --> 00:10:42,840 Speaker 1: not the same. That's a different organization entirely. So that 174 00:10:43,000 --> 00:10:45,880 Speaker 1: is the sad tale of a family of companies that 175 00:10:45,920 --> 00:10:49,640 Speaker 1: were wiped out due to external forces. Honestly, I'm surprised 176 00:10:49,640 --> 00:10:52,400 Speaker 1: I couldn't find more information about this When I was searching, 177 00:10:52,520 --> 00:10:54,760 Speaker 1: you know, I read a lot of translated articles because 178 00:10:54,800 --> 00:10:57,520 Speaker 1: again I can't write, read, or write in Danish. But 179 00:10:57,679 --> 00:11:00,480 Speaker 1: I would have expected at least a few deeper to 180 00:11:00,600 --> 00:11:04,240 Speaker 1: investigate how the company's handled or failed to handle, the 181 00:11:04,320 --> 00:11:07,680 Speaker 1: fallout of this situation that led up to them just 182 00:11:08,120 --> 00:11:12,240 Speaker 1: shutting down, as well as the questionable origins of Rocky Nordic. 183 00:11:12,280 --> 00:11:16,280 Speaker 1: I feel like having that jump up so quickly as 184 00:11:16,320 --> 00:11:18,880 Speaker 1: an alternative, and it was founded by one of the 185 00:11:18,880 --> 00:11:21,480 Speaker 1: co founders of the companies that had been affected by 186 00:11:21,520 --> 00:11:24,040 Speaker 1: the ransomware attacks, you know, that just seems like it's 187 00:11:24,080 --> 00:11:26,800 Speaker 1: something that needs to be investigated a little bit. Maybe 188 00:11:26,840 --> 00:11:29,920 Speaker 1: everything is just as it seems on the surface, everything's 189 00:11:29,960 --> 00:11:31,920 Speaker 1: on the up and up, and you know, there's nothing 190 00:11:31,960 --> 00:11:35,520 Speaker 1: really questionable here, But I feel like it almost feels 191 00:11:35,559 --> 00:11:39,800 Speaker 1: like an attempt to continue business as usual and shirking 192 00:11:39,840 --> 00:11:44,080 Speaker 1: off the reputation of a company that failed to protect 193 00:11:44,120 --> 00:11:49,439 Speaker 1: customer data to like the most extreme degree possible. It's 194 00:11:49,520 --> 00:11:52,240 Speaker 1: like if you were running a game and you realize, oh, no, 195 00:11:52,920 --> 00:11:56,280 Speaker 1: this game has totally gone off the rails. I'm just 196 00:11:56,360 --> 00:12:00,880 Speaker 1: gonna quit. Now start a new game, call it something else, 197 00:12:01,120 --> 00:12:04,000 Speaker 1: and hope that nobody questions me about it, like that's 198 00:12:04,040 --> 00:12:06,400 Speaker 1: what it feels like to me, and it may not 199 00:12:06,600 --> 00:12:10,720 Speaker 1: be that. Again, this is my opinion. It's how I feel, 200 00:12:10,760 --> 00:12:12,959 Speaker 1: how the red flags are popping up in my mind. 201 00:12:13,160 --> 00:12:16,160 Speaker 1: And there may even be perfect answers for all of this, 202 00:12:16,320 --> 00:12:18,600 Speaker 1: and I just couldn't find it in my research. So 203 00:12:18,640 --> 00:12:21,520 Speaker 1: I want to be totally fair here. Okay, let's take 204 00:12:21,559 --> 00:12:23,640 Speaker 1: a quick break. When we come back, we'll talk about 205 00:12:23,640 --> 00:12:36,280 Speaker 1: some more flops in twenty twenty three. We're back, so 206 00:12:36,440 --> 00:12:39,839 Speaker 1: how about we focus on a failed startup in which 207 00:12:40,000 --> 00:12:43,400 Speaker 1: all the details of that failure are Fuzzy. That's my 208 00:12:43,480 --> 00:12:47,360 Speaker 1: cute way to introduce the sad story of Fuzzy, a 209 00:12:47,520 --> 00:12:52,240 Speaker 1: telehealth site for pets, really for pet owners. Pets are 210 00:12:52,240 --> 00:12:56,720 Speaker 1: notoriously bad at operating apps. Fuzzy introduced apps for pet 211 00:12:56,760 --> 00:13:01,199 Speaker 1: owners and on demand telemedicine appointments. Before that, though, Fuzzy 212 00:13:01,280 --> 00:13:05,600 Speaker 1: actually offered customers the chance to book physical vet visits, 213 00:13:05,880 --> 00:13:10,080 Speaker 1: so they were working with actual veterinary offices and kind 214 00:13:10,080 --> 00:13:14,720 Speaker 1: of serving as a booking agency for those. But that 215 00:13:14,760 --> 00:13:18,120 Speaker 1: particular business approach proved to be too difficult to scale, 216 00:13:18,480 --> 00:13:21,840 Speaker 1: so in twenty twenty and in twenty twenty one, the 217 00:13:21,920 --> 00:13:26,320 Speaker 1: company would change course to focus more on telemedicine. Customers 218 00:13:26,360 --> 00:13:28,680 Speaker 1: would pay a fee of fifteen dollars per month, and 219 00:13:28,720 --> 00:13:31,640 Speaker 1: in return, they would have access to various like telehealth 220 00:13:31,640 --> 00:13:36,280 Speaker 1: appointments and a few other services. Zubin Bette, whose name 221 00:13:36,320 --> 00:13:40,960 Speaker 1: I'm sure I'm also mispronouncing, founded Fuzzy back in twenty sixteen. 222 00:13:41,320 --> 00:13:44,280 Speaker 1: By twenty twenty three, the company had raised more than 223 00:13:44,360 --> 00:13:48,559 Speaker 1: eighty million dollars in various investment rounds. But on Thursday 224 00:13:48,679 --> 00:13:52,880 Speaker 1: June fifteenth, twenty twenty three, the company abruptly shut down. 225 00:13:53,120 --> 00:13:57,160 Speaker 1: And when I say abruptly, I do mean it was fast. Now. 226 00:13:57,240 --> 00:14:01,040 Speaker 1: Employees reported that they had not been paid since the 227 00:14:01,120 --> 00:14:04,360 Speaker 1: end of May, so something was clearly up right, and 228 00:14:04,720 --> 00:14:07,800 Speaker 1: some employees might have already had an inkling that things 229 00:14:07,840 --> 00:14:10,440 Speaker 1: were going south in a hurry. There were also other 230 00:14:10,480 --> 00:14:14,680 Speaker 1: employees who reported that they encountered some difficulties when trying 231 00:14:14,760 --> 00:14:18,679 Speaker 1: to use company provided medical insurance and to use the 232 00:14:18,840 --> 00:14:25,000 Speaker 1: various insurance benefits, that they were running into issues with processing. 