In May at the 2019 Digital Media Summit the inPowered CEO, Peyman Nilforoush, was interviewed by Ashkan Karbasfrooshan from ContextTV on a variety of topics – from entrepreneurship to the evolution of advertising. Peyman lays out his vision of an entire industry moving from interruptive display advertising to a non-interruptive based content amplification environment that users appreciate. This is a must watch for entrepreneurs, adtech and martech professionals, and any budding business folks with a vision.
Peyman [00:00:04] This is not about you know raising money and flipping. This is about building something meaningful something game changing that’s going to last hopefully forever.
Ashkan [00:00:14] Peyman Nilforoush THE HUSTLER. One of the things I like about DMS is meeting other founder CEOs. On for whose shares another two traits with me as an Iranian born Canadian. Although today he lives in the Bay Area. We met a few years ago and connected on social media and he had just sold his first company Net shelter and was about to embark on his next adventure within power. We connected stayed in touch and this year when I saw that he would be a DMS again I wanted to sit down with him to talk about entrepreneurship and immigration which are two of the main themes of my upcoming documentary Fox in the henhouse.
Ashkan [00:00:50] All right come on. Thanks for making time so you’re an interesting profile of an entrepreneur because your first company Net shelter I think you started in 98.
Peyman [00:00:58] So before dot.com burst in 1999. Interesting time now. One year before the but let’s start with that.
Ashkan [00:01:05] So you see dot com the promises pot of gold at the end of the rainbow world is changing. Amir let your later dot.com bubble burst Nasdaq burst. But what’s your state of mind.
Peyman [00:01:18] My brother Pirouz was you know he was so he is 14. He is coding in my parents basement. He ends up building Web sites. One of the Web sites he builds is for South Park. This is a beautiful dot com story. Okay. This thing gets popular wildly popular is called SP downloads right. And you know this is before YouTube.
Ashkan [00:01:40] I could see the season this is already so.
Peyman [00:01:44] So there is there’s you know they’re putting episodes of the show and nobody minds because it’s actually created this awesome community. He’s got a discussion forum he’s creating 3D characters of like you know Eric Cartman and whatnot.
Peyman [00:01:59] This thing it’s popular. You go UGL comes to him and says listen we’ll pay you 14 grand a month we’ll host we’ll split the ad revenue. And 14 year old kid. My parents.
Peyman [00:02:15] Is your brother selling drugs. I don’t think so. So sorry. How old are you at the time. He’s 14 year old self five years old. No you’re not. OK. So and I’m I’m literally first year of University of Toronto selling computer engineering and I’m like well what he’s doing is far more interesting than what I’m doing anyway.
Peyman [00:02:35] So you know he starts making making money and he came to me with the idea of NetShelter there which is there are many independent Web sites out there that need to monetize their content. And you know we have a passion for Independent Journalism right obviously born in Iran not a lot of freedom of press there were like you know Internet is democratizing content. We want to help him and we were like OK well we have no idea about advertising but we love content. We love publishers and we want to help them. So over Christmas.
Peyman [00:03:10] Ninety nine. We literally you know over overnight we come up with the name net shelter which is where you shelter the publishers essentially were in charge of selling their ad revenue. And they’re in charge of producing great content. And he is out there recruiting publishers. I’m now out there calling on ad agencies and trying to sell banner ads in 99.
Ashkan [00:03:33] So it’s a fascinating story. Yeah.
Ashkan [00:03:35] South Park even though they’re a part of a big media corporation I think because they relied a lot on satire and parody. But I spoke to them saying hey you know fast forward 15 years people were making top 10 list with your songs they were like Yeah but we rely on parody and satire. So we obviously recognize fair use. I think if it would have been around SpongeBob at Nickelodeon it would’ve been a very different a different outcome.
Ashkan [00:03:58] OK. So now. So that’s great as an origin story. The Nasdaq bursts. What is your thinking. This is fine.
Ashkan [00:04:05] Long term we believe in it. Or were you like hey maybe this was we should go maybe I should go back to school and just right at a real job I wasn’t thinking.
Peyman [00:04:12] So there was a lot of like doing. Right. So it’s like you know that the world of advertising nobody wanted to buy banner ad in ninety nine right after it after the bubble burst so our thinking is Well you know we believe in this long term but our cost is high. So this is when our dad probably you know God bless him. He literally came up with this. You guys got to go and return a bunch of servers like you got to like your cost is just too high. Right. And you know we argued that we’re like that. What he taught you No no. Right. We were building a long term business. You don’t know what you’re talking about. You know we got this and is that guys who are not going to make it. So you know it’s one of those moments where you you don’t listen to your parents but you actually do right and you actually end up doing that.
