WEBVTT - Tech Startups that Died in 2023 0:00:04.480 --> 0:00:12.440 Welcome to tech Stuff, a production from iHeartRadio. Hey there, 0:00:12.480 --> 0:00:16.320 and welcome to tech Stuff. I'm your host Jonathan Strickland. 0:00:16.320 --> 0:00:19.919 I'm an executive producer with iHeart Podcasts and how the 0:00:19.960 --> 0:00:24.400 tech are you? You know, tech startups are a risky thing. 0:00:24.880 --> 0:00:27.440 There are certainly unicorns out there, you know. There are 0:00:27.440 --> 0:00:30.960 these companies that get incredible buzz and support and hit 0:00:31.000 --> 0:00:34.360 a billion dollars valuation and it propels them monopath that 0:00:34.520 --> 0:00:38.519 inevitably leads to either an IPO or an acquisition and 0:00:38.840 --> 0:00:41.400 huge payouts for the folks who's stuck with it. But 0:00:41.680 --> 0:00:46.320 those are actually the exceptions to the rule most startups. 0:00:46.360 --> 0:00:51.440 The vast majority of startups will fail, and a few 0:00:51.520 --> 0:00:55.000 will fail in their first year. Somewhere around ten percent 0:00:55.040 --> 0:00:57.520 of all startups fail in the first year. According to 0:00:57.560 --> 0:01:00.400 at least some sources, as many as ninety or even 0:01:00.480 --> 0:01:03.560 ninety one percent of startups fail in the long run, 0:01:03.720 --> 0:01:05.880 and it might take several years for that to happen, 0:01:06.080 --> 0:01:09.600 but it does happen. Maybe the business plan never worked out. 0:01:09.840 --> 0:01:14.200 Maybe whatever the company was providing people just weren't seeking. 0:01:14.680 --> 0:01:18.800 Maybe external factors beyond anyone's control were to blame. Maybe 0:01:18.840 --> 0:01:21.680 the only common factor among all the businesses that went 0:01:21.760 --> 0:01:25.319 bust is that, you know, they all fizzled out. So 0:01:25.560 --> 0:01:28.360 I thought it would look back to last year, which 0:01:28.440 --> 0:01:30.840 was twenty twenty three for those of you listening from 0:01:30.959 --> 0:01:33.800 the future, and I thought i'd talk about some of 0:01:33.840 --> 0:01:37.600 the startups that failed that year. Now, these weren't companies 0:01:37.640 --> 0:01:41.160 that necessarily launched in twenty twenty three. In fact, none 0:01:41.200 --> 0:01:44.679 of the ones I'm talking about launched that year, but 0:01:44.760 --> 0:01:49.240 they did die in twenty twenty three. In one case, 0:01:49.640 --> 0:01:54.240 it only became mostly dead. So let's dive in. First up, 0:01:54.320 --> 0:01:57.080 let's talk about a business that actually was around longer 0:01:57.120 --> 0:02:00.000 than a decade before it failed in twenty twenty three. 0:02:00.080 --> 0:02:02.400 This also makes you wonder at what point you stop 0:02:02.520 --> 0:02:05.680 using the word startup to describe a business and then 0:02:05.880 --> 0:02:10.280 instead use phrases like established business. I guess most folks 0:02:10.320 --> 0:02:14.120 say a startup graduates after not after surviving a certain 0:02:14.120 --> 0:02:16.640 amount of time. It's not like after X number of 0:02:16.720 --> 0:02:20.760 years you're no longer a startup. Instead, the metric appears 0:02:20.800 --> 0:02:24.280 to be growing to a certain scale, like once you 0:02:24.360 --> 0:02:26.880 hit a certain scale, you're no longer a startup. That 0:02:27.040 --> 0:02:31.440 seems weird to me because sometimes unicorns scale up way 0:02:31.600 --> 0:02:35.639 faster than others, but they don't manage to get established, 0:02:35.960 --> 0:02:39.639 and so I think startup would still be an applicable term. 0:02:39.680 --> 0:02:43.040 But what do I know? All right? So the businesses 0:02:43.080 --> 0:02:46.200 I wanted to mention first off, because there's a pair 0:02:46.240 --> 0:02:49.280 of them that both were owned by the same company 0:02:49.720 --> 0:02:53.560 were Cloud Nordic and A Zero, So these were two 0:02:53.760 --> 0:02:57.320 cloud services companies, both of which were owned by a 0:02:57.400 --> 0:03:02.160 holding company called Cerdica Holding. Certica Holding also owned a 0:03:02.240 --> 0:03:06.720 cybersecurity company called netquestaps more on that in a second. 