A Founder's Story From Concept To $105M Exit
Crick: Ribbit started out as IDP Communications in 2004, started doing business as Duality in 2005, and after all become Ribbit in 2006. It was mid-2004. I had noticed that companies needed phone features for individual, company-specific, use cases that couldn't easily be met with traditional telco infrastructure. These features were inaccessible for three reasons: they required purchase of racked equipment and telecom connections, were sold in bundles at very high per seat prices, and they could not be triggered or accessed via web services.
I realized that if the features of telephony services could be disaggregated, hosted as a cloud service, and be made accessible via web services; at the time these phone features would become "software" to developers making possible a whole new market of high-value applications.
The first application
The first application was conceived of late in 2004 around the idea of "never miss that [buyer's] call." I put at the same time a PowerPoint of the product idea, cold called several newspapers, and convinced the San Francisco Examiner to introduce "never miss the call" as a feature built into all of their classified online and offline ads. The Examiner would pay IDP Communications five dollars per ad. They loved the idea and a contract was drafted up and sent to Philip Anschutz's CFO in Denver for approval.
At the same time, Anschutz created a new national marketing VP position to oversee all the Examiner properties across the country. I got a heads-up call from the consulting firm in Florida that was helping me with introductions in the newspaper and advertising industries warning me that the person who had been tapped for the job was old-school, unlikely to understand the innovation, and would probably kill the deal. Sure enough, he was and he did, and the two executives I had been working with at the SF Examiner both quit within weeks.
Bruce, although, had introduced me to John Appler. John had been helping me on business development with the Examiner. John, in turn, introduced me to Ted Griggs, who was founder and CEO of a company called Syndeo, where John had earlier worked.
Though Syndeo had developed award-winning innovation and had international operating deployments, the market had moved on without affording Syndeo an exit. The company had trimmed down to its founding team and was looking for ways of leveraging its intellectual property with its remaining funds.
Syndeo's research was much more advanced than what I had anticipated having to work with to jumpstart IDP Communications, and the Examiner deal had left me free to pivot. So when I was introduced to Syndeo, Ted and I were able to put our heads at the same time over a potentially faster-bigger-stronger plan. "Okay," we thought, "let’s see if we can take the IDP Communications concepts and re-apply them with the more powerful soft switch in other words than using Asterisk or LignUp.
Whole set of ideas
We spent nine months iterating on a whole set of ideas. From April 2005 onward, we took a number of turns. One of which was pursing an enterprise peering exchange for MCI, another was pursing a dual-mode phone strategy using intelligent call routing to seamlessly hand-off calls between mobile and fixed endpoints. It was this idea that led us to file a dba form as "Duality" and IDP Communications became Duality Inc.
The Duality team in the long run arrived at a revised business model and a product that we would call Mobi-Link. Mobi-Link converged your cell phone number with your fixed-line number allowing calls to be made from and received with home or office phones, VoIP (Voice over Internet Protocol) phones, instant messenger customers, and with any Internet browser.
Mobi-Link came with a networking platform, call diversion and re-direction features, a graphical UI, contact management, and a whole bunch of stuff that we take for granted in many applications today — however in 2005 were kind of radical. In December of 2005, we started getting nibbles from the venture community. Recurring interest.
Crick: Right. We were working tirelessly at fundraising throughout 2005. Toward the end of 2005, now a year since Ted and I had started talking to the finance community, we were nevertheless unfunded. Fortunately, Ted was able to reign in some money by licensing a portion of Syndeo's innovation to another firm. Those licensing fees gave us the runway we needed to fund development of Mobi-Link.
It was social networking and serendipity that were the origins of Ribbit's funding. Even serendipity has a path and the path to Ribbit's first round of funding started when my son was a year old. My wife made plans for our family of three to have breakfast with a friend of hers with whom she had worked at Excite @Home. Her friend, who as well had a one-year-old son, would be bringing her husband, Gilman Louie.
In 2006, Gillman left In-Q-Tel and at the same time with Stewart Alsop who left NEA, formed a new firm called Alsop-Louie Partners. As the two of them were starting up ALP, Stewart, whom I didn't know, blogged about how he couldn't find a phone system that met the needs of small businesses. Stewart had been with NEA. He knew research and he knew the Vonage guys. So if he couldn't figure out how to get a phone system that would work for him at the time he was a guy I needed to talk to.
