by Nathan Nambiar
No one knows better than Dion Sullivan that start-ups can live or die by the milestones they set. If you make those milestones, you boost your investors’ confidence and your employees’ morale. But many a start-up has failed, not because its concept wasn’t viable or its employees weren’t talented, but simply because it failed to meet the milestones it had set for itself.
That’s why Dion Sullivan is not only committed to achieving every milestone on or before its deadline, but also to making sure that his investors and other stakeholders are made aware of every milestone success.
Recently, not long after Dion had returned from building relationships with his strategic partners, investors, and other stakeholders during a tour of Australia and China, he sat down with MSM’s newsletter team for a wide-ranging interview on a variety of topics.
The following is a transcript of that interview, edited for clarity and brevity.
Have you reached any major milestones lately?
Yes, indeed we have. Our first major milestone, as you know, was reaching our fundraising goals, which we did back in October. Our second major milestone was to relist on the ASX, which we did in January. Recently, we achieved our third major milestone: Our first playable. And we’ve done it ahead of schedule. It was initially slated for the end of May, but we brought it in about five weeks early.
Could you tell us what a playable is?
A playable is a usable, interactive version of a software program — in this case, our Megastar Millionaire mobile app for Android and iPhone. Until now, the versions that we’ve released have only featured “dummy” buttons and other interface elements that were not actionable.
The only way that I’ve been able to demonstrate how the app will work has been with a PowerPoint presentation. This is our first release that enables the user to supply input to the app and get an appropriate response.
Does this mean you’re almost ready to release the final version?
[LAUGHS] Not quite. This first playable could not even be described as a beta. “Alpha” would be a better word. It’s not pretty, and it’s got bugs and other quirks that will all be gone by the final version. Rather, it’s what I would describe as foundational — a reasonable representation of what the end product will be.
How important is this first playable in your development process?
Very important. For one, it exists outside of our infrastructure. Although it’s not available to the public, the playable resides in the iTunes store, which means Apple is aware of it and has put it through the initial approval process. It is also fully integrated with YouTube, and since YouTube is owned by Google, it is integrated with Google as well. Between iOS and Android, we’re covering 97% of the world’s mobile devices. That’s a big deal.
Secondly, as I’ve already mentioned, we achieved this important milestone ahead of schedule. This is significant, because it proves that we’re able to do what we say we’re going to do in a timely and cost-effective manner. My trip to Australia was an informational and educational tour. I visited with some of our stakeholders to update them on our progress, and to give them our scorecard on the items that I’d promised in my prior trip.
What were some of those promises?
I said that fundraising would be successful, and it has been. I said that we would complete the hiring out of the development team. That’s been done. I said that the team would actually spec and build the first prototype, and that the prototype would result in the first playable, which as you now know, is also done.
Are you approaching any other major milestones?
Yes. Four of them. The first was conducting our “friends and family” competition, which we’ve just completed a few days ago. This was our premiere pseudo-competition that did not consist of MSMCI employees, and it was a good approximation of what the actual Megastar Millionaire competition will be. It ran for two weeks, and we limited it to a very manageable number: 100 participants. We’ll even be awarding a prize. Right now, we’re compiling the data, which we’ll release in a few weeks. But the important take-away is that we were able to build, launch, operate and now deconstruct a facsimile of a competition.
The second milestone on the horizon is that of third-party qualitative research. We’ve just started to work with a research company in Massachusetts specializing in mobile entertainment and social. They are conducting for us a 4,500-person panel consisting of respondents from Australia, the U.K. and the U.S. The research was launched about a week ago and we already have more than 500 completes. I’ll be getting initial tabulations in the latter part of June, with the full appendixes coming early July.
What are you hoping to learn from this research?
It’s an open-ended survey with more than 30 questions that takes about an hour to complete. It has questions like, “Is the Megastar Millionaire concept appealing to you?” “If it is, why?” “Is it something you’d consider paying for?” “How much would you be willing to pay?” “Is it something you’d share with your friends?” And so on.
The answers we get will tell us if people find the concept to be compelling, and if they do, will it be something that could replace something else they’re already doing with their phones. This is quite important, because when it comes to digital technology, specifically entertainment, people are only willing to spend so much time, so something has to give.