0:03:07.040 --> 0:03:10.400 And all of these businesses were located out of Denmark, 0:03:10.600 --> 0:03:13.000 so that means that there's going to be names that 0:03:13.120 --> 0:03:17.400 I'm going to butcher because I don't speak Danish and 0:03:18.400 --> 0:03:22.840 I have no familiarity with any Norwegian language. So that's 0:03:22.960 --> 0:03:26.760 just a precursor for what's about to happen. Anyway, the 0:03:26.840 --> 0:03:32.280 various companies that were under Certica Holding had been operating 0:03:32.360 --> 0:03:35.320 as successful businesses for several years, but all of that 0:03:35.360 --> 0:03:39.839 would change on Friday, August eighteenth, twenty twenty three. That's 0:03:39.840 --> 0:03:43.920 when some ransomware hackers infiltrated systems belonging to A zero 0:03:44.040 --> 0:03:47.680 and Cloud Nordic and locked away essentially all of their 0:03:47.680 --> 0:03:53.080 customer data, like made it impossible for Cloud Nordic or 0:03:53.080 --> 0:03:57.160 A zero to access any of that customer information. And 0:03:57.200 --> 0:03:59.320 to be fair, I should say that that's not exactly 0:03:59.360 --> 0:04:03.040 when the hackers necessarily infiltrated the systems, it's when they 0:04:03.120 --> 0:04:07.320 executed their attack. They had probably actually exploited the systems 0:04:07.320 --> 0:04:10.800 a week earlier, but every single zero and every single 0:04:10.840 --> 0:04:16.680 one belonging to the company's customers was removed from their access. 0:04:16.960 --> 0:04:19.120 And as far as I can tell, the identity of 0:04:19.200 --> 0:04:22.520 the ransomware hackers has never been disclosed, which is a 0:04:22.520 --> 0:04:26.400 little bit strange. It's possible that the information can be 0:04:26.520 --> 0:04:30.880 found on some Danish cybersecurity site and I simply couldn't 0:04:30.920 --> 0:04:37.640 find it, maybe because Google's usefulness has arguably become less 0:04:37.640 --> 0:04:39.520 so over years. There are a lot of people who 0:04:39.520 --> 0:04:42.760 say that Google is essentially ruined at this point, and 0:04:42.880 --> 0:04:46.320 maybe I should switch to other web search tools than Google. 0:04:46.640 --> 0:04:50.719 But I couldn't find a lot of sources, even in 0:04:50.839 --> 0:04:55.039 Denmark that really went into detail about this. So I'm 0:04:55.040 --> 0:04:58.680 not saying the ransomware hackers were never identified. I'm just 0:04:58.760 --> 0:05:02.640 saying I couldn't fin the information about that. But apparently 0:05:03.040 --> 0:05:05.599 they did strike it pretty much the perfect time. So 0:05:05.720 --> 0:05:09.159 Certica Holding was in this process of moving systems from 0:05:09.200 --> 0:05:13.480 one data center to another. The hackers had apparently already 0:05:13.520 --> 0:05:17.560 penetrated company systems leading up to this transition, and the 0:05:18.080 --> 0:05:22.040 actual moving gave them access to pretty much all corporate 0:05:22.080 --> 0:05:24.680 systems across the board, so it was a total nightmare. 0:05:24.960 --> 0:05:28.120 A zero and cloud Nordick admitted that they couldn't and 0:05:28.279 --> 0:05:33.440 wouldn't respond to ransomware demands. So apparently the hackers demanded 0:05:34.040 --> 0:05:37.400 money that exceeded the company's access to funds. They could 0:05:37.440 --> 0:05:39.680 not pay the ransom even if they wanted to, and 0:05:39.720 --> 0:05:42.440 they said they didn't want to, which is honestly the 0:05:42.520 --> 0:05:47.080 right answer generally speaking, because paying off ransoms just encourages 0:05:47.120 --> 0:05:49.599 more ransoms down the road. If you show that this 0:05:49.800 --> 0:05:53.000 is a viable way to make millions of dollars, of 0:05:53.040 --> 0:05:56.800 course more attacks will follow because there's the incentive to 0:05:56.839 --> 0:06:00.680 do it. If nobody pays the ransom. Eventually, any hacker 0:06:00.720 --> 0:06:02.760 that's doing this for the money at the very least 0:06:03.000 --> 0:06:05.880 is going to stop doing ransomware attacks because it won't 0:06:05.920 --> 0:06:09.160 be effective. It'll be a waste of time for ransomware 0:06:09.240 --> 0:06:12.480 hackers who are doing this for some sort of perceived cause. 