This is part of our “Bootstrapped, Profitable, & Proud” series which profiles companies that have $1MM+ in revenues, didn’t take VC, and are profitable. Terry Jackson of Admoda responds in the comments section to reader questions.
One sign that Admoda, an ad network for mobile phones, is doing things a little bit differently: this press release announcing the company’s rejection of ”$25M of 3rd Round investment.”
Along with the angel investment of $250,000 that Admoda (and sister service Adultmoda) declined initially, the $3M in declined first round funding, and the $10M in declined second round funding, this latest round brings the total investment declined by Admoda to $38.25M…
Terry Jackson, CEO and founder of Admoda, had this to say, “Well, we did consider the traditional N step business plan of startups in the tech sector. But, in the end, we opted for a less-conventional, two-step plan; First, build a profitable business and grow it by re-investing the profits. Second … Sorry, did I say ‘two steps’? There’s just the one, actually.”
A fun little April Fool’s joke — but one inspired by frustration. “Many companies seem far more excited about sending out a press release regarding a round of funding then they would if they clinched a great sale or shipped a superb product,” explains Jackson when asked why the company posted the fake release. “It’s as if raising finance is the end goal for some businesses — like a prize or some kind of status symbol. It’s always press releases about VC funding too — I’ve noticed bank loans are not that cool. Investment is great if it is for the right reasons. But it should not be considered as a goal for a business in itself.”
How Admoda started
Back in 2002, Jackson founded MobVision, a group of businesses selling mobile content and mobile affiliation services. By 2005, he realized clients were struggling for ways to get traffic and thus the idea for Admoda sprouted. He felt that building an ad network for companies to buy and sell mobile traffic seemed a natural service to launch.
In 2006, Jackson (pictured at left) and co-founder David Salgado launched Admoda. It’s a global network run out of London, UK. There’s also a partner service called Adultmoda for mobile ad campaigns aimed at adults.
The founders started out with a set of goals: Bootstrap from the start, avoid the need for investment, provide a great service, build a great place to work, make a lot of money, and have fun. Jackson encourages other startups to also figure out their goals in the beginning. “Every founder should ask themselves: ‘What were the reasons I had for starting my business in the first place? What was I looking for from the business? What excited me? What drove me?’” he explains. “If those things are being achieved, or on their way to being achieved, then the business is successful.”
The founders funded themselves through their own cash, though they didn’t need much capital outlay at first. They launched Admoda as the most basic ad network companies could use to buy and sell traffic. Soon they made money and invested it back in.
The company has been profitable since shortly after launch and the number of ad requests per month has doubled in the last year, according to Jackson. The combined networks currently see over 7.5 billion ad requests per month. While Admoda is slightly larger, Adultmoda is the largest adult mobile ad network in the world.
Productivity as a measure of success
Profit is key, but Jackson feels productivity is also a good way to measure the success of a business. “We far outstrip the productivity of any of our competitors when you compare the volume of business our small team delivers compared to our larger VC funded competitors with their massive pools of staff and global offices,” he says.
Jackson feels using a company head count as something to brag about is ridiculous. (Admoda has a core team of only nine people.) “If you have the productivity to match the head count, great. But raising $40m and recruiting 85 employees does not constitute a good business — or a successful one.”
Exit strategy, or lack thereof
Admoda isn’t interested in the acquisition game either. He says, “Virtually all mobile phone ad networks at the moment are raising investment, spending money, making a loss, and desperately trying to be acquired by someone with very deep pockets,” he says. “This is not a scenario that comes along and attacks from behind. Companies and the founders create their own destiny. Once you set off on the route of needing to make money you end up on a very different road than companies who don’t necessarily need to make money quickly because they have investment.”
Being funded by profit results in different choices. “We have to carefully decide where to channel our available resources,” he explains. “It also means we focus on making money rather than spending it, which requires a very different approach to business compared to many of our competitors. You can sense the desperation from some VC funded mobile advertising companies who are not yet acquired.”
We focus on making money rather than spending it, which requires a very different approach to business compared to many of our competitors.
Would Jackson consider selling? “We are making good money and enjoying ourselves. Why bother selling it?” he asks. “If the right ‘cash’ buyer comes along at some point we would talk. Funnily enough, when you focus on growing a great business you actually create a very valuable business as a by product anyway! Focusing on business plans and running around institutions trying to raise investment is an enormous drain on resource and means you are not concentrating on your business.”