So we drive up from Mountain View and snagged a clutch parking space right along Levi Plaza. It's all metered street parking up there with aggressive parking police driving around all the time. So we waited until just previously our meeting start time to go in so that the maximum one-hour of parking time would cover our hour with Stewart and Gilman. We went in in every respect focused on what Stewart saw as the problem needing to be solved in small office phone systems. ALP, remember, had just formed and had no fund but. They barely had furniture back at the time.
Crick: So that emboldened me, and I took the early exit from AT&T. Clearly there were endless follow-on periods of anxiety. The turns and tumbles – like when the contract with the Examiner fell through and my CTO resigned. Endless challenges. What do I do? How do I resolve that? Where do I go for innovation? How do I find people? And there was investor on every corner telling me my idea was stupid. The good news is that it only takes one investor to like and fund your vision.
Crick: So now we're going to start getting into how the company was sold. Frist we need to roll the clock back and talk about how networking in 2004 led us to BT in 2008.
Crick: During I was nevertheless at AT&T in 2004, I was invited to an industry networking event by a company called Light Reading. Light Reading was a market innovation and publication firm. They invited a bunch of people to a Light Reading golf tournament down in Half Moon Bay in 2004 – which I attended with an AT&T badge, and made good connections with the Light Reading team. In 2005, I was again invited, nevertheless this time I was unemployed with Duality Inc. and the event was in southern California - not a simple drive over to Half Moon Bay funded by AT&T, yet a personal investment in airfare, rental car, and hotel accommodations. This was a big commitment for me - and I struggled with the question of whether or not to go. One thing that tipped my decision was following through on an introduction to Tom Marcin who was Global Director of Telecommunications at DuPont. Tom had been supportive of Duality in many phone and e-mail conversations and would be attending the Light Reading event, so I decided to go to meet Tom in person and during making the most of the event.
The conference itself
The conference itself was good, even though uneventful. Afterward, some of us found ourselves at the same time at the Santa Barbara airport waiting for our flights home. Santa Barbara airport has a little bar upstairs and I went on up to find a boisterous, red-faced, Brit talking loudly and inviting me to join the table for a beer. I sat down, introduced myself, and discovered him to be a research scout, Rob Hull, working out of the Bay area for British Telecom.
I in the long run told him what we were working on and that we'd been funded. He took some notes and we went on about our businesses. When we released Ribbit for Salesforce a year later in September of 2007, I thought of Rob and called him again to meet for a coffee - something like, "Hey, I want to show you this thing. We're going to need a distribution partner for Ribbit for Salesforce in Europe sometime and perhaps BT would be a good partner." We didn't talk about telephony APIs at all.
Joe Black was the business development lead for BT's API group. As Joe described to me later, he would go to Salesforce, Oracle, and others to introduce BT's API business. When he did, these prospects would say things like, "Oh, you're kind of like Ribbit." Joe was irritated to no end as you can imagine. Who and what is this Ribbit thing? So the BT API guys talked to their research scouting team asking if they knew about Ribbit. And clearly Rob Hull did.
Crick: Right. There were: to sell or to grow the business. So now we do some math. We had $11M invested on a post-money valuation of $30M with ~$6M in the bank when BT came to us with an offer. We had no plans to sell the company.
Meanwhile, our board was like, "No you're crazy. You're going to be a billion dollar company, why would you do this?" Ted Griggs managed all the stress of this sell-build dilemma. There was high stress on all three sides of the conversation - BT, Ribbit, and VCs. The only way this could work was if our board agreed to the buy-it-now price of $105M and BT met this price with an all-cash offer. There could be no monkey-business in any quarter of the deal.
So Ted and I went for lunch to talk over our dilemma. $100M was very close to $105 - however not $105. We'd worked hard to get our board to agree to the $105 price and were uncomfortable considering something just 5% short of threshold from BT - a company with near $40B in annual revenue. We had a long conversation and concluded that fundamentally, we couldn't accept a one hundred million dollar offer because we, our venture partners, and our board, had been very clear that they didn't want to sell the company and would only consider an offer meeting the hundred and five million dollar buy-it-now price.
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