Q&A: Ben Kartzman, CEO, Spongecell – “Entrepreneurs Need to Be Eternal Optimists”
Posted by | April 30, 2012
Spongecell is a digital advertising technology company that enhances standard banner ads with rich interactive features including video, social media, interactive maps, carousels, downloadable/SMS coupons, and more. Spongecell allows companies to collect data and analytics that provide a detailed portrait of audiences that cannot be produced in other advertising platforms.
In this Q&A, Ben discusses the key components to determine when/if to pivot your business, the importance of transparency in creating a great company culture, and his vision for the future of the ad tech industry.
Why did you choose to become an entrepreneur?
In a way, it’s about controlling your own destiny. You’re able to work closely with people who you trust—both to take initiative and to make decisions that impact your life as well as the lives of everyone else you’re working with.
When I was in high school, I actually started a couple of small businesses on my own. Then in college, I had my own web consulting company. So while I always gravitated towards entrepreneurship, I graduated college right in middle of the dot-com craziness and felt like I needed to get experience and learn from other people who were already out in the real world before starting my own venture. So I worked for companies of all different sizes, from start-ups to high-growth companies to public multi-nationals, to get a varied set of skill sets—the combination of which made it really easy for me to transition into helping start Spongecell.
I also quickly realized that Carnegie Mellon prepared me well to be an entrepreneur. A lot of my coursework had been project-based—sort of semester-long startups. So I found that I’d gotten a lot of experience related to the business world before I’d ever really even been in it. I had the tools, skills, and confidence; I just needed an idea and the right partners!
To what would you attribute your success?
So much of it is about being an eternal optimist. Look at the story of Spongecell. Five of us started the company in 2006, raising a couple million dollars to go after our first idea—a calendaring widget—back when widgets were all the rage. We were so incredibly optimistic about the idea, but it just didn’t work out. We ran out of money, had to let all our employees go. We were back to square one.
We started working on a new idea—interactive ads—but unfortunately, we didn’t have any capital to support this new endeavor. This was back in October 2008, and if you recall, it was nearly impossible to raise money to hire or to do anything else. We hadn’t even paid ourselves a salary for nine months at that point.
But being the overly optimistic entrepreneurs that we were, we thought this new idea had legs, and it helped that we had some early validation in the form of a few successful test campaigns. Thankfully, since then the idea has really taken off, and we’ve been able to build a great business that we get to enjoy every day.
What’s the most important lesson you’ve learned as an entrepreneur?
I learn a new one every day. A business is constantly changing, so you’re always learning. In the early stages, when you’re trying to raise your first dollar and trying to earn your first dollar of revenue, you learn different things than when you’re a company with 60 people that’s growing rapidly and facing different kinds of challenges.
So I’d say the most important lesson I’ve learned is being able to adapt to a constantly changing environment. I mean constantly, even from one day to the next. Being able to adapt and morph your business, whether you’re introducing new ideas or adding new products or bringing in new people or entering new markets, is key to getting where you’re trying to go.
Communication, too, is critical. At Spongecell, we have employees spread across the country, even into Europe, and we have to make sure that everybody’s on the same page, that we’re all selling the same products, that we’re all following the same core principles. That only happens with good communication and making sure that people really understand what’s going on so they can embrace it. When everybody’s operating on the same core principles, you’re going to have a more efficient business and a better culture.
What’s your biggest business challenge right now?
I think it’s being smart about how we scale. A lot of people talk about scaling for its own sake. But we’re more interested in being smart about it. We try to take a long-term approach to our growth. Scale to me is about more than just driving as much revenue as we possibly can. Scale is making sure that our existing clients are happy and that our new clients are having great first-time experiences. It’s making sure that our software is in tiptop shape and that people who work with us have great experiences on all fronts.
Being smart about those kinds of things and taking a long-term view on growth will ultimately help us scale successfully. It’s easy to just chase the dollar and sell deals that may or may not be the right fit, but we want to make sure that we’re taking the right deals, knowing that we can deliver on them and that they’re going to be great for our clients.