Peyman [00:05:00] So we did that. So we returned a bunch servers bootstrapped the business. Right. Yeah. And you know that’s like Canada. There’s not a lot of venture capital right.
Ashkan [00:05:09] None. So. So there’s snow.
Peyman [00:05:11] Yes. So we bootstrapped it and it was a it was a grind and also like you know I’m calling on anybody and everybody trying to get them to understand there’s a value in you getting out there and you know building your brand online. There’s even value of them clicking and going and buying your product. So we you know we hustled and grinded it out until 2004 when Google brought back that credibility to online advertising. And I always say that it all started with direct response. It wasn’t a brand advertising medium. Right. This is showing that using search you can sell products. And as that happen online advertisers started like you know kind of giving that that you know mindshare if you will too. But at the time banner ads. And this was the time when you know it was almost someone last year in the University of Toronto and we were kind of doing this big negotiation with one of the first online advertisers Vonage thought it would be worth it though.
Peyman [00:06:15] So they all.
Peyman [00:06:17] Ultimately we won a two million dollar contract with them which essentially fund that company.
Ashkan [00:06:25] So you went to a number of cycles because that was the two thousand. Then there was also I know the resurgence started with Google but also AOL buying advertising dot com. There was a lot of you know even when AOL came back with Live 8 it was kind of like wow the internet exists.
Ashkan [00:06:41] But then there was another correction in the late 2007. So you went through that again and there was another one in 2011 and followed 2013 you decide to sell. Right. So as an entrepreneur what switch does you’ve been at it for 14 years. Like what happened then for you to go it’s time to sell because I’m sure you had other offers you had other conversations.
Peyman [00:07:01] Well first of all the joke with me and Pirouz is whenever we’re out there trying to kind of build a business there’s a crash happening. So as you know our Series A In fact we ended up raising money for NetShelter our series A We Are you know August of 2008 we are going out there literally. I’ve just hired this guy who’s who used to be the CFO for Dell and he’s out there with me raising money and we’re on a plane going to Montreal closing trying to close with Rowe and he’s like showing me the RIP Good Times article that I’m like they don’t show me that. So anyway we end up closing that kind of last minute in December of 2008 and kind of moved to the Bay Area really. That was our exposure right to to kind of entrepreneurship outside of Toronto. And you know so you you’re you’re kind of like a big fish in a small pond and then all of a sudden now you’re making that transition.
Peyman [00:08:02] So we start building kind of growing the company and expanding it and getting you know got a head of sales on board build the revenue team store it kind of like getting the real media dollars as we sort of kind of seeing that traction. That’s when the NetShelter started growing and Pirouz started focusing on you know we that is when we made the fundamental decision that we’re going to go in one vertical and we’re going to go deep was the one vertical tech tech. So naturally it ended up being ultimately we signed up the arse technical cause of the Mac Rumors all those kind of nerdy blogs in the tech category which got us the aggregate reach that was larger than CNET and Ziff Davis in Com Score which was the holy grail of media buying which is the reason why ultimately Ziff Davis bought NetShelter because overnight they became number one.
Ashkan [00:08:51] Role being one of the hundred or so of these VCs who turned us down by the way which is all good. Okay. So why did you move to San Fran. I mean it’s obvious but what was that. That’s a big decision.
Peyman [00:09:00] Yeah. You know a lot of it was entrepreneurship in Toronto and being able to hire talent. So we got to a place where we’re like Okay we need added sales that really understands media sales. We need a team. And he can’t really be like over the phone. It actually has to be you know out there in a field sales team where we’re going to go right and and and the thinking was well New York or San Francisco and then San Francisco ended up being place whereas there’s a lot of tech media. See it was there and they had a lot of talent.
Peyman [00:09:35] So we ended up hiring more people in San Francisco than Toronto. So by the time we’ll move there we had like a team of 16 people that are pretty full time working so that worked out but did adjustment of going from a small market in Toronto to San Francisco where you now you know you’re competing with tap for talent. Even back then it was media talent now building inPowered is like competing tech in a talent with like Facebook and Google is but it’s an amazing thing that you get it like you you look at it and you’re like wow you’re somebody you really must love what they’re building here to come in and work for you and kind of work with you to build a company.
Ashkan [00:10:18] So a lot to talk about inPowered before one question when you sold to Ziff I wanted to be an MNA banker when I was studying finance then I fell into media but to the extent you can share. I was at that Ziff was the obvious fit likely fit and those start to end more or less or did you run a process. What was that experience. We ran a process because we had incoming request and or that you asked why then we had gone to a place where it was so clear for us that the future of advertising was not going to be banner ads.
Peyman [00:10:50] And we’re like we we so knew and believed that that the future is going to be much more consumer friendly type