233 00:14:25,200 --> 00:14:29,400 Speaker 1: So obviously there were problems that were already evident even 234 00:14:29,480 --> 00:14:33,480 Speaker 1: before the company officially shut down. But the shutdown was 235 00:14:33,520 --> 00:14:35,880 Speaker 1: so sudden that a lot of high ranking folks at 236 00:14:35,920 --> 00:14:38,760 Speaker 1: the company had no idea that it was happening, and 237 00:14:39,120 --> 00:14:42,000 Speaker 1: they were just as shocked as anyone else. So, according 238 00:14:42,000 --> 00:14:46,640 Speaker 1: to the news site Coverager, Zubin Bette's LinkedIn and Twitter 239 00:14:46,680 --> 00:14:51,240 Speaker 1: profiles were both taken offline. Now they have since been restored, 240 00:14:51,520 --> 00:14:53,560 Speaker 1: because I saw both of them while I was researching 241 00:14:53,640 --> 00:14:55,800 Speaker 1: this episode. So I don't want to suggest that he 242 00:14:56,080 --> 00:14:59,600 Speaker 1: just you know, ghosted the entire world and hid away 243 00:15:00,200 --> 00:15:04,760 Speaker 1: because this business that he founded had failed. Initially, that 244 00:15:04,920 --> 00:15:07,560 Speaker 1: might have been the case, because again that's what Coverager 245 00:15:07,680 --> 00:15:10,480 Speaker 1: was saying, but when I did the search, they both 246 00:15:10,480 --> 00:15:13,920 Speaker 1: popped up, so you know, it could have been a 247 00:15:14,000 --> 00:15:16,680 Speaker 1: knee jerk reaction. I know that if I had a 248 00:15:16,720 --> 00:15:21,880 Speaker 1: business that failed pretty spectacularly, especially one that had raised 249 00:15:21,920 --> 00:15:25,680 Speaker 1: like forty million dollars the year before, like a year 250 00:15:25,680 --> 00:15:27,880 Speaker 1: and a half before, I would be tempted to just 251 00:15:27,960 --> 00:15:30,560 Speaker 1: go and hide too. I'm actually tempted to go and 252 00:15:30,640 --> 00:15:34,200 Speaker 1: hide most days, and I don't have something like that 253 00:15:34,200 --> 00:15:37,160 Speaker 1: that happened to me. So I'm not blaming him at 254 00:15:37,200 --> 00:15:40,000 Speaker 1: all if that was his initial reaction, but I don't 255 00:15:40,040 --> 00:15:42,200 Speaker 1: know for a fact that that was his reaction at all. 256 00:15:42,280 --> 00:15:44,760 Speaker 1: I just know that it was reported that way, but 257 00:15:44,920 --> 00:15:48,200 Speaker 1: now it appears that all that information is back up online. 258 00:15:48,640 --> 00:15:52,200 Speaker 1: It sounded like the company had owed a great deal 259 00:15:52,240 --> 00:15:54,960 Speaker 1: of money to its creditors and it just hit a 260 00:15:54,960 --> 00:15:57,560 Speaker 1: point where money was going out faster than it could 261 00:15:57,600 --> 00:16:01,280 Speaker 1: come in, even with these large investments in on occasion. 262 00:16:01,440 --> 00:16:03,000 Speaker 1: But it had been like a year and a half 263 00:16:03,040 --> 00:16:06,360 Speaker 1: since the last round of investment funding, so I think 264 00:16:06,560 --> 00:16:09,920 Speaker 1: it was just a critical case of a company running 265 00:16:09,960 --> 00:16:12,680 Speaker 1: out of all that investment money and not generating enough 266 00:16:12,720 --> 00:16:17,320 Speaker 1: revenue to sustain itself. The news site sf gate suggested 267 00:16:17,360 --> 00:16:21,240 Speaker 1: a potential link between the failure of the Silicon Valley 268 00:16:21,320 --> 00:16:25,200 Speaker 1: Bank with Fuzzy going off to the Rainbow Bridge. To 269 00:16:25,400 --> 00:16:29,080 Speaker 1: use a analogy as a reminder, the Silicon Valley Bank 270 00:16:29,280 --> 00:16:33,760 Speaker 1: collapsed due to a number of reasons, including inflation and 271 00:16:33,920 --> 00:16:38,720 Speaker 1: high interest rates, which then discouraged various companies and individuals 272 00:16:38,880 --> 00:16:41,280 Speaker 1: from taking out loans. There were a lot of other 273 00:16:41,360 --> 00:16:44,760 Speaker 1: factors that contributed to the bank's failure. To go into 274 00:16:44,760 --> 00:16:47,520 Speaker 1: all of those would take a full episode by itself, 275 00:16:47,560 --> 00:16:50,560 Speaker 1: and honestly, it probably would be best reserved for a 276 00:16:50,600 --> 00:16:54,280 Speaker 1: totally different type of podcast like a financial podcast. Silicon 277 00:16:54,360 --> 00:16:58,520 Speaker 1: Valley Bank was and now is again, although it's a 278 00:16:58,640 --> 00:17:01,440 Speaker 1: totally different entity than it was before. But it was very, 279 00:17:01,520 --> 00:17:04,119 Speaker 1: very important in the tech industry. Like it was a 280 00:17:04,440 --> 00:17:09,639 Speaker 1: bank that catered to startups and to venture catalysts and 281 00:17:09,760 --> 00:17:13,000 Speaker 1: other investors. So it was a big deal. And I 282 00:17:13,040 --> 00:17:16,520 Speaker 1: do remember when this failure actually happened, because the news 283 00:17:16,600 --> 00:17:19,800 Speaker 1: broke while I was waiting to board a flight to Austin, 284 00:17:19,920 --> 00:17:23,000 Speaker 1: Texas for south By Southwest in twenty twenty three, and 285 00:17:23,080 --> 00:17:25,800 Speaker 1: a bunch of tech executives were supposed to be well. 286 00:17:25,880 --> 00:17:28,960 Speaker 1: They were on that flight, and I started