What advice would you give other entrepreneurs in the ad tech or digital advertising space?
I would say don’t be afraid to change. Be ready and willing to change if and when you see the opportunity to create a better business. One of the mistakes we made was hanging on to our old business six months longer than we should have, which ate up a lot of cash that would have been useful in starting our new endeavor. It’s definitely challenging to let go though, as you get so emotionally tied to your idea knowing it’s something that you believed in and worked years of your life on.
Make sure that you find a balance between sticking to your original idea and knowing when it’s time to pivot into something new. Pivoting is inevitable. It’s not necessarily worn like a badge of honor, and it’s something that people should take very seriously. Once the decision’s made to do it though, do it with all of your heart and effort. Don’t hang on. That would be my advice: When the time comes to change—and it inevitably will—change quickly and don’t look back.
Also, be able to identify when the time is right to make the change. There are tangible signs that it’s time that you can look out for, like when you you’re not hitting your revenue metrics and your pipeline isn’t there (if you can identify why you aren’t hitting the metrics or if you have a big pipeline that you think will close, that’s a different story). Making the pivot is important even when you’re having success. Never stop looking for other ways to increase the value of your business, like adding new markets or products.
What is your long-term vision for the ad tech or digital advertising marketplace?
Right now we think about marketing on different devices in different ways. For a long time TV and radio, for example, were separate entities; you only bought and sold for one medium.
In digital, there’s still a lot of this kind of fragmentation. Some teams buy video campaigns, others buy mobile tablet campaigns. You would think that all of that would, and should be, consolidated under a single digital team. I think that’s where it’s going. I think the technology will provide for one ad buy that can be executed across tablets, across pre-roll video ads, across display ads, and potentially even extend to outdoor and traditional TV ads.
Eventually, it could all be bought, sold, and delivered in the same way. I think traditional TV probably will stay outside the realm for a while, but ultimately I believe it’ll all converge, and there will be one or more unifying platforms.
How do you operate at Spongecell? How do you motivate your team? What’s the culture like?
We’re very transparent about what our opportunities are. We have a chart that everybody in the company can see, and you can click on everybody’s name and see what their roles and responsibilities are and what they need to do to get to the next level. Anyone can even see what my job is and what I do on a daily basis. I think that level of transparency helps people really feel like this is a company that actually cares about them and wants to see them grow and develop. As such, our turnover rate is really low.
We have an intense and passionate group. We all work hard and people put in long hours. We’re intensely focused on delivering for our clients and being a client-first organization. We try to become smarter by understanding who we’re working for and how we’re working for them, ensuring our clients are going to have great experiences. When you have a great team that’s having a great time and they’re building a great product, that’s naturally going to lend itself to having great clients who are having that same positive experience.
What should startups look for in VCs, beyond just the financing? What are the core services that are most important for startups? What do startups tend not to think about?
I think it depends on the stage your business is in. In the early stages you really need money, but you should be smart about where it comes from. For example, if you know you’re going to be in the media world, then you should find investors with media connections. If you’re going to be in the consumer world, find those with consumer connections. You should always find investors that have expertise and experience in the space that you think you’re in or want to move into.
The early stages of a business are all about the product. You need to figure out what skill sets you have on your team and what you’re missing, then try to find an investor that can help fill in those gaps.
In the growth stage, a company’s needs change. You’re in your market, you know your market, and you have a skilled team that can sell into the market. But if you still have gaps that you can’t fill through hiring, you want to see if you can fill those with an investor. For example, maybe you need operational expertise to think about how to grow internationally. You’ll want to find an investor that’s been there, done that, so you have someone to guide you along the way.
What is your go-to news source?
AdExchanger. It covers our space really well. It feels more like an industry forum than a traditional publication.
What’s your must-have app?
The camera (yes it’s an app!), so I can take pictures of my beautiful 17-month-old daughter!