0:06:12.720 --> 0:06:14.760 It could be a different story, right if you're doing 0:06:14.800 --> 0:06:18.560 something because you have a personal grudge against the company, 0:06:18.800 --> 0:06:22.640 or you believe in some philosophy that targets the company 0:06:22.640 --> 0:06:25.040 as an enemy, then maybe you would go through the 0:06:25.200 --> 0:06:28.720 trouble of attacking with ransomware even if you weren't going 0:06:28.800 --> 0:06:30.480 to get paid out at the end of the day. 0:06:31.080 --> 0:06:34.000 There are some other factors in this story that make 0:06:34.080 --> 0:06:37.040 it sound at least a little shady to me, like 0:06:37.080 --> 0:06:40.440 it raises some red flags. But customers started to receive 0:06:40.520 --> 0:06:44.960 notifications that their data was inaccessible. It was caput, it 0:06:45.040 --> 0:06:49.120 was gone. Cloud Nordic began to restore servers like web 0:06:49.160 --> 0:06:52.680 servers and email servers, so customers would have access to 0:06:52.720 --> 0:06:56.239 their domains and their email servers again. But then everything 0:06:56.279 --> 0:06:59.680 that had been on those servers was gone. It was 0:06:59.720 --> 0:07:04.600 all blank slate, starting from square one. In the real world, 0:07:04.880 --> 0:07:07.320 this would be kind of like you come home and 0:07:07.360 --> 0:07:10.240 you see that your house or apartment building or whatever 0:07:10.400 --> 0:07:13.520 is totally gone. You still have access rights to the 0:07:13.600 --> 0:07:17.160 land where the building had stood, but you have nothing there. 0:07:17.200 --> 0:07:20.440 You would be forced to rebuild, and just imagine your 0:07:20.640 --> 0:07:24.400 company and all of your web presence is wiped out. 0:07:24.880 --> 0:07:28.440 So the two companies A zero and Cloud Nordick went 0:07:28.480 --> 0:07:32.120 to the rather extraordinary length of advising customers to actually 0:07:32.240 --> 0:07:36.840 port their accounts to other providers, which signaled that these, 0:07:36.960 --> 0:07:40.520 these providers, these cloud companies A zero and Cloud Nordick, 0:07:40.560 --> 0:07:43.880 were not long for this world. If you're telling your customers, hey, 0:07:43.920 --> 0:07:46.440 you need to go find a different provider, chances are 0:07:46.480 --> 0:07:49.640 you're not sticking around very long. One company that popped 0:07:49.720 --> 0:07:53.800 up as an alternative to Cloud Nordic was called Rocky Nordic. 0:07:54.280 --> 0:07:57.440 Rocky Nordic exists to this day, but you know what, 0:07:58.120 --> 0:08:01.280 it didn't exist, or at least, the website for Rocky 0:08:01.320 --> 0:08:06.200 Nordic didn't exist until August twenty second, twenty twenty three. 0:08:06.600 --> 0:08:10.440 So the attack happened August eighteenth, twenty twenty three. So 0:08:10.560 --> 0:08:13.640 just a few days after this ransomware attack that Cloud 0:08:13.680 --> 0:08:17.920 Nordick was hit by Rocky Nordic, the website launches, which 0:08:17.920 --> 0:08:21.200 seems a little strange right now. If I were the 0:08:21.400 --> 0:08:24.800 fringe theory type, I might start to think that someone 0:08:24.840 --> 0:08:28.080 over at Cloud Nordic had scrambled to create a new 0:08:28.160 --> 0:08:32.360 company that also was not saddled with the reputation of 0:08:32.400 --> 0:08:38.200 having lost every single scrap of customer data to hackers. 0:08:38.480 --> 0:08:41.720 And here's a very weird coincidence, y'all. The owner of 0:08:41.800 --> 0:08:46.959 Rocky Nordic, according to various CVR registers, is Casper Tikiob 0:08:47.360 --> 0:08:51.720 or Tikub. Again, I don't speak Danish, so I'm butchering 0:08:51.760 --> 0:08:54.640 the name, but he's the chairman of the board for 0:08:54.840 --> 0:08:58.920 Rocky Nordic. He was also a co founder of both 0:08:58.960 --> 0:09:02.400 A zero and Cloud Nordic, and look at that. The 0:09:02.520 --> 0:09:05.880 Rocky Nordic website talks about how safe and secure their 0:09:05.960 --> 0:09:09.360 service is, which is kind of interesting. Also, by the way, 0:09:09.400 --> 0:09:12.520 if you try to navigate to the old Cloud Nordic site, 0:09:12.600 --> 0:09:16.400 you get redirected to Rocky Nordic, which is also kind 0:09:16.400 --> 0:09:19.720 of interesting. Anyway, the damage was done to A zero 0:09:19.840 --> 0:09:23.000 and Cloud Nordic customers. The company claimed it wouldn't be 0:09:23.040 --> 0:09:26.120 able to compensate customers for the loss of that data either. 