Aereo! Fab! Just like that over $400 million in investor money seems to have gone kaput, just like that. When I read the news of Aereo’s bankruptcy and Fab’s rumored sale, two things stood out for me:
- It doesn’t matter how much money you have in the bank, or how wonderfully designed your service is — in the end execution is what matters.
- The non-technical risks are actually much higher in today’s highly networked society.
Fab, in its second incarnation as an elitist and design driven commerce curator was an interesting proposition. It served a real purpose but in the end like most companies of its ilk (Groupon, LivingSocial), i.e., companies that expect you to keep buying stuff face the reality that there is only so much you can buy and so often you can buy. The volumes and margins, despite all the talk of technical efficiencies, run smack into the reality of people’s wallets. Fab is rumored to be in talks with PCH International to sell itself for about $15 million, which is quite a comedown for the company that was valued at over a billion dollars a few months ago.
“E-commerce is a b**ch,” said Fab CEO Jason Goldberg in an onstage interview at Techcrunch Disrupt London, though I don’t quite know why then his spin-off, Hem, an online furniture store going to be a place where one will stop by to buy, but that’s another story for another day. Fab’s initial success and the ruthless charm of its leader allowed the company to keep raising money — about $330 million — at a furious pace, at ungodly valuation. So in order to justify its valuation-driven existence, company did things that were unnatural and its problems were then compounded by execution failures.
My takeaway from Fab’s flameout: The mercurial leaders who can often create heat around a startup can also lead it to spontaneous combustion — but that’s a risk one needs to assume, especially when betting on those who want to create something from nothing.
If Fab was not so fab behind the scenes, Aereo was a company that didn’t make much sense to me. For me Aereo was a technology-driven short term arbitrage attempt. They had developed a “cloud-based, individual antenna and DVR that enabled you to record and watch live television on the device of your choice, all via the Internet,” something I didn’t know I needed till they told me. Well, apparently I wasn’t alone — at the end of 2013, a mere 77,596 people had signed up for the service in 10 cities. Not a ringing endorsement in my opinion, but then I wasn’t really one of those 77,596!
That said it apparently had developed a keen antenna technology and it worked somewhat better than TV Everywhere — its true value proposition wasn’t something I fully grokked. I became an early convert to the on-demand video revolution — as early as 2006 — and from that perspective, watching broadcast television hasn’t been something I even consider. Whenever I talk to the consumers of tomorrow, they all talk about watching something on YouTube or Netflix or something like that.
Still, watching them tussle with the broadcasters in the courtroom has been a good reminder that non-technical risks — legislative, judicial, philosophical — are new to technology industry and will increase as technology starts to influence our social fabric even more. In the case of Aereo, a weakling in my opinion, the dying gasp of a dying business model was strong enough to crush its soul and turn the lights out.
My takeaway from Aereo bankruptcy: If as an entrepreneur you are taking on incumbents and the old order, you need to factor the non-technical risks in your battle plans, for technology is not enough to solve all the world’s problems!
PS: I think both those companies failed the “will I miss them or the service they provide” test!