The survey will also give us a third-party validation of the premise of that Megastar Millionaire is based on. We plan to release that third-part data to the public market. We also intend to give the data to an investment research firm in Australia, so their research and analytics department will be able to write an opinion paper based on that data. The data and the resulting opinion paper will be invaluable in proving out the Megastar Millionaire concept and in getting third-party validation.
Is there a reason why you’ve chosen to survey 4,500 people? That’s a lot of names.
Yes, it is. From a statistical standpoint, we’ll be able to project those 4,500 completes out to 1.5 billion potential respondents, and that’s important, because it will give us the utmost confidence that we’re building something that people will find appealing. I believe so much in Megastar Millionaire that we’re going to release the results without cutting anything, without editing anything. You are going to see exactly what the respondents say.
You mentioned four milestones. What are the other two?
The third milestone involves the first playable. Thanks to this release, we can now start to have tangible conversations with celebrities and social influencers and brands. Because up until this point, Megastar Millionaire was basically a PowerPoint and a theory. Now we have an actual, functional application. Again, it’s not clean or pretty. But it is something substantial that people can interface with and work through, this is very important to assuring brands and celebrities alike that we are a focused, determined and legitimate digital entertainment technology business.
And the fourth milestone?
The fourth will be the most significant. On September 1, we’ll be kicking off an invite only closed beta that will be going out to a minimum of 1,000 people. These are not friends and family. They’ll be YouTube users who fall into the general genres that we think we’re going to be most transactional with, users who have the minimum viable social graphs. It will be an actual contest that will run for a month, with a $10,000 US prize.
We are going to get all sorts of metadata from this. Adoption rates, usage rates, frequency rates, drop-off rates, attrition rates. What sort of transactions are we seeing from within a social graph? We’re going to have all that data. We’ve already built all the analytics. It’s home grown, built by us, and it’s actually going to be resident within the open beta.
Will you be sharing this data as well?
Yes, we will. So, when I return to Australia and Asia in mid-to-late September, I will once again pull out my scorecard to show that we did what we said we were going to do. “Here are the response rates for the ‘friends and family’ contest, here’s what the 3rd party, independent research revealed and here’s what we’ve learned so far from the September contest, which will still be ongoing. Here’s what we’re pleased with and here’s what the ‘watch outs’ are. Here are the conversations we’ve had with sponsors, with social influencers, with celebrities.”
It looks like it’s going to be a busy few months for you.
Busy, indeed. I need to fit sleep in there somewhere.
Atlassian co-founder Mike Cannon Brookes. Picture: David Geraghty
Virginia-based drone detection outfit Droneshield is the latest US entity to chance the ASX back door listing route, with a $7 million raising in progress. It’s a well-worn path given Droneshield’s Virginian neighbour and fellow counter-drone specialist Department 13(D13, 10c) debuted in January after a $4m whip-around.
Other Silicon Valley tech emigrants are the hot-but-now-not recruitment play 1-Page(1PG, 69c) and social media content acquirer ShareRoot(SRO, 3.9c).
Criterion gathers there’s no shortage of ongoing interest in heading to the Antipodes on the part of the boffins and the spruikers. But there’s a ‘‘cloud’’ over the sector and we’re not talking about software-as-a-service: the ASX’s proposals to raise the bar on the size of putative listings.
In its current consultative process, hopefully the ASX taps the global views of offshore enterprises that have braved a listing.
Predictably, they caution against quashing the entrepreneurial spirits of the newcomers, but concur more can be done to winnow the legitimate players from the chancers.
“We have seen the effects over the last 12 months of what happens when a sector catches fire on the ASX,’’ says ShareRoot chief Noah Abelson.
He contends that of the 100 or so new tech listings, “only a small percentage are legitimate companies with a road map, model and vision to get there’’.
From your columnist’s view, the problem is that they all claim to be within this small percentage. But we can’t argue with Abelson’s assertion that if the new rules are too onerous, “a lot of the early stage companies that have the potential to be large high growth entities will never get off the ground’’.
Having done business with the Singapore, Frankfurt and Nasdaq exchanges, US entrepreneur Dion Sullivan reckons the ASX provides the right mix of rigour and accessibility.
Sullivan’s listed digital entertainment play Megastar Millionaire (MSM, 12c), “a cross between Eurovision Song Contest and America’s Got Talent”, listed in January after raising $7m.
“The ASX is a perfect vehicle for small emerging companies,’’ Sullivan says. “It is a top 10 exchange, it’s heavily regulated and stable and with good volumes.’’
