“Look for pain, but don’t be greedy. The big gap between the pain we solved and the value we created was huge and that is what drove the massive shift of demand to us.”
It’s fair to describe Brighter Option’s Peter Goodman as a dyed-in-the-wool start-up entrepreneur — the business was born from the gaps he saw in social advertising as founder of a successful advertising agency in London. After meeting his engineering Co-Founder Andrew Craven, Brighter Option was born.
Social advertising, though relatively new, was becoming a major sector in its own right — by 2012 it was worth $8 billion. But Goodman’s achievement was not just to ride the coat-tails of a market trend: his view was that social advertising was operating on an outdated spend-and-bill system which was ripe for disruption.
The time-honoured agency model was to take ad-spend in its total and then to charge 15% brokerage.
As MD of a small London advertising agency, this made little sense: he was struggling to produce the ad spend and commission, and figured that the problem was scalable – it must be significantly worse for bigger players.
He was right, and Brighter Option’s pure technology platform - taking no media spend - but charging 3% on spend through the platform at the end of each month drove huge demand.
That led to Brighter Option being acquired by New York City-based social management platform Buddy Media in February 2012 in a cash-and-stock deal providing a good return on the £500k investment of Brighter Option’s Angel investors.
Goodman stayed on to spearhead international expansion.
Buddy Media was billed as the world’s leading social media advertising company, with agency clients such as advertising giant WPP, and enabling brands such as Ford, Hewlett Packard and L’Oreal to connect with more than a billion customers across social media platforms.
Within six months of the Brighter Option deal, Salesforce bought Buddy Media for $740m (8x revenues).
This dwarfed the three-times-revenue stream in the deal that Vitrue had negotiated in its acquisition by Oracle, just months earlier.
Revealingly, industry observers pointed to the fact that Vitrue was seen more as a traditional agency model, whereas with Brighter Option, Buddy Media offered a technology platform and an evolution, as well as its roster of impressive high-prestige brands as clients.
Brighter Option was renamed Social.com and Goodman went to Salesforce as part of the deal, a position he left after 18 months in April 2014.
On his LinkedIn page, he now describes himself as “investor, mentor and improving golfer”, though as a serial entrepreneur also runs “next generation incubator” Grow Bag Capital, and contributes at board level to online conveyancing and moving technology platform When You Move and is the full time CEO of his insurance one-stop shop Homelyfe back alongside Andrew Craven as the co-founder and CTO, the same team that built Brighter Option.
Destroy the old model if you’re angry with it.
Our idea was simple. A self-serve model, charging 3% (as opposed to 15%), taking no media spend simply enabling it.
Our business model was simple, our clients booked their ad space and paid for their media spend themselves and we would reconcile spend at the end of each month.
We destroyed the old model in a matter of months and the spend moved to us incredibly fast. In hindsight it was an amazing move.
At the time it was motivated by the fact that we didn’t have the cash to arbitrage the media spend and also that I hate to see people being ripped off! We were also very focused on the underlying economics of our business so that the revenue we were generating contributed free cash flow to fund growth.
Look for pain, but don’t be greedy.
The big gap between the pain we solved and the value we created was huge and that is what drove the massive shift of demand to us.
Keep adding value – because the competition will come
Once we had created the technology platform and the model, a number of better-funded competitors entered the market.
But we had a few key advantages from the outset.
We had a very strong relationship with Facebook and they understood and liked our approach.
Secondly we understood their strategy.
Facebook at the time was growing incredibly fast and constantly evolving as they explored new routes for monetisation; which mostly manifested in adding more ad units.
We separated our R&D into an “innovation” team and what we called a “keepy-uppy” team and it was the latter that was most important.
Facebook were evolving their model incredibly fast, constantly adding new ad units and channels and it was our focus on “keeping up” that kept us ahead of the competition and within nine months we had the biggest Facebook ad platform in the world.
Know where the value lies: mountains and plateaux.
We realised pretty early on that world domination was not on the cards. We had commoditised the market and stolen a march, and we were consuming most of the available Facebook ad spend within 18 months.
A new wave of growth would entail significant investment and the challenge of overcoming the inertia of the big ad agencies – a very different direction from the technology business we had built.
As a team we were well aligned with the reality of the business we were creating.
We were fortunate that we hadn’t raised much in terms of investment (we had raised £400,000, although with hindsight we should have raised 50% more); so when the opportunity came knocking, we were well placed to realise the incredible value we had created.
A good exit is a win-win: then you can capitalise on the next 12 months.
We had a few options on the table, but when negotiating with Buddy Media it was really just me, my laptop and some numbers. I knew I would end up working with whoever acquired me so I knew I wanted to do a deal that was win-win.
So when they asked, I gave them a number which was realistic and at the end we were very close.
I could never have imagined that within a couple of years of starting the business, we would end up working with Marc Benioff at Salesforce.
The exit for me was an incredible learning experience and I would encourage anyone who ends up being acquired by a far bigger company to embrace it and learn from it as we did.
It was great to negotiate out of an earnout in a successive acquisition and I loved every minute.
I learned so much at Salesforce, it was like an MBA, and working with Benioff was incredible. He is on another level of smart.
The big regret…
I don’t have any regrets, but it’s critical that you have good legal support behind you. The team at Osborne Clarke, and in particular Mathias Loertscher and Mike Turner, were incredible for us.
And the big take-away…
Treat the earn-out as a learning opportunity. It can be an incredible opportunity.
First published in The Art of Exiteering: In conversation with European tech founders.