Culture: “We do what we do”
Jackson describes Admoda’s culture as “we do what we do.” A big part of that: Saying no. “We say no to a lot of business propositions,” he explains. “A key part of our strategy is choosing who not to work with. Many companies get sucked into trying to accommodate every opportunity that comes along, instead of focusing on making their core offering the very best it can be. We only develop features and tools that the majority of our clients need. On the business side, we only work with clients who are ready to buy or sell mobile traffic right now.”
A key part of our strategy is choosing who not to work with.
One example: Admoda and Adultmoda actually reject around 70% of all publisher registrations, in order to ensure that ads are served on quality sites and in quality apps. That means higher returns for advertisers and more money for publishers.
That “saying no” philosophy extends to some customers too. “We don’t tolerate toxic customers,” says Jackson. “It’s amazing how much time and resource one rude and arrogant person can consume. If someone is constantly asking for things you don’t offer, whining, complaining, or emailing through lots of questions, drop them like a hot potato. It never ends well anyway. If your first contact from a potential client is abusive and rude, they will be worse when they part with some money. Do yourself and your team a favor and politely decline their business.”
UI screenshots of Admoda.
Admoda avoids meetings too. “Half the time meetings are totally unproductive anyway – they feel productive at that moment, and you come away with lots of exciting ideas and proposals, but after an initial follow up the communication withers and nothing actually happens,” according to Jackson. “We prefer to exchange information by email and follow up on the phone. Running around from meeting to meeting to feel important is pointless.”
As for the adult nature of Adultmoda, Jackson’s fine with it. “We never once considered ignoring the adult sector. Why should we?” he asks. “It is a massive industry that is perfect for mobile phones. Most of our competitors have something in their Ts & Cs that forbid advertising adult products, or placing their ads on adult sites. Why? Adult is a hugely profitable sector, but mentioning it might tarnish the reputation of the VC’s involved or the company’s executives. In practice, most of those same competitors’ ads frequently show up on adult sites. It’s quite common for adult ads to be there too, so there is a degree of hypocrisy going on. We prefer to be upfront and honest about it – we’re happy to do business with adult brands through Adultmoda.”
Hiring
Jackson’s advice on hiring:
Hire the best you can afford, once you have clearly identified the role. Particularly if you have a technical business you must hire the best programmers/developers/engineers – I can’t stress that enough. Mediocre developers will develop a mediocre product. An experienced person brings just that… experience. They have seen and handled many of the situations and challenges they will come across as part of your growing business. An experienced person will slot into the team quickly, communicate well, and deliver the goods.
Also be clear about what part you want the new person to play in your team. Will they develop a new section of business? Will they relieve pressure from your existing team by taking some of their workload? Will they speed up a section of your business? Will they help provide a better service to clients? All these questions, and more, need to be answered before you hire.
Also avoid hiring someone who will work on stuff which is ‘nice to have’. Too often I hear of a business which is working at full capacity, so they hire someone to help out, but instead of reducing the workload of the team, they ‘create’ a load more work for themselves and the team. Avoid the trap.
Jackson: “All our team are dotted all over the place at the moment (UK, Spain, and India!) so getting them together for a team photo was not possible. Therefore we put together a little collage of us all doing various things!”
Bootstrapping advice
Before you give up your day job, Jackson suggests considering the following questions:
Do you have the money to get started? Do you need any money? Look into that side of things – particularly cash flow. You may have low overheads but if your clients only ever pay for your service 6 months in arrears you may need some working capital – or look at another pricing structure.
Is there a need for the business you want to create? Creating a heatproof cover for a chocolate fireguard is not going to be in demand however unique it is.
If you do a business plan, do it for yourself. It should be a working plan that guides you and helps define your goals and how you will go about reaching them. Forget the idea of 3 and 5 year projections — I’ve yet to hear of a company who has gone on to follow the 5 year projections with any degree of accuracy. They are pure guesswork and a total waste of time.
Bootstrap. Take some action right away — get on with it and get something deployed. Start small, get a product to market that will make some money and build it from there. You do not need a wall of servers to get started.
Choose who you work with very carefully. Do not chase the chance of working with a huge company. They will pull you all over the place, drain your resources, take your ideas and clients, and dump you. Remember it is your company, which means you have a choice about who you work with. Also avoid those toxic customers.
Take care of your finances. Don’t procrastinate and don’t sweep anything under the carpet. If it needs dealing with, deal with it.