0:09:26.480 --> 0:09:31.120 That essentially the customer agreement made with these companies essentially 0:09:31.120 --> 0:09:33.440 said the companies would not be at fault for any 0:09:33.600 --> 0:09:38.920 loss of data. So Cloud Nordic and A zero quickly disappeared. Also, 0:09:39.559 --> 0:09:44.520 net questaps the information security company would disappear. That was 0:09:44.559 --> 0:09:47.319 the other one that was held by the same holding company. 0:09:47.520 --> 0:09:51.200 Also interesting that an information security company wasn't able to 0:09:51.240 --> 0:09:53.880 do more in the face of a ransomware attack that 0:09:54.000 --> 0:09:58.079 affected its sister companies. How about that? Now, there are 0:09:58.360 --> 0:10:01.360 other companies called Netquest out there. Just to be clear, 0:10:01.640 --> 0:10:03.640 So if you were to like, oh, I want to 0:10:03.679 --> 0:10:05.839 read up more about this, you need to make sure 0:10:05.840 --> 0:10:08.640 you're looking at the right net Quest, because there are 0:10:08.760 --> 0:10:11.680 a couple of other companies called Netquest that are not 0:10:12.040 --> 0:10:14.400 this one. There's in fact a net Quest here in 0:10:14.400 --> 0:10:18.120 the United States that provides threat detection for stuff like 0:10:18.240 --> 0:10:21.120 state backed hacker attacks and that kind of thing, like 0:10:21.520 --> 0:10:26.200 really serious potential threats. So that's not the same company. 0:10:26.840 --> 0:10:29.360 I say that because at least one of the sources 0:10:29.360 --> 0:10:31.760 I was looking at while I was researching this made 0:10:31.760 --> 0:10:35.400 the mistake of equating the net Quest that was part 0:10:35.400 --> 0:10:38.679 of this other holding company with that one. They are 0:10:38.720 --> 0:10:42.840 not the same. That's a different organization entirely. So that 0:10:43.000 --> 0:10:45.880 is the sad tale of a family of companies that 0:10:45.920 --> 0:10:49.640 were wiped out due to external forces. Honestly, I'm surprised 0:10:49.640 --> 0:10:52.400 I couldn't find more information about this When I was searching, 0:10:52.520 --> 0:10:54.760 you know, I read a lot of translated articles because 0:10:54.800 --> 0:10:57.520 again I can't write, read, or write in Danish. But 0:10:57.679 --> 0:11:00.480 I would have expected at least a few deeper to 0:11:00.600 --> 0:11:04.240 investigate how the company's handled or failed to handle, the 0:11:04.320 --> 0:11:07.680 fallout of this situation that led up to them just 0:11:08.120 --> 0:11:12.240 shutting down, as well as the questionable origins of Rocky Nordic. 0:11:12.280 --> 0:11:16.280 I feel like having that jump up so quickly as 0:11:16.320 --> 0:11:18.880 an alternative, and it was founded by one of the 0:11:18.880 --> 0:11:21.480 co founders of the companies that had been affected by 0:11:21.520 --> 0:11:24.040 the ransomware attacks, you know, that just seems like it's 0:11:24.080 --> 0:11:26.800 something that needs to be investigated a little bit. Maybe 0:11:26.840 --> 0:11:29.920 everything is just as it seems on the surface, everything's 0:11:29.960 --> 0:11:31.920 on the up and up, and you know, there's nothing 0:11:31.960 --> 0:11:35.520 really questionable here, But I feel like it almost feels 0:11:35.559 --> 0:11:39.800 like an attempt to continue business as usual and shirking 0:11:39.840 --> 0:11:44.080 off the reputation of a company that failed to protect 0:11:44.120 --> 0:11:49.439 customer data to like the most extreme degree possible. It's 0:11:49.520 --> 0:11:52.240 like if you were running a game and you realize, oh, no, 0:11:52.920 --> 0:11:56.280 this game has totally gone off the rails. I'm just 0:11:56.360 --> 0:12:00.880 gonna quit. Now start a new game, call it something else, 0:12:01.120 --> 0:12:04.000 and hope that nobody questions me about it, like that's 0:12:04.040 --> 0:12:06.400 what it feels like to me, and it may not 0:12:06.600 --> 0:12:10.720 be that. Again, this is my opinion. It's how I feel, 0:12:10.760 --> 0:12:12.959 how the red flags are popping up in my