seeing them 287 00:17:29,040 --> 00:17:32,399 Speaker 1: all look at their notifications on their phone and start 288 00:17:32,440 --> 00:17:38,080 Speaker 1: to sweat really, really hard as the money that they 289 00:17:38,160 --> 00:17:41,720 Speaker 1: counted on was suddenly getting harder for them to get 290 00:17:41,760 --> 00:17:46,679 Speaker 1: access to. It was a really dramatic moment that I witnessed, 291 00:17:46,960 --> 00:17:49,080 Speaker 1: just because I happened to be in the right place 292 00:17:49,080 --> 00:17:51,040 Speaker 1: at the right time to see it, at least on 293 00:17:51,080 --> 00:17:53,399 Speaker 1: a small scale of folks who were waiting for a 294 00:17:53,440 --> 00:17:57,760 Speaker 1: flight from Atlanta to Austin, Texas. Anyway, it's possible that 295 00:17:57,960 --> 00:18:03,360 Speaker 1: Silicon Valley banks collapse exacerbated problems that already existed at Fuzzy. 296 00:18:03,680 --> 00:18:07,439 Speaker 1: Maybe if SVB had remained solvent, Fuzzy would still be 297 00:18:07,480 --> 00:18:10,600 Speaker 1: around today, But it sounds to me as though the 298 00:18:10,720 --> 00:18:14,840 Speaker 1: scaling problems were a real issue and that the odds 299 00:18:14,840 --> 00:18:19,440 Speaker 1: were stacked against Fuzzy even before the failure of Silicon 300 00:18:19,520 --> 00:18:23,600 Speaker 1: Valley Bank. Now, not all startup failures are the end 301 00:18:23,840 --> 00:18:27,720 Speaker 1: of the story entirely, so let me set the next scene. 302 00:18:28,119 --> 00:18:32,840 Speaker 1: It's the spring of twenty fourteen, and you are Keith Alexander, 303 00:18:33,160 --> 00:18:36,520 Speaker 1: the four star general and former director of the United 304 00:18:36,520 --> 00:18:41,160 Speaker 1: States National Security Agency, or NSA, and you've just had 305 00:18:41,200 --> 00:18:45,680 Speaker 1: a heck of a couple of years after denying multiple 306 00:18:45,720 --> 00:18:49,800 Speaker 1: times that your agency was collecting information on American citizens, 307 00:18:49,960 --> 00:18:51,920 Speaker 1: because you know, the NSA is really supposed to be 308 00:18:52,040 --> 00:18:56,639 Speaker 1: focused on foreign intelligence threats. Then a contractor named Edward 309 00:18:56,680 --> 00:18:59,440 Speaker 1: Snowden has revealed to the world that, whoopsie Daisy, the 310 00:18:59,560 --> 00:19:03,560 Speaker 1: NSA kind of was collecting data on Americans after all, 311 00:19:03,800 --> 00:19:06,600 Speaker 1: at least to the extent of, you know, who Americans 312 00:19:06,640 --> 00:19:10,200 Speaker 1: were calling and who was calling Americans and like a big, 313 00:19:10,359 --> 00:19:14,320 Speaker 1: massive record of all of those phone calls. So yeah, 314 00:19:14,520 --> 00:19:17,719 Speaker 1: you kind of were collecting information about American citizens, even 315 00:19:17,760 --> 00:19:19,520 Speaker 1: though you were saying you weren't. So then you go 316 00:19:19,560 --> 00:19:21,920 Speaker 1: and you retire from that gig and you're looking to 317 00:19:22,000 --> 00:19:25,960 Speaker 1: launch something new. That knew something in twenty fourteen is 318 00:19:26,000 --> 00:19:30,240 Speaker 1: a cybersecurity company, and you call it IronNet. It launches 319 00:19:30,440 --> 00:19:34,880 Speaker 1: on May Well in May of twenty fourteen, and Keith 320 00:19:34,920 --> 00:19:39,439 Speaker 1: Alexander's involvement and the company's reputation among investors encouraged a 321 00:19:39,440 --> 00:19:43,440 Speaker 1: lot of initial enthusiasm, so over time the company would 322 00:19:43,520 --> 00:19:46,840 Speaker 1: raise more than four hundred million dollars in funding. In 323 00:19:46,880 --> 00:19:51,000 Speaker 1: twenty twenty one, the plan was to take the company public, 324 00:19:51,200 --> 00:19:56,960 Speaker 1: but not through the traditional initial public offering or IPO route. 325 00:19:57,040 --> 00:19:59,960 Speaker 1: So the IPO, as I said, is the traditional way 326 00:20:00,119 --> 00:20:03,640 Speaker 1: to take a privately held company to become a publicly 327 00:20:03,720 --> 00:20:06,320 Speaker 1: traded one. You go through a whole bunch of different steps. 328 00:20:06,359 --> 00:20:09,840 Speaker 1: You work with underwriters, you work with regulators, and you 329 00:20:09,920 --> 00:20:12,520 Speaker 1: come up with an initial stock price for your company 330 00:20:12,560 --> 00:20:14,760 Speaker 1: as well as the number of shares that you're going 331 00:20:14,840 --> 00:20:18,280 Speaker 1: to issue to a stock market, and the market kind 332 00:20:18,320 --> 00:20:20,760 Speaker 1: of takes care of the rest. And if you're really lucky, 333 00:20:21,000 --> 00:20:23,600 Speaker 1: people are super jazzed about your company, and the stock 334 00:20:23,640 --> 00:20:26,359 Speaker 1: price goes up because demand is going up, and you 335 00:20:26,480 --> 00:20:28,720 Speaker 1: end up raising a huge amount of capital that you 336 00:20:28,760 --> 00:20:32,280 Speaker 1: can then invest into the business and then scale things 337 00:20:32,359 --> 00:20:36,000 Speaker 1: because now you've got all this cash at your disposal. 