Monday, October 12, 2015
Kixer's Co-Founders On Mobile Ads and Early Exits
Story by Benjamin F. Kuo
It's not all that often that you hear of a local startup being acquired after only raising less than $1M in funding, because the company was growing so fast, rather than because an idea didn't pan out. That's the story behind Los Angeles-based Kixer (www.kixer.com), which saw a great exit last week as it was acquired by content management software developer Lakana. The startup was co-founded by Keith Bonnici, Omar Nicola, and Jake Moilanen, and was venture backed by TenOne Ten Ventures, Lowercase Capital, and local angels. We caught up with two of the company's co-founders, Keith Bonnici and Omar Nicola, to hear about how the company decided to sell the company, even as it planned a big expansion and hiring, and already had turned profitable. Kixer develops mobile advertising software which helps publishers and connects mobile web users with apps. Image, from left to right: Keith Bonnici, Omar Nicola, and Jake Moilanen
You guys really saw quite a quick exit on the company, how did that happen?
Keith Bonnici: Yes, we were way early on this, as we thought it would be at least five to seven years to sell the company. Lakana was super persistent on this, and chased us for the past six months, and got us to where we needed to be to make it happen.
Talk a bit about where the company was at the time of the acquisition?
Keith Bonnici: We had raised money from Lowercase Capital and TenOnTen, as well as acouple of angels, just about 18 months prior. About 80 percent of that capital was actually still in the bank, because we had ramped up our revenues pretty quickly. We sent from the zero idea stage to 11 employees, across two offices in two states, a healthy, seven figure run rate, all in an eighteen month period. When we started talking to the Lakana guys, we were still in the newlywed phase. We had planned on adding another eight to ten bodies over the next couple of quarters, and the business had already turned profitable in the middle of the year. We did $100,000 in profits in August alone. It was turning into something real, pretty quickly. So, we were all surprised when we ended up where we did this deal, which made a lot of sense after the opportunity was explained.
Talk briefly about the business for folks who aren't that familiar with what you've been doing?
Omar Nicola: When we launched the company, it was no surprise that content publishers were struggling to monetize their mobile audience. Both Keith and myself, and Jake, our third business partner, came from digital publishing. We saw this firsthand. On the other side, these mobile developers were starving for quality mobile distribution. Most people really hadn't tapped into the mobile web. Most of the incumbents in the ad technology space were just not able to piece together inventory the way they wanted to buy. What we did, is we brought the two worlds together, providing a recommendation engine similar to Boola and Outbrain do with content, with a post-article recommendation for more content. We did that with mobile ads, essentially promoting different mobile apps after a user would visit a site like TMZ or IGN.
Keith Bonnici: One of the things that got us acquired, more than any other, was our focus on the technology side. We were focused so much on the technology, that we didn't have a single ad salesperson. It's all been self signups. All we did was create the pipeline, and allow publishers to sell their mobile inventory to ad developers, in the same way they were used to buying on Facebook, with hyper-targeted, cost-per-install performance marketing.
What was the magic piece which enabled you to ramp this up so fast?
Keith Bonnici: There's always a bit of luck. We were in the right space at the right time. What allowed us to execute as quickly as we were, was our background. Speaking for Jake, the last five years before Kixer, we spent building similar technology, almost the same thing, except for content on the desktop. We had built a very similar thing in content widgets, which promoted internal content. That gave us five years of machine learning and big data experience with Jake, which allowed us to execute on our technology quickly, and not make mistakes building this up.
Omar Nicola: Keith and I had experience dealing with these content publishers for the last seven years. We had relationships on the side, in addition, with what Keith had done at Scopely and what I had done working in mobile ad tech, with advertisers. Plus, we chose a niche, and stuck to that niche, and did not veer from it. We see a lot of folks in the ad tech space, looking to cater to brands—which is not a bad thing—but there are only so many brand dollars. For us, because we are in the performance space, if you are performing to KPIs, they will spend with you all day. That helped tremendously, and was part of our secret sauce. Plus, operationally, Keith is an ex M&A attorney, with finance chops. That enabled us to set up the organization in a fashion that really helped us succeed.
Did that finance background really help in this deal?Keith Bonnici: For sure. I had done almost 30 deals in my life, the majority on the buy side, and a couple of the sales side. I sold businesses for Evolve Media. That teaches you a lot. You learn that deals don't happen because people are being coy and playing games. At the end of the day, though, it was our great product, and 600 percent growth year-over-year, and our team, and the fact that we were profitable.
Omar Nicola: The buyer fit like a key in the lock.
Keith Bonnici: Everything was going the right way, and the great think about Philip Lakana, is he saw something here that fit into the technology he is building on his end. Our fast growing revenue will help accelerate his top line, and it also helped that we knew he wanted to get a deal done.
It looks like you guys only raised less than a million in seed funding?
Keith Bonnici: Yes, only about $950,000.
Did you ever think you'd make it this far on only that small amount of seed?
Keith Bonnici: No! One of the things is, we're cheap. If I could tell you how many, 3-person hotel rooms we used when traveling, you'd think we were insane. We were very capital efficient. This is the first rodeo for ourselves, our first company without other partners, so every penny spent was our own, and treated it that way. Plus, we didn't have $10 million in our coffers to do stupid deals.
What did you learn from this whole experience?
Keith Bonnici: To me, the number one thing, is that you can't expect anyone else to do anything for you. We raised money from great investors, and they've been really, erally good to us. When we called them, they were helpful. But you have to call them. They're not going to go out there and drum up business for you. Your old boss, you rold colleagues, your family, they are not going to sell things for you—you have to get out there and it it. It's not all glory. The outcome in this case is great, and our everyone make a bunch of money. But in most cases, it doesn't. Expect your life to be dominated by your business, because there is no such thing as balance when you start a company.
Omar Nicola: You have to be comfortable being outside of your comfort level. You need to surround yourself with complimentary pieces. The thing we always had going for us, is there was not much overlap with our founders. We were able to segregate our duties pretty efficiently, because everyone knew their role. There was no ego involved. It was not in our mind to sell this and make money, it was to go build something, and see if we can do it. We've all had chips on our shoulders, having been the guys behind the guy, and we wanted to prove to ourselves that we could do this ourselves. I think a lot of what it was, was making sure we were okay being uncomfortable for some time.
Thanks, and congrats!