mind. 0:12:13.160 --> 0:12:16.160 And there may even be perfect answers for all of this, 0:12:16.320 --> 0:12:18.600 and I just couldn't find it in my research. So 0:12:18.640 --> 0:12:21.520 I want to be totally fair here. Okay, let's take 0:12:21.559 --> 0:12:23.640 a quick break. When we come back, we'll talk about 0:12:23.640 --> 0:12:36.280 some more flops in twenty twenty three. We're back, so 0:12:36.440 --> 0:12:39.839 how about we focus on a failed startup in which 0:12:40.000 --> 0:12:43.400 all the details of that failure are Fuzzy. That's my 0:12:43.480 --> 0:12:47.360 cute way to introduce the sad story of Fuzzy, a 0:12:47.520 --> 0:12:52.240 telehealth site for pets, really for pet owners. Pets are 0:12:52.240 --> 0:12:56.720 notoriously bad at operating apps. Fuzzy introduced apps for pet 0:12:56.760 --> 0:13:01.199 owners and on demand telemedicine appointments. Before that, though, Fuzzy 0:13:01.280 --> 0:13:05.600 actually offered customers the chance to book physical vet visits, 0:13:05.880 --> 0:13:10.080 so they were working with actual veterinary offices and kind 0:13:10.080 --> 0:13:14.720 of serving as a booking agency for those. But that 0:13:14.760 --> 0:13:18.120 particular business approach proved to be too difficult to scale, 0:13:18.480 --> 0:13:21.840 so in twenty twenty and in twenty twenty one, the 0:13:21.920 --> 0:13:26.320 company would change course to focus more on telemedicine. Customers 0:13:26.360 --> 0:13:28.680 would pay a fee of fifteen dollars per month, and 0:13:28.720 --> 0:13:31.640 in return, they would have access to various like telehealth 0:13:31.640 --> 0:13:36.280 appointments and a few other services. Zubin Bette, whose name 0:13:36.320 --> 0:13:40.960 I'm sure I'm also mispronouncing, founded Fuzzy back in twenty sixteen. 0:13:41.320 --> 0:13:44.280 By twenty twenty three, the company had raised more than 0:13:44.360 --> 0:13:48.559 eighty million dollars in various investment rounds. But on Thursday 0:13:48.679 --> 0:13:52.880 June fifteenth, twenty twenty three, the company abruptly shut down. 0:13:53.120 --> 0:13:57.160 And when I say abruptly, I do mean it was fast. Now. 0:13:57.240 --> 0:14:01.040 Employees reported that they had not been paid since the 0:14:01.120 --> 0:14:04.360 end of May, so something was clearly up right, and 0:14:04.720 --> 0:14:07.800 some employees might have already had an inkling that things 0:14:07.840 --> 0:14:10.440 were going south in a hurry. There were also other 0:14:10.480 --> 0:14:14.680 employees who reported that they encountered some difficulties when trying 0:14:14.760 --> 0:14:18.679 to use company provided medical insurance and to use the 0:14:18.840 --> 0:14:25.000 various insurance benefits, that they were running into issues with processing. 0:14:25.200 --> 0:14:29.400 So obviously there were problems that were already evident even 0:14:29.480 --> 0:14:33.480 before the company officially shut down. But the shutdown was 0:14:33.520 --> 0:14:35.880 so sudden that a lot of high ranking folks at 0:14:35.920 --> 0:14:38.760 the company had no idea that it was happening, and 0:14:39.120 --> 0:14:42.000 they were just as shocked as anyone else. So, according 0:14:42.000 --> 0:14:46.640 to the news site Coverager, Zubin Bette's LinkedIn and Twitter 0:14:46.680 --> 0:14:51.240 profiles were both taken offline. Now they have since been restored, 0:14:51.520 --> 0:14:53.560 because I saw both of them while I was researching 0:14:53.640 --> 0:14:55.800 this episode. So I don't want to suggest that he 0:14:56.080 --> 0:14:59.600 just you know, ghosted the entire world and hid away 0:15:00.200 --> 0:15:04.760 because this business that he founded had failed. Initially, that 0:15:04.920 --> 0:15:07.560 might have been the case, because again that's what Coverager 0:15:07.680 --> 0:15:10.480 was saying, but when I did the search, they both 0:15:10.480 --> 0:15:13.920 popped up, so you know, it could have been a 0:15:14.000 --> 0:15:16.680 knee jerk reaction. I know that if I had a 0:15:16.720 --> 0:15:21.880 business that failed pretty spectacularly, especially one that had raised 0:15:21.920 --> 0:15:25.680 like forty million dollars the year before, like a year 0:15:25.680 --> 0:15:27.880 and a half before, I would be tempted to just 0:15:27.960 --> 0:15:30.560 go and hide too. I'm actually tempted to go and 0:15:30.640 --> 0:15:34.200 hide most days, and I don't have something like that 0:15:34.200 --> 0:15:37.160 that happened to me. So I'm not blaming him at 0:15:37.200 --> 0:15:40.000 all if that was his initial reaction, but I don't 0:15:40.040 --> 0:15:42.200 know for a fact that that was his reaction at all. 0:15:42.280 --> 0:15:44.760 I just know that it was reported that way, but 0:15:44.920 --> 0:15:48.200 now it appears that all that information is back up online. 