338 00:20:36,160 --> 00:20:39,359 Speaker 1: But there's an alternative to the IPO, which I would 339 00:20:39,359 --> 00:20:43,680 Speaker 1: call the old standby. It's known as the special purpose 340 00:20:43,800 --> 00:20:50,400 Speaker 1: acquisition company or SPAC spack approach. This involves investors creating 341 00:20:50,440 --> 00:20:54,240 Speaker 1: a shell company that doesn't do anything like it doesn't 342 00:20:54,400 --> 00:20:59,760 Speaker 1: produce anything, no products, no services, nothing. It just exists 343 00:21:00,040 --> 00:21:03,200 Speaker 1: for the purposes of going public and then being used 344 00:21:03,240 --> 00:21:06,800 Speaker 1: to acquire some other company, like a private company. And 345 00:21:06,880 --> 00:21:11,040 Speaker 1: at that point the acquired private company becomes part of 346 00:21:11,080 --> 00:21:13,960 Speaker 1: a public holding company and boom, you got yourself a 347 00:21:13,960 --> 00:21:17,440 Speaker 1: publicly traded company now, which sounds a bit wild, right, 348 00:21:17,520 --> 00:21:20,960 Speaker 1: Like you're bypassing all the IPO stuff in order to 349 00:21:21,000 --> 00:21:23,800 Speaker 1: be able to take this private company public. It's a 350 00:21:23,840 --> 00:21:26,679 Speaker 1: workaround which sounds like it shouldn't be allowed, but it 351 00:21:26,760 --> 00:21:31,480 Speaker 1: totally is allowed. Spacks have become really popular in recent years. 352 00:21:31,520 --> 00:21:34,280 Speaker 1: They sidestep a lot of tricky hurdles that you have 353 00:21:34,320 --> 00:21:37,479 Speaker 1: to overcome if you're taking a privately held company public 354 00:21:37,520 --> 00:21:42,000 Speaker 1: the traditional way. Sometimes companies fail to go to a 355 00:21:42,000 --> 00:21:44,879 Speaker 1: full IPO. That's happened a few times, so a SPAC 356 00:21:45,000 --> 00:21:48,600 Speaker 1: is one way to kind of sidestep all that. Now, 357 00:21:48,640 --> 00:21:51,439 Speaker 1: I've got a lot of cynical opinions about SPACs, but 358 00:21:51,480 --> 00:21:53,879 Speaker 1: I also have to admit that I am not at 359 00:21:53,920 --> 00:21:57,720 Speaker 1: all educated about this kind of stuff. My reticence could 360 00:21:57,920 --> 00:22:01,040 Speaker 1: only be based off my ignorance. It could be that 361 00:22:01,080 --> 00:22:04,320 Speaker 1: I'm just completely off base because I don't understand it properly. 362 00:22:04,720 --> 00:22:08,400 Speaker 1: But it still does seem kind of questionable to me. However. Anyway, 363 00:22:08,640 --> 00:22:11,840 Speaker 1: in twenty twenty one, iron Net would go public through 364 00:22:11,880 --> 00:22:15,680 Speaker 1: a SPAC acquisition. Less than a year later, in June 365 00:22:15,760 --> 00:22:20,160 Speaker 1: twenty twenty two, iron Net would go through a reorganization 366 00:22:20,400 --> 00:22:24,280 Speaker 1: and would downsize. It laid off around seventeen percent of 367 00:22:24,320 --> 00:22:27,280 Speaker 1: its workforce, which is kind of crazy, Like, you know, 368 00:22:27,320 --> 00:22:30,040 Speaker 1: here's a company that had raised hundreds of millions of 369 00:22:30,080 --> 00:22:33,359 Speaker 1: dollars in investments, then managed to go public through a 370 00:22:33,400 --> 00:22:38,640 Speaker 1: SPACK acquisition, and now just a year later, is downsizing. 371 00:22:38,880 --> 00:22:43,160 Speaker 1: Tech Crunch's Carly page included a quote from IronNet spokesperson 372 00:22:43,320 --> 00:22:47,359 Speaker 1: Joseph P. Deppa the Third that said, quote, the workforce 373 00:22:47,440 --> 00:22:51,000 Speaker 1: reduction is part of a broader plan to streamline our operations. 374 00:22:51,000 --> 00:22:55,359 Speaker 1: For higher efficiency, to reduce overall expenses and preserve cash, 375 00:22:55,680 --> 00:22:59,360 Speaker 1: and to set iron Net up for rationalized growth going forward. 376 00:22:59,560 --> 00:23:02,560 Speaker 1: End quote. So it sounds like despite that influx of 377 00:23:02,600 --> 00:23:05,960 Speaker 1: cash from investments and from going public, iron Net was 378 00:23:06,040 --> 00:23:09,680 Speaker 1: hitting hard times, which is weird, right because we're also 379 00:23:09,800 --> 00:23:14,879 Speaker 1: talking about a time when cybersecurity threats were definitely on 380 00:23:14,920 --> 00:23:18,560 Speaker 1: the rise, like from twenty twenty to today, Like you've 381 00:23:18,600 --> 00:23:22,720 Speaker 1: seen just such a dramatic rise in cybersecurity threats, particularly 382 00:23:22,880 --> 00:23:27,560 Speaker 1: nation backed cybersecurity threats. You would think that a company 383 00:23:27,640 --> 00:23:31,720 Speaker 1: headed by a former director of the NSA would actually 384 00:23:31,720 --> 00:23:34,119 Speaker 1: be doing business like gangbusters, like they'd be able to 385 00:23:34,160 --> 00:23:39,080 Speaker 1: scale easily, you would think based upon just the reputation 386 00:23:39,200 --> 00:23:43,000 Speaker 1: of the people involved and the factors that were present 387 00:23:43,480 --> 00:23:45,560 Speaker 1: at that time. But that's not what was going on. 388 00:23:45,920 --> 00:23:49,640 Speaker 1: Iron Net was not doing well. According to Zach Whittaker, 389 00:23:49,880 --> 00:23:53,480 Speaker 1: also of tech Crunch, iron Net had fewer than one 390 00:23:53,600 --> 00:23:58,040 Speaker 1: hundred corporate customers in twenty twenty two. The company worded 391 00:23:58,080 --> 00:24:01,920 Speaker 1: it a little differently in a statement from Alexander that 392 00:24:02,600 --> 00:24:07,880 Speaker 1: read quote, we encountered unexpected headwinds in our transactional business 393 00:24:07,920 --> 00:24:11,960 Speaker 1: this quarter. To contain costs, we are undertaking a further 394 00:24:12,040 --> 00:24:15,480 Speaker 1: restructuring of the company with the support of our new CFO, 395 00:24:15,600 --> 00:24:18,520 Speaker 1: Cameron four. We have decided to forego a call with 396 00:24:18,600 --> 00:24:21,800 Speaker 1: management this quarter until we are better able to communicate 397 00:24:21,840 --> 00:24:24,960 Speaker 1: on our progress end quote, which almost sounds like we 398 00:24:25,000 --> 00:24:26,280 Speaker 