Forget the idea of 3 and 5 year projections. They are pure guesswork and a total waste of time.
Visit Admoda or Adultmoda
More “Bootstrapped, Profitable, & Proud” posts [Signal vs. Noise]
JF
on 28 Oct 10(JF: Some people asked about pricing chart changes on the Basecamp site. In order to keep this thread on topic, I’ve deleted those comments and posted an official response below. Let’s keep this thread on topic.)
Hey guys… We haven’t raised prices. Basic is still $24, Plus is still $49, Premium is still $99, etc. The prices are the same as before.
We are experimenting and testing different pricing chart designs and combinations. This means Basic may not show up one day, Free may not show up another day, etc.
Depending on how the tests turn out, we may permanently remove a plan from signup or bring them all back. Either way, none of this affects existing customers.
Now let’s get this thread back on topic ;)
Greg
on 28 Oct 10How can a company complain to have 2nd and 3rd “rounds” of investment when they state they have never taken money.
Seems to me that the first take they take money, would be the first round … not round N
Nathan
on 28 Oct 10I’d like to hear more about turning away those “toxic” customers. How do you turn them away and what kind of responses have you gotten?
DR
on 28 Oct 10Tony Ramirez
on 28 Oct 10Terry-
I am currently a student and I am interested in starting a business. I will most likely need to take a job before I start this endeavor.
I was hoping you could speak to any learning experiences from typical job(s) that you held previous to starting Admoda that helped you become a great starter/entrepreneur.
For instance, I may need to take a job as a waiter out of college, but there is something to be taken away from that learning experience that could help me start a business (e.g. learning how to read people, dealing with time constraints, interacting with customers etc.)
Any “typical job” learning experience that you had that ultimately helped you become a good starter would be great to hear, and the more offbeat the better. Thanks.
MJK
on 29 Oct 10Where do I learn more about ad networks in general? I have ideas about a future technology that might incorporate ads but I don’t know much about the ins and outs of the business as a whole. Where do people learn about this? Is OpenX worth while as a place to start?
Roderick Silva
on 29 Oct 10Tony, we are a little off-topic but if your a developer looking to start a business and needing an entry level job, I would recommend a sales position. It will help your networking and presentation skills.
John Beckett
on 29 Oct 10I like the idea of turning away toxic customers, and was wondering if that is something that 37Signals have done in the past?
I disagree that experience is what we should be looking for in new employees. It just means that they have been doing their ‘thing’ for a long time. I would take good and teachable over experienced in anything that requires some creativity.
JF
on 29 Oct 10I like the idea of turning away toxic customers, and was wondering if that is something that 37Signals have done in the past?
I believe we’ve asked two customers to leave in the past 6 years. They were being abusive to our staff and that simply isn’t tolerated. People can be mad, upset, disappointed, frustrated, etc., but abuse and threats toward our people is simply not acceptable.
Travis
on 29 Oct 10This article inspired me even further. I started my own company almost two years ago and bootstrapped it so far. I’m getting ready to launch the product nationally and am really excited too. I’ve had so many people tell me “get vc!!” but it’s always seemed to me like making a deal with the devil. Don’t know how true this is but I recently read a stat that 9/10 companies which receive VC fail.
My theory is they weren’t forced to evolve in a pressured environment so the business model is less likely to represent real world demands. It’s like welfare almost and it can remove the impetus to maintain vigilance in the face of business environment pressures.
Vinod
on 29 Oct 10Just not sure what you guys mean with this series …after having taken VC funding earlier. Sure not taking external funding is great for certain types of companies …but that is certainly not general at all. Dual sided businesses …that today are part of major tech successes ( Visa, google, ....) need see funding at least to keep traction on one side before converting it into revenues from the other side. Starting as consultancy or from a contract to bigger corp…is a model …but not general at all. That why europe is far behind the US /Sillicon valley as everyone is focussed on immeidate revenues and profitablity. Seed funding allows to dream and build with long term vision …sometimes it goes south (just like any other company) but at least the dream is here.
Not all businesses can be run like pop & mom retail shops. Some ambition is good. and that is what seed funding provides.
Fernando Correia
on 29 Oct 10I liked the way you describe the impact of hiring not merely good developers, but the best you can afford, people that can drop into a team and provide not only technical expertise but who also know how to interact and how to deliver. That reminds me of the debates about Joel Spolsky’s thoughts about hiring smart people that get things done.