0:15:48.640 --> 0:15:52.200 It sounded like the company had owed a great deal 0:15:52.240 --> 0:15:54.960 of money to its creditors and it just hit a 0:15:54.960 --> 0:15:57.560 point where money was going out faster than it could 0:15:57.600 --> 0:16:01.280 come in, even with these large investments in on occasion. 0:16:01.440 --> 0:16:03.000 But it had been like a year and a half 0:16:03.040 --> 0:16:06.360 since the last round of investment funding, so I think 0:16:06.560 --> 0:16:09.920 it was just a critical case of a company running 0:16:09.960 --> 0:16:12.680 out of all that investment money and not generating enough 0:16:12.720 --> 0:16:17.320 revenue to sustain itself. The news site sf gate suggested 0:16:17.360 --> 0:16:21.240 a potential link between the failure of the Silicon Valley 0:16:21.320 --> 0:16:25.200 Bank with Fuzzy going off to the Rainbow Bridge. To 0:16:25.400 --> 0:16:29.080 use a analogy as a reminder, the Silicon Valley Bank 0:16:29.280 --> 0:16:33.760 collapsed due to a number of reasons, including inflation and 0:16:33.920 --> 0:16:38.720 high interest rates, which then discouraged various companies and individuals 0:16:38.880 --> 0:16:41.280 from taking out loans. There were a lot of other 0:16:41.360 --> 0:16:44.760 factors that contributed to the bank's failure. To go into 0:16:44.760 --> 0:16:47.520 all of those would take a full episode by itself, 0:16:47.560 --> 0:16:50.560 and honestly, it probably would be best reserved for a 0:16:50.600 --> 0:16:54.280 totally different type of podcast like a financial podcast. Silicon 0:16:54.360 --> 0:16:58.520 Valley Bank was and now is again, although it's a 0:16:58.640 --> 0:17:01.440 totally different entity than it was before. But it was very, 0:17:01.520 --> 0:17:04.119 very important in the tech industry. Like it was a 0:17:04.440 --> 0:17:09.639 bank that catered to startups and to venture catalysts and 0:17:09.760 --> 0:17:13.000 other investors. So it was a big deal. And I 0:17:13.040 --> 0:17:16.520 do remember when this failure actually happened, because the news 0:17:16.600 --> 0:17:19.800 broke while I was waiting to board a flight to Austin, 0:17:19.920 --> 0:17:23.000 Texas for south By Southwest in twenty twenty three, and 0:17:23.080 --> 0:17:25.800 a bunch of tech executives were supposed to be well. 0:17:25.880 --> 0:17:28.960 They were on that flight, and I started seeing them 0:17:29.040 --> 0:17:32.399 all look at their notifications on their phone and start 0:17:32.440 --> 0:17:38.080 to sweat really, really hard as the money that they 0:17:38.160 --> 0:17:41.720 counted on was suddenly getting harder for them to get 0:17:41.760 --> 0:17:46.679 access to. It was a really dramatic moment that I witnessed, 0:17:46.960 --> 0:17:49.080 just because I happened to be in the right place 0:17:49.080 --> 0:17:51.040 at the right time to see it, at least on 0:17:51.080 --> 0:17:53.399 a small scale of folks who were waiting for a 0:17:53.440 --> 0:17:57.760 flight from Atlanta to Austin, Texas. Anyway, it's possible that 0:17:57.960 --> 0:18:03.360 Silicon Valley banks collapse exacerbated problems that already existed at Fuzzy. 0:18:03.680 --> 0:18:07.439 Maybe if SVB had remained solvent, Fuzzy would still be 0:18:07.480 --> 0:18:10.600 around today, But it sounds to me as though the 0:18:10.720 --> 0:18:14.840 scaling problems were a real issue and that the odds 0:18:14.840 --> 0:18:19.440 were stacked against Fuzzy even before the failure of Silicon 0:18:19.520 --> 0:18:23.600 Valley Bank. Now, not all startup failures are the end 0:18:23.840 --> 0:18:27.720 of the story entirely, so let me set the next scene. 