1: don't want to talk to you all till we can 399 00:24:26,280 --> 00:24:30,600 Speaker 1: get our story straight. In July twenty twenty three, Alexander 400 00:24:30,920 --> 00:24:33,520 Speaker 1: was shown the door. Now, this was all part of 401 00:24:33,520 --> 00:24:36,920 Speaker 1: a larger strategy to take the company private again. Remember 402 00:24:37,000 --> 00:24:39,520 Speaker 1: it had only been public for like less than a 403 00:24:39,640 --> 00:24:43,920 Speaker 1: year at this point. Linder Zicher who was chosen as 404 00:24:44,280 --> 00:24:47,119 Speaker 1: the person who would step in from the investor. She 405 00:24:47,280 --> 00:24:50,720 Speaker 1: was a big wig over at the main investor C five. 406 00:24:51,040 --> 00:24:55,960 Speaker 1: She would become the new CEO of this beleaguered cybersecurity 407 00:24:56,000 --> 00:24:59,360 Speaker 1: company for day to day operations. By this point, Ironnet's 408 00:24:59,440 --> 00:25:03,280 Speaker 1: stock with down to a measly twenty one cents per share. 409 00:25:03,680 --> 00:25:07,760 Speaker 1: When the SPAC first acquired iron Net in twenty twenty one, 410 00:25:07,840 --> 00:25:10,560 Speaker 1: the stock was trading at more than thirteen dollars per share, 411 00:25:10,640 --> 00:25:13,760 Speaker 1: so down to twenty one cents was a huge decline. 412 00:25:13,880 --> 00:25:17,000 Speaker 1: Iron Net would go through some serious slimming even at 413 00:25:17,000 --> 00:25:19,920 Speaker 1: the board level. The strategy included a requirement that iron 414 00:25:19,920 --> 00:25:22,119 Speaker 1: Net's board of directors would need to slim down to 415 00:25:22,240 --> 00:25:24,800 Speaker 1: just seven folks, three of whom would be determined by 416 00:25:24,840 --> 00:25:28,000 Speaker 1: that venture capital firm C five. And a couple of 417 00:25:28,040 --> 00:25:31,679 Speaker 1: months after that, in October of twenty twenty three, iron 418 00:25:31,680 --> 00:25:35,280 Speaker 1: Net went dark. All staff were let go. The company 419 00:25:35,280 --> 00:25:39,399 Speaker 1: filed for bankruptcy. However, it would end up being only 420 00:25:39,720 --> 00:25:43,760 Speaker 1: mostly dead. In February twenty twenty four, iron Net would 421 00:25:43,840 --> 00:25:48,119 Speaker 1: sputter to life again, emerging from Chapter eleven bankruptcy and 422 00:25:48,200 --> 00:25:52,280 Speaker 1: restructured as a privately held company. Well, iron Net do 423 00:25:52,400 --> 00:25:56,679 Speaker 1: better the second time around? Beats me? But golly, I 424 00:25:56,680 --> 00:25:59,000 Speaker 1: bet folks who invested in the company before it went 425 00:25:59,040 --> 00:26:03,240 Speaker 1: into bankruptcy are really regretting that decision because that one 426 00:26:03,520 --> 00:26:09,639 Speaker 1: was a monumental failure leading up to the relaunch. Right, so, 427 00:26:10,560 --> 00:26:15,240 Speaker 1: rough times, I'm curious about other things that happened at 428 00:26:15,240 --> 00:26:19,800 Speaker 1: that company. I saw kind of vague mentions of mismanagement, 429 00:26:20,280 --> 00:26:22,600 Speaker 1: and it does sound like that would have had to 430 00:26:22,640 --> 00:26:25,600 Speaker 1: have been part of it, right, Like, you know, how 431 00:26:25,600 --> 00:26:28,199 Speaker 1: do you have a company that's getting hundreds of millions 432 00:26:28,240 --> 00:26:31,399 Speaker 1: of dollars in investment and then is going public end 433 00:26:31,480 --> 00:26:35,119 Speaker 1: up having that same issue where you have to reorganize 434 00:26:35,119 --> 00:26:39,520 Speaker 1: like twice in a year due to issues like that 435 00:26:39,560 --> 00:26:42,320 Speaker 1: does suggest there's some mismanagement going on, But I didn't 436 00:26:42,400 --> 00:26:44,840 Speaker 1: find a lot of details, so I'm going to keep 437 00:26:44,920 --> 00:26:47,439 Speaker 1: looking to see if I can learn more about what 438 00:26:47,480 --> 00:26:51,000 Speaker 1: actually happened to this cybersecurity company, because there's got to 439 00:26:51,000 --> 00:26:53,600 Speaker 1: be more to the story than that. But in the meantime, 440 00:26:53,800 --> 00:26:55,720 Speaker 1: we're going to take a quick break. When we come back, 441 00:26:55,760 --> 00:26:58,600 Speaker 1: I've got one more failure I want to talk about 442 00:26:58,600 --> 00:27:01,840 Speaker 1: for this episode before we things up. I plan on 443 00:27:01,920 --> 00:27:06,280 Speaker 1: doing a second episode of failures from twenty twenty three 444 00:27:06,680 --> 00:27:08,879 Speaker 1: because there were a bunch of them and this is 445 00:27:08,960 --> 00:27:11,600 Speaker 1: just a small sample. But first, let's take another quick 446 00:27:11,640 --> 00:27:23,720 Speaker 1: break to thank our sponsors. Okay, so we're back. Get 447 00:27:23,800 --> 00:27:29,000 Speaker 1: ready for stating the obvious moment, right, The pandemic really 448 00:27:29,040 --> 00:27:32,600 Speaker 1: did a big old whammy on businesses. Now, some businesses 449 00:27:32,720 --> 00:27:36,800 Speaker 1: like Quibi stumbled really hard, and you could at least 450 00:27:36,960 --> 00:27:40,080 Speaker 1: partly blame the pandemic for that. Now, there are plenty 451 00:27:40,119 --> 00:27:43,160 Speaker 1: of people who say that Quibi was doomed to fail, 452 00:27:43,520 --> 00:27:45,680 Speaker 1: whether the pandemic had happened or not. If you don't 453 00:27:45,720 --> 00:27:51,480 Speaker 1: remember Quibi that was a short form video streaming platform. 