Having said that, Sullivan is receptive to some regulatory nipping and tucking, arguing our regulators have become bogged down dealing with sub-scale wannabe IPO. “I think a $5m minimum raise is legitimate,’’ he says. “Anything below that would be considered to be angel investing.’’
But a vaunted raising of the $20m minimum market cap (from the current $10m) looks too harsh: “I would go to a $5m minimum raise on a $15m valuation,’’ he says. “A one-to-three ratio makes more sense.’’
Droneshield’s motivation to list here was not so much about the cheaper cost, but was integral to locating the business to Sydney. “Australia has good talent with the right engineering skills,’’ CEO James Walker says. “You don’t have the problem with Silicon Valley wages and staff turnover issues.’’ He reckons the equivalent boffin is 30-40 per cent cheaper here than in the US.
Walker’s not a fan of the bourse’s proposed tightening — especially the measure to increase a minimum individual subscription from $2000 to $5000.
“I’m a bit disappointed,’’ he says. “The prospectus and disclosure laws are already fairly detailed. People are well informed and not treating them as smart investors would be counter-productive.’’
As with Sullivan, Vancouver-based Jason Tomkinson has global experience with fundraising, but opted for here after Hong Kong investors suggested the company take a Captain Cook at the local market.
Tomkinson heads the cybersecurity play Zyber(ZYB, 2.2c), which had to pedal hard to raise its minimum required $3m after the tech sector got the jitters in late 2015. Zyber eventually relisted in February through the shell of Dourado Resources.
Tomkinson says the Vancouver exchange has already seen the effect of a rule-tightening regimen, followed by a relaxation that “sucked the last remnants of capital out of a very fatigued capital base.’’
He says: “the more we looked the more we saw you guys were doing lots of things right which we weren’t in Vancouver, quite frankly.’’
One tick for us is not succumbing to the allure of a separate board, which have a habit of becoming irrelevant, for the minnows.
Sullivan suggests ASX and ASIC do more due diligence upfront “to separate the contenders from the pretenders’’ and expedite the listing process.
He also counsels them to invest in some digital expertise “to ask the harder questions of American companies trying to do what we did’’.
Not surprisingly, there’s little support for the views of Atlassian co-founder Mike Cannon Brookes, who told our colleague David Swan that backdoor listings were a “horrible idea” because they were a raising of last resort.
An Australian provider of construction industry software, Atlassian turned the tables by listing on the Nasdaq after raising a chunky $US430m.
Zyber’s Tomkinson says while his company managed to raise $3m through the back door, the process was harder than envisaged.
A key lesson was handling the expectations of the ‘‘acquired’’ shell shareholders, who expected things to happen faster than management could deliver. “Part of the challenge of doing a backdoor listing is you are buying a set of investors,’’ he says. While Tomkinson discovered local investors demand a higher level of communication and disclosure, “frankly, I would do it again.’’
Meanwhile, Megastar’s Sullivan found dealing with the ASX in Perth was “notoriously difficult” but ultimately the process was easy enough.
Undeterred by the road humps along the way, he’s pondering another reverse takeover after the ASX’s new rules become clearer.
The global tech brigade is praying the new world order will raise the standard without stymieing innovation.
The Australian accepts no responsibility for stock recommendations. Readers should contact a licensed financial adviser. The author does not own any of the stocks mentioned.
True visionaries — people with an almost supernatural ability to see where the future is heading — are a rare breed. Even rarer are visionaries who have the passion, drive, and talent to turn their visions into thriving and profitable businesses.
Jon Kraft is one of those people. A classic “serial entrepreneur,” Jon has participated in the birth of no fewer than seven successful companies, including Big Stage Entertainment, UberMedia, Stanford Technology Group, Thrively, LiffOff, MuMo, and his best-known venture, Pandora Media. One of the world’s largest and most successful music streaming services, Pandora currently has over 250 million registered users and a market cap of over $2.1 billion.
Here at MSM, we consider ourselves to be extremely fortunate that Jon has agreed to join our Advisory Board. His vision, insights, and knowledge will prove invaluable to helping our Megastar Millionaire online talent competition platform become a worldwide success.
Recently, we sat down with Jon to get his thoughts on Pandora’s impressive success and how he plans to help MSM achieve growth and profitability. The following transcript has been edited slightly for clarity.
What inspired you to co-found Pandora?
