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