454 00:27:51,920 --> 00:27:54,040 Speaker 1: The original idea was that this would be something you 455 00:27:54,040 --> 00:27:56,760 Speaker 1: would watch on your mobile device, like your phone, and 456 00:27:56,840 --> 00:27:59,440 Speaker 1: that it was designed so that you could watch videos 457 00:27:59,520 --> 00:28:02,320 Speaker 1: either in portrait or landscape mode, you would get a 458 00:28:02,400 --> 00:28:05,280 Speaker 1: slightly different experience depending on how you were holding your phone, 459 00:28:05,520 --> 00:28:08,720 Speaker 1: and that all the content on Quibi would be designed 460 00:28:08,920 --> 00:28:12,520 Speaker 1: to be digestible in short stents, so like even a 461 00:28:12,560 --> 00:28:15,760 Speaker 1: full length film would be divided into like ten minute chapters, 462 00:28:15,920 --> 00:28:18,679 Speaker 1: so that you could watch it whenever you had time. 463 00:28:19,119 --> 00:28:22,040 Speaker 1: And you know, you wouldn't necessarily sit down to watch 464 00:28:22,240 --> 00:28:27,480 Speaker 1: full length films or television episodes in one sitting. It 465 00:28:27,520 --> 00:28:29,520 Speaker 1: was more like, oh, throughout the day, you might watch 466 00:28:29,560 --> 00:28:31,240 Speaker 1: a little bit now and a little bit later, and 467 00:28:31,240 --> 00:28:35,080 Speaker 1: that kind of thing. But Quibi famously blazed out of 468 00:28:35,119 --> 00:28:39,400 Speaker 1: control in its first year of existence, where it overspent. 469 00:28:40,040 --> 00:28:43,800 Speaker 1: It spent way too much on production and securing content. 470 00:28:44,480 --> 00:28:48,480 Speaker 1: And also you had the pandemic hit, so people weren't 471 00:28:49,120 --> 00:28:51,600 Speaker 1: out and about with their smartphones anymore, they were staying 472 00:28:51,640 --> 00:28:54,200 Speaker 1: at home. But again there were those who were saying 473 00:28:54,200 --> 00:28:57,240 Speaker 1: that even if the pandemic hadn't happened, Quibi probably would 474 00:28:57,240 --> 00:29:01,400 Speaker 1: not have succeeded. That it was just a bad idea 475 00:29:01,480 --> 00:29:05,240 Speaker 1: from the beginning. But there were other companies, other services 476 00:29:05,280 --> 00:29:08,440 Speaker 1: that would do quite well, largely due to the pandemic. 477 00:29:08,480 --> 00:29:12,240 Speaker 1: I mean, Zoom saw a meteoric rise in importance because 478 00:29:12,240 --> 00:29:14,880 Speaker 1: of the restrictions that the world was working under. And 479 00:29:15,360 --> 00:29:17,520 Speaker 1: you know, when you have so much of the world 480 00:29:17,560 --> 00:29:21,720 Speaker 1: under lockdown and all meetings have to be virtual, a 481 00:29:21,760 --> 00:29:25,160 Speaker 1: tool like Zoom is obviously going to do very well well. 482 00:29:25,200 --> 00:29:29,040 Speaker 1: One company that initially did well under the circumstances of 483 00:29:29,080 --> 00:29:33,480 Speaker 1: the pandemic was a live streaming service company called Mandolin. 484 00:29:34,320 --> 00:29:36,960 Speaker 1: In fact, it was the pandemic that inspired Mandolin's co 485 00:29:37,080 --> 00:29:41,000 Speaker 1: founders to create the company. Mandolin launched on June first, 486 00:29:41,440 --> 00:29:45,440 Speaker 1: twenty twenty. Now, when I read that, I assumed that 487 00:29:45,520 --> 00:29:47,200 Speaker 1: this was actually going to be the story about a 488 00:29:47,200 --> 00:29:50,680 Speaker 1: company that began as an idea that formed a year 489 00:29:50,800 --> 00:29:54,960 Speaker 1: or two in advance, right like maybe twenty eighteen, twenty nineteen, 490 00:29:55,280 --> 00:29:59,160 Speaker 1: and that it kind of incubated for months and months 491 00:29:59,240 --> 00:30:02,080 Speaker 1: before it finally launched in the summer of twenty twenty. 492 00:30:02,120 --> 00:30:06,560 Speaker 1: But I was wrong. Mandolin's earliest days are traced to 493 00:30:06,920 --> 00:30:10,440 Speaker 1: just a month before it launched in May twenty twenty. 494 00:30:10,640 --> 00:30:16,880 Speaker 1: That's incredible. That's an insane ramp up. Co founders Steve Caldwell, 495 00:30:17,240 --> 00:30:21,880 Speaker 1: Mary Kay Hughes, and Robert Mitis saw opportunity where otherwise 496 00:30:21,920 --> 00:30:25,920 Speaker 1: things were really looking pretty bleak. Obviously, the pandemic would 497 00:30:25,960 --> 00:30:29,920 Speaker 1: have an enormous impact on live performances. Venues had to 498 00:30:29,920 --> 00:30:33,880 Speaker 1: shut down, Artists had nowhere to go to play, Audiences 499 00:30:33,920 --> 00:30:36,880 Speaker 1: had nowhere to go to listen. So enormous companies that 500 00:30:36,920 --> 00:30:41,280 Speaker 1: had built empires on managing live events were suddenly shackled 501 00:30:41,680 --> 00:30:44,240 Speaker 1: and in a holding pattern, and no one was sure 502 00:30:44,240 --> 00:30:47,240 Speaker 1: how long this was going to last. This created a 503 00:30:47,280 --> 00:30:51,440 Speaker 1: heck of an opportunity for entrepreneurs. A live streaming service 504 00:30:51,560 --> 00:30:55,600 Speaker 1: catering specifically to live music would have no better shot 505 00:30:55,680 --> 00:30:58,280 Speaker 1: at gaining mind share than in the early days of 506 00:30:58,280 --> 00:31:01,040 Speaker 1: the pandemic. I mean, they were already platforms out there 507 00:31:01,080 --> 00:31:06,200 Speaker 1: that could do this, but they weren't necessarily dedicated for 508 00:31:06,360 --> 00:31:08,760 Speaker 1: live music. Right like you could do it on Twitch, 509 00:31:08,800 --> 00:31:11,840 Speaker 1: you could do it on YouTube. There were solutions out there, 510 00:31:12,040 --> 00:31:15,240 Speaker 1: but one that was specifically built to cater to the 511 00:31:15,320 --> 00:31:19,600 Speaker 1: live music community. That was something