In 1999, Tim Westergren and I were both spending a lot of time in Los Angeles. Tim was in the middle of breaking into the film scoring business, staying at my LA apartment whenever he was down here, and we’d often talk late into the night. Tim pitched me his vision for Pandora one night around 3 a.m. and it was a true “Aha!!” moment for me. I was a believer instantly. We made a couple of calls the next morning to a couple of folks who became our initial investors, and we were off to the races.
What was the hardest part of getting Pandora up and running?
The toughest thing for us was navigating the overwhelming negativity and confusion in the market back in the early 2000s. Investors wanted nothing to do with a music-technology company. The traditional music companies were terrified of anything technology-related because Napster was in the middle of becoming a major disruptor to their industry, and all of this was going on while the Internet bubble of the late ’90s was bursting. There were very few external believers in the early days, and keeping the team positive amidst all of those challenges was very difficult.
What was the biggest challenge you faced as CEO of Pandora?
Fundraising was far and away the biggest challenge we faced. Everyone loved our product, and we were winning every major customer who was in the market for music discovery experiences — companies like Tower Records, Barnes & Noble, AOL, and Best Buy. But institutional investors were not buying the vision. Our first angel investor, John Rogers, was the bedrock that kept us going in those early days, and we were able to find enough other angel investors who loved the product and believed in us to keep us alive and keep the team together.
But it was an enormous challenge, trying to establish the business with far less capital than any of our competitors, in an industry that was struggling to figure out its future, and we were barely keeping it together.
Did you ever expect it to become such a success?
We absolutely expected success. You have to be a relentless optimist to be an entrepreneur, and to try to do something that mixed technology and music in the early 2000s, you had to be both a relentless and a fanatical optimist. Having said that, if I told you that doubt never crept in, I would be lying.
Do you think the Megastar Millionaire concept has the same potential to change digital media and entertainment?
Without a doubt. YouTube has already proven to be a tremendous unstructured talent pool, and the popularity of more structured platforms like American Idol, X-Factor, and all of the talent competition shows over the past decade has been overwhelming. Clearly, people love to see talent, people want to be discovered, and it’s a process that fans want to engage with. I have no doubt Megastar Millionaire is going to be extremely successful.
What attracted you to working with Megastar Millionaire?
I’ve known Doug Barry for years, ever since Tim and I first pitched him to invest in Pandora. I’ve known him as a board member and an advisor. He is a very strong strategist and the kind of honest, direct, no-nonsense executive that people want to work with. When I met with him and Dion Sullivan to dive deeper into their vision for Megastar Millionaire, I knew they were the right team to put this project together.
What sort of advice will you be giving the Megastar Millionaire team?
I’ll help them think through the kinds of partnerships and influencers they’ll need to build the momentum for Megastar Millionaire, and I’ll make whatever introductions I can to ensure that they are successful. I also look forward to weighing in on the ongoing product roadmap. There are so many exciting directions to take this.
What other projects are you working on now?
I run an accelerator in LA called LiftOff, and we have more than 15 companies we’re helping to build, ranging from a 3-D printing marketplace to an “infinite swarming” control system for drones, to a strength-based education platform, among many others. The one I’m spending the most time on today is MuMo, short for Music Moments, where I’ve become the Interim CEO. MuMo allows people to listen to music together in real time.
How does MUMO work?
MuMo is an incredible way to spend time with friends, no matter where you are. Listening to music together is a very cool experience, and something people don’t get to do enough these days. MuMo brings that experience back in a cool, visual interface that lets you share your moment with music, photos, and messaging. Users simply listen to whatever they want — one of their iTunes playlists, for example — and then they “publish” what they’re listening to in real time, along with a photo of wherever they are, so that all of their friends, family, and fans can join in right then and there.
What is the most exciting thing about MuMo?
As awesome as the idea was when I was first pitched MuMo, I was really surprised at how impactful the experience was when I started listening to music with other people again. I realized I hadn’t done that in a long time. Other users were jumping in, commenting on my songs and on the pictures I took, and it creates a nice vibe. You’re suddenly hanging out with friends, even if you’re eating a late dinner alone, going on a run by yourself, or getting caught up on some admin work. It was the first time the user experience of a product really took me by surprise; it’s just an incredibly fun product to use. In fact, download it from the app store today and invite a few friends. If you aren’t blown away, let me know and I’ll buy you a year’s worth of Pandora One!