Would you care to elaborate how would you go about finding and attracting these people, and putting them in a position where they can do something useful?
qdfqdfq
on 29 Oct 10qdfqdfqdf
Jason Cianchette
on 29 Oct 10Great post! I started a mobile advertising business 2 years ago that I have bootstrapped into a nice little business. Previously, I worked for 10 years at VC backed companies and it has been quite a shift.
Cash flow definitely clarifies my short-term decision making, but I was wondering, how do you set your long term strategy?
Terry Jackson
on 29 Oct 10“Nathan 28 Oct 10 I’d like to hear more about turning away those “toxic” customers. How do you turn them away and what kind of responses have you gotten?”
Hi Nathan,
Thanks for your question.
Turning away toxic customers is different every time depending on the reason. A lot depends on the attitude of the customer too. There is nothing wrong with customers asking questions of course but if they are abusive, don’t grasp what we sell even after we have spent a long time explaining, or they want us to provide something that we do not offer, then it is time to say goodbye. Some people seem to think that since they might spend some money with us that we should put up with anything from them. That is simply not the case. All business have the right to turn down a client for whatever reason.
If they ask why, we will tell them – there will always be good reason why we choose not to work with someone. It is normally taken really well. It’s important to be clear, firm, and assertive. At the end of the day it is our business so we have the choice about who we work with, and once we point that out there is not a lot they can say.
If it is a company approaching us with a proposal that does not fit in with what we do, then we would just politely say “thanks, but no thanks”, whilst at the same time perhaps helping them out by pointing them in the right direction. They are not toxic as such but have potential to take up a lot of time if we get sucked into long drawn out conversations. We tend to assess a proposal quickly and if it is not for us, we move on.
Terry Jackson
on 29 Oct 10“Tony Ramirez 28 Oct 10 I am currently a student and I am interested in starting a business….”
Hi Tony,
I think the main thing I learned from “typical jobs” was that I didn’t want a “typical job”. I found it very difficult to fit into a corporate structure and right away knew that I wanted to start a business.
It is really difficult to prepare yourself for running a business for the first time. The skill set required is extremely wide ranging and I think the best thing to do it to just do it. In my experience, the only real training for running a business is to run one. Starting something you are passionate about and really enjoy is a great help too.
“(e.g. learning how to read people, dealing with time constraints, interacting with customers etc.)”. All that stuff is great and anything you learn in the real world will always prove useful. It is probably a good idea to try and find a job that is in the same sector as the business you are looking to start.
All the best,
Terry
Terry Jackson
on 29 Oct 10“MJK 29 Oct 10 Where do I learn more about ad networks in general? I have ideas about a future technology that might incorporate ads but I don’t know much about the ins and outs of the business as a whole. Where do people learn about this? Is OpenX worth while as a place to start?”
Hi,
I think the best place to start would be to check out a few companies in this space. This following site should give you a good intro to mobile ad networks.
Terry Jackson
on 29 Oct 10“Fernando Correia 29 Oct 10 I liked the way you describe the impact of hiring not merely good developers, but the best you can afford, people that can drop into a team and provide not only technical expertise but who also know how to interact and how to deliver. That reminds me of the debates about Joel Spolsky’s thoughts about hiring smart people that get things done. Would you care to elaborate how would you go about finding and attracting these people, and putting them in a position where they can do something useful?”
Hi Fernando,
Thanks for the comment.
Finding great people is always quite difficult, particularly for us since mobile advertising is a relatively new sector. We are always on the look out for good people – we don’t wait until we are desperate for someone to start looking.
We post ongoing job openings on our site, and generally meet people through networking, from a recommendation, a meet-up group, conference, etc. We do not use recruitment companies.
Example of our latest hire: We have recently opened a sales office in India to take care of the market in Asia. The person who now runs this for us, Milind, was a client with us for a year. Before that he worked for one of our competitors. We therefore knew him, we knew he could bring the business in, we knew he had the Asian market contacts/experience, and importantly we enjoyed working with him. He approached us about heading up an Asian office, and after a few discussions we made the decision to proceed. It is really good to have worked with someone for real before hiring them.
Nathan
on 29 Oct 10@Terry – thanks for taking the time to really answer my question, much appreciated. The very concept of saying “no” and turning away certain opportunities or people is really important to remember. Its seems like when you are starting a business or trying to grow one, you can get fixated on having customers/partners even when the costs outweigh the benefits.
This discussion is closed.