that was seen as 512 00:31:19,640 --> 00:31:24,000 Speaker 1: an opportunity. The business minds behind Mandolin secured partnerships with 513 00:31:24,080 --> 00:31:28,520 Speaker 1: venues like City Winery, so they even had venue sponsored 514 00:31:28,560 --> 00:31:33,360 Speaker 1: livestream events where you're virtually attending a City Winery show. 515 00:31:33,880 --> 00:31:38,080 Speaker 1: They became the backbone for digital only online festivals, and 516 00:31:38,480 --> 00:31:41,440 Speaker 1: the leaders of the business stressed that the company's success 517 00:31:41,680 --> 00:31:46,600 Speaker 1: wasn't only dependent upon the unfortunate lockdown situation, that the 518 00:31:46,720 --> 00:31:49,960 Speaker 1: music industry as a whole was ripe for disruption for 519 00:31:50,080 --> 00:31:53,479 Speaker 1: a multitude of reasons, and to some extent I agree 520 00:31:53,480 --> 00:31:56,479 Speaker 1: with them. I do think the live music industry in 521 00:31:56,520 --> 00:32:00,360 Speaker 1: general is ripe for disruption. We're certainly seeing a lot 522 00:32:00,400 --> 00:32:05,920 Speaker 1: more pushback against the traditional live music industry, especially here 523 00:32:05,920 --> 00:32:09,600 Speaker 1: in the United States, with companies like ticket Master being 524 00:32:10,240 --> 00:32:14,240 Speaker 1: challenged by the US government saying that they're operating as 525 00:32:14,720 --> 00:32:18,360 Speaker 1: a monopoly, essentially that they're using anti competitive practices to 526 00:32:18,440 --> 00:32:23,360 Speaker 1: lock down venues and artists into agreements where Ticketmaster has 527 00:32:23,360 --> 00:32:26,600 Speaker 1: control of all the different elements in that vertical stack. 528 00:32:27,080 --> 00:32:30,120 Speaker 1: We're seeing that happen now. So I agree that the 529 00:32:30,160 --> 00:32:35,520 Speaker 1: live music industry as a whole is ripe for disruption. However, 530 00:32:35,640 --> 00:32:38,840 Speaker 1: I'm not sure that Mandolin was doing as much as 531 00:32:38,880 --> 00:32:43,480 Speaker 1: the creators of the company were boasting about Now, Mandolin's 532 00:32:43,520 --> 00:32:48,200 Speaker 1: operations received both financial investment and critical acclaim in those 533 00:32:48,640 --> 00:32:52,840 Speaker 1: few years where it existed. Investors poured several million dollars 534 00:32:52,840 --> 00:32:56,920 Speaker 1: into the company, and in twenty twenty one, Pollstar named 535 00:32:57,000 --> 00:33:00,720 Speaker 1: Mandolin the best streaming platform fast Come. He would follow 536 00:33:00,760 --> 00:33:04,360 Speaker 1: suit and named Mandolin the most innovative music company in 537 00:33:04,400 --> 00:33:08,680 Speaker 1: the world in twenty twenty two, and just a year later, 538 00:33:09,200 --> 00:33:13,320 Speaker 1: Mandolin would cut its strings and shut down. Obviously, some 539 00:33:13,400 --> 00:33:16,200 Speaker 1: things changed in those years between the company's launch in 540 00:33:16,240 --> 00:33:19,680 Speaker 1: twenty twenty and shutting down in twenty twenty three. For 541 00:33:19,760 --> 00:33:23,120 Speaker 1: one thing, the severity of the pandemic was in decline, 542 00:33:23,360 --> 00:33:25,520 Speaker 1: and you had a lot more folks going out to 543 00:33:25,640 --> 00:33:28,600 Speaker 1: live venues, and live venues were opening back up again. 544 00:33:28,760 --> 00:33:30,920 Speaker 1: Now there was a lot of shuffling going on in 545 00:33:30,960 --> 00:33:33,520 Speaker 1: the live venue space. You had some folks and companies 546 00:33:33,520 --> 00:33:36,720 Speaker 1: that were getting out of the business or had failed entirely, 547 00:33:37,000 --> 00:33:40,120 Speaker 1: and other companies got into it, and Mandolin tried to 548 00:33:40,200 --> 00:33:45,000 Speaker 1: navigate those changes as well, but found it challenging to 549 00:33:45,040 --> 00:33:48,160 Speaker 1: do so so. For one thing, Mandolin introduced a feature 550 00:33:48,200 --> 00:33:52,360 Speaker 1: called Live Plus in twenty twenty one, as Variety would report. 551 00:33:52,440 --> 00:33:55,560 Speaker 1: This was really a suite of features that included quote 552 00:33:55,840 --> 00:34:00,440 Speaker 1: a plethora of digital choices before, during, and after show, 553 00:34:00,600 --> 00:34:04,240 Speaker 1: from ticket sales to meet and greet or after party 554 00:34:04,320 --> 00:34:07,160 Speaker 1: add ons to the show, to ordering food and merch 555 00:34:07,240 --> 00:34:10,520 Speaker 1: online without waiting in line, to getting access at home 556 00:34:10,640 --> 00:34:14,160 Speaker 1: to replays of shows that are filmed live end quote. 557 00:34:14,520 --> 00:34:17,680 Speaker 1: I can totally dig on that. Like one thing I 558 00:34:17,800 --> 00:34:19,640 Speaker 1: tend to do when I go to a live show 559 00:34:19,760 --> 00:34:23,439 Speaker 1: is I'm always tempted to scoop up an album by 560 00:34:23,480 --> 00:34:26,880 Speaker 1: the artists I'm watching, particularly if the album happens to 561 00:34:26,920 --> 00:34:29,600 Speaker 1: be Vinyl. But it can be a real hassle getting 562 00:34:29,640 --> 00:34:31,400 Speaker 1: in line at the end of a show. And I 563 00:34:31,440 --> 00:34:34,640 Speaker 1: can definitely see the value proposition of a service like 564 00:34:34,680 --> 00:34:37,960 Speaker 1: that where you've got essentially like a virtual line queue 565 00:34:38,080 --> 00:34:40,959 Speaker 1: or whatever. But for the business side of things, well 566 00:34:40,960 --> 00:34:43,799 Speaker 1: that's a bit more opaque to me. So apparently the 567 00:34:43,880 --> 00:34:47,600 Speaker 1: idea was that venues would opt into supporting this feature. 