0:18:28.119 --> 0:18:32.840 It's the spring of twenty fourteen, and you are Keith Alexander, 0:18:33.160 --> 0:18:36.520 the four star general and former director of the United 0:18:36.520 --> 0:18:41.160 States National Security Agency, or NSA, and you've just had 0:18:41.200 --> 0:18:45.680 a heck of a couple of years after denying multiple 0:18:45.720 --> 0:18:49.800 times that your agency was collecting information on American citizens, 0:18:49.960 --> 0:18:51.920 because you know, the NSA is really supposed to be 0:18:52.040 --> 0:18:56.639 focused on foreign intelligence threats. Then a contractor named Edward 0:18:56.680 --> 0:18:59.440 Snowden has revealed to the world that, whoopsie Daisy, the 0:18:59.560 --> 0:19:03.560 NSA kind of was collecting data on Americans after all, 0:19:03.800 --> 0:19:06.600 at least to the extent of, you know, who Americans 0:19:06.640 --> 0:19:10.200 were calling and who was calling Americans and like a big, 0:19:10.359 --> 0:19:14.320 massive record of all of those phone calls. So yeah, 0:19:14.520 --> 0:19:17.719 you kind of were collecting information about American citizens, even 0:19:17.760 --> 0:19:19.520 though you were saying you weren't. So then you go 0:19:19.560 --> 0:19:21.920 and you retire from that gig and you're looking to 0:19:22.000 --> 0:19:25.960 launch something new. That knew something in twenty fourteen is 0:19:26.000 --> 0:19:30.240 a cybersecurity company, and you call it IronNet. It launches 0:19:30.440 --> 0:19:34.880 on May Well in May of twenty fourteen, and Keith 0:19:34.920 --> 0:19:39.439 Alexander's involvement and the company's reputation among investors encouraged a 0:19:39.440 --> 0:19:43.440 lot of initial enthusiasm, so over time the company would 0:19:43.520 --> 0:19:46.840 raise more than four hundred million dollars in funding. In 0:19:46.880 --> 0:19:51.000 twenty twenty one, the plan was to take the company public, 0:19:51.200 --> 0:19:56.960 but not through the traditional initial public offering or IPO route. 0:19:57.040 --> 0:19:59.960 So the IPO, as I said, is the traditional way 0:20:00.119 --> 0:20:03.640 to take a privately held company to become a publicly 0:20:03.720 --> 0:20:06.320 traded one. You go through a whole bunch of different steps. 0:20:06.359 --> 0:20:09.840 You work with underwriters, you work with regulators, and you 0:20:09.920 --> 0:20:12.520 come up with an initial stock price for your company 0:20:12.560 --> 0:20:14.760 as well as the number of shares that you're going 0:20:14.840 --> 0:20:18.280 to issue to a stock market, and the market kind 0:20:18.320 --> 0:20:20.760 of takes care of the rest. And if you're really lucky, 0:20:21.000 --> 0:20:23.600 people are super jazzed about your company, and the stock 0:20:23.640 --> 0:20:26.359 price goes up because demand is going up, and you 0:20:26.480 --> 0:20:28.720 end up raising a huge amount of capital that you 0:20:28.760 --> 0:20:32.280 can then invest into the business and then scale things 0:20:32.359 --> 0:20:36.000 because now you've got all this cash at your disposal. 0:20:36.160 --> 0:20:39.359 But there's an alternative to the IPO, which I would 0:20:39.359 --> 0:20:43.680 call the old standby. It's known as the special purpose 0:20:43.800 --> 0:20:50.400 acquisition company or SPAC spack approach. This involves investors creating 0:20:50.440 --> 0:20:54.240 a shell company that doesn't do anything like it doesn't 0:20:54.400 --> 0:20:59.760 produce anything, no products, no services, nothing. It just exists 0:21:00.040 --> 0:21:03.200 for the purposes of going public and then being used 0:21:03.240 --> 0:21:06.800 to acquire some other company, like a private company. And 0:21:06.880 --> 0:21:11.040 at that point the acquired private company becomes part of 0:21:11.080 --> 0:21:13.960 a public holding company and boom, you got yourself a 0:21:13.960 --> 0:21:17.440 publicly traded company now, which sounds a bit wild, right, 0:21:17.520 --> 0:21:20.960 Like you're bypassing all the IPO stuff in order to 0:21:21.000 --> 0:21:23.800 be able to take this private company public. It's a 0:21:23.840 --> 0:21:26.679 workaround which sounds like it shouldn't be allowed, but it 0:21:26.760 --> 0:21:31.480 totally is allowed. Spacks have become really popular in recent years. 