568 00:34:47,680 --> 00:34:51,279 Speaker 1: So presumably there would be some sort of compensation for that, right, 569 00:34:51,320 --> 00:34:53,320 Speaker 1: like the venue would pay a certain amount of money, 570 00:34:53,360 --> 00:34:56,880 Speaker 1: maybe like a recurring fee on a yearly or monthly basis, 571 00:34:56,960 --> 00:35:01,080 Speaker 1: to be part of this service. Whether that would actually 572 00:35:01,120 --> 00:35:04,479 Speaker 1: generate enough revenue to sustain the company in the long run. 573 00:35:04,520 --> 00:35:07,760 Speaker 1: I can't say, but at the time Mandolin had raised 574 00:35:07,800 --> 00:35:11,000 Speaker 1: nearly twenty million investments and then on top of that, 575 00:35:11,360 --> 00:35:15,680 Speaker 1: had these revenue generation strategies. In twenty twenty two, the 576 00:35:15,719 --> 00:35:18,840 Speaker 1: company launched a couple of new products called fan Pages 577 00:35:18,920 --> 00:35:23,960 Speaker 1: and Fan Navigator. These were not geared to live music audiences. 578 00:35:24,040 --> 00:35:27,520 Speaker 1: These were geared to the actual musicians. So Fan Navigator 579 00:35:27,560 --> 00:35:32,120 Speaker 1: would give musical acts access to aggregated data about fans. 580 00:35:32,520 --> 00:35:35,960 Speaker 1: Fan Pages would include a tool that would collect data 581 00:35:35,960 --> 00:35:38,959 Speaker 1: from fans in the first place, and presumably acts would 582 00:35:38,960 --> 00:35:41,319 Speaker 1: then be able to take this information and then make 583 00:35:41,360 --> 00:35:44,759 Speaker 1: something useful out of it. Perhaps they could use it 584 00:35:44,920 --> 00:35:49,960 Speaker 1: to plan out new merch launches, or maybe make ideas 585 00:35:50,000 --> 00:35:52,960 Speaker 1: for new tours, that kind of thing. But despite all 586 00:35:53,040 --> 00:35:56,560 Speaker 1: these efforts, Mandolin wasn't able to stick around once folks 587 00:35:56,560 --> 00:36:00,880 Speaker 1: started to go back to live venues again. Company's website 588 00:36:00,960 --> 00:36:03,520 Speaker 1: had a message that read quote, we are sad to 589 00:36:03,600 --> 00:36:07,319 Speaker 1: announce that, after three incredible years of connecting artists and 590 00:36:07,400 --> 00:36:11,960 Speaker 1: fans more authentically through digital experiences, we are officially closing 591 00:36:12,040 --> 00:36:15,080 Speaker 1: down our product and business operations end quote, and they 592 00:36:15,120 --> 00:36:17,920 Speaker 1: said that the final day of operations would be April 593 00:36:17,960 --> 00:36:22,280 Speaker 1: twenty first, twenty twenty three, and another live streaming music 594 00:36:22,320 --> 00:36:26,600 Speaker 1: platform called Sessions also shut down, this one much earlier 595 00:36:26,640 --> 00:36:30,600 Speaker 1: in twenty twenty three. Like Mandolins, Sessions launched in twenty twenty. 596 00:36:30,640 --> 00:36:33,520 Speaker 1: In fact, it launched first. It launched in April twenty twenty, 597 00:36:33,840 --> 00:36:36,720 Speaker 1: right in the very beginning of the pandemic. The former 598 00:36:36,880 --> 00:36:40,360 Speaker 1: CEO of Pandora was the founder for this company, and 599 00:36:40,480 --> 00:36:44,560 Speaker 1: rumors about its demise began to circulate in late twenty 600 00:36:44,680 --> 00:36:47,359 Speaker 1: twenty two. So I didn't really think it quite made 601 00:36:47,400 --> 00:36:50,080 Speaker 1: the cut for this episode for you know, startups that 602 00:36:50,120 --> 00:36:53,640 Speaker 1: failed in twenty twenty three. But you know, the fate 603 00:36:53,760 --> 00:36:58,320 Speaker 1: of Sessions really did show that Mandolin was not unique 604 00:36:58,360 --> 00:37:00,960 Speaker 1: in this issue. A lot of companies that had been 605 00:37:01,000 --> 00:37:04,560 Speaker 1: well positioned to provide products and services during the pandemic 606 00:37:04,840 --> 00:37:09,000 Speaker 1: failed to remain relevant once those conditions changed, right like 607 00:37:09,040 --> 00:37:13,040 Speaker 1: once people started to leave their homes again. And this 608 00:37:13,239 --> 00:37:16,000 Speaker 1: was something that was bigger than just startups. Obviously, we 609 00:37:16,320 --> 00:37:19,160 Speaker 1: saw lots and lots of companies start to hold layoffs 610 00:37:19,480 --> 00:37:24,759 Speaker 1: in the months that followed lockdowns, opening up because these 611 00:37:24,760 --> 00:37:28,200 Speaker 1: companies had invested big time in ramping things up during 612 00:37:28,280 --> 00:37:33,920 Speaker 1: the pandemic, and then didn't need those larger staff bases 613 00:37:34,280 --> 00:37:39,160 Speaker 1: once the pandemic conditions changed. So we didn't just see 614 00:37:39,160 --> 00:37:42,680 Speaker 1: startups but affected by this. We saw massive companies like 615 00:37:43,080 --> 00:37:47,839 Speaker 1: big tech companies obviously continued to hold massive layoffs year 616 00:37:47,920 --> 00:37:51,239 Speaker 1: over year. And that's just a taste of some of 617 00:37:51,280 --> 00:37:54,319 Speaker 1: the tech startups that failed last year. I'll bring more 618 00:37:54,560 --> 00:37:56,960 Speaker 1: of those to you later this week, but for now, 619 00:37:57,160 --> 00:37:59,759 Speaker 1: I hope you are all well, and I'll talk to 620 00:37:59,760 --> 00:38:10,560 Speaker 1: you again really soon. Tech Stuff is an iHeartRadio production. 621 00:38:10,840 --> 00:38:15,879 Speaker 1: For more podcasts from iHeartRadio, visit the iHeartRadio app, Apple Podcasts, 622 00:38:16,000 --> 00:38:18,000 Speaker 1: or wherever you listen to your favorite shows.