0:21:31.520 --> 0:21:34.280 They sidestep a lot of tricky hurdles that you have 0:21:34.320 --> 0:21:37.479 to overcome if you're taking a privately held company public 0:21:37.520 --> 0:21:42.000 the traditional way. Sometimes companies fail to go to a 0:21:42.000 --> 0:21:44.879 full IPO. That's happened a few times, so a SPAC 0:21:45.000 --> 0:21:48.600 is one way to kind of sidestep all that. Now, 0:21:48.640 --> 0:21:51.439 I've got a lot of cynical opinions about SPACs, but 0:21:51.480 --> 0:21:53.879 I also have to admit that I am not at 0:21:53.920 --> 0:21:57.720 all educated about this kind of stuff. My reticence could 0:21:57.920 --> 0:22:01.040 only be based off my ignorance. It could be that 0:22:01.080 --> 0:22:04.320 I'm just completely off base because I don't understand it properly. 0:22:04.720 --> 0:22:08.400 But it still does seem kind of questionable to me. However. Anyway, 0:22:08.640 --> 0:22:11.840 in twenty twenty one, iron Net would go public through 0:22:11.880 --> 0:22:15.680 a SPAC acquisition. Less than a year later, in June 0:22:15.760 --> 0:22:20.160 twenty twenty two, iron Net would go through a reorganization 0:22:20.400 --> 0:22:24.280 and would downsize. It laid off around seventeen percent of 0:22:24.320 --> 0:22:27.280 its workforce, which is kind of crazy, Like, you know, 0:22:27.320 --> 0:22:30.040 here's a company that had raised hundreds of millions of 0:22:30.080 --> 0:22:33.359 dollars in investments, then managed to go public through a 0:22:33.400 --> 0:22:38.640 SPACK acquisition, and now just a year later, is downsizing. 0:22:38.880 --> 0:22:43.160 Tech Crunch's Carly page included a quote from IronNet spokesperson 0:22:43.320 --> 0:22:47.359 Joseph P. Deppa the Third that said, quote, the workforce 0:22:47.440 --> 0:22:51.000 reduction is part of a broader plan to streamline our operations. 0:22:51.000 --> 0:22:55.359 For higher efficiency, to reduce overall expenses and preserve cash, 0:22:55.680 --> 0:22:59.360 and to set iron Net up for rationalized growth going forward. 0:22:59.560 --> 0:23:02.560 End quote. So it sounds like despite that influx of 0:23:02.600 --> 0:23:05.960 cash from investments and from going public, iron Net was 0:23:06.040 --> 0:23:09.680 hitting hard times, which is weird, right because we're also 0:23:09.800 --> 0:23:14.879 talking about a time when cybersecurity threats were definitely on 0:23:14.920 --> 0:23:18.560 the rise, like from twenty twenty to today, Like you've 0:23:18.600 --> 0:23:22.720 seen just such a dramatic rise in cybersecurity threats, particularly 0:23:22.880 --> 0:23:27.560 nation backed cybersecurity threats. You would think that a company 0:23:27.640 --> 0:23:31.720 headed by a former director of the NSA would actually 0:23:31.720 --> 0:23:34.119 be doing business like gangbusters, like they'd be able to 0:23:34.160 --> 0:23:39.080 scale easily, you would think based upon just the reputation 0:23:39.200 --> 0:23:43.000 of the people involved and the factors that were present 0:23:43.480 --> 0:23:45.560 at that time. But that's not what was going on. 0:23:45.920 --> 0:23:49.640 Iron Net was not doing well. According to Zach Whittaker, 0:23:49.880 --> 0:23:53.480 also of tech Crunch, iron Net had fewer than one 0:23:53.600 --> 0:23:58.040 hundred corporate customers in twenty twenty two. The company worded 0:23:58.080 --> 0:24:01.920 it a little differently in a statement from Alexander that 0:24:02.600 --> 0:24:07.880 read quote, we encountered unexpected headwinds in our transactional business 0:24:07.920 --> 0:24:11.960 this quarter. To contain costs, we are undertaking a further 0:24:12.040 --> 0:24:15.480 restructuring of the company with the support of our new CFO, 0:24:15.600 --> 0:24:18.520 Cameron four. We have decided to forego a call with 0:24:18.600 --> 0:24:21.800 management this quarter until we are better able to communicate 0:24:21.840 --> 0:24:24.960 on our progress end quote, which almost sounds like we 0:24:25.000 --> 0:24:26.280 don't want to talk to you all till we can 0:24:26.280 --> 0:24:30.600 get our story straight. In July twenty twenty three, Alexander 0:24:30.920 --> 0:24:33.520 was shown the door. Now, this was all part of 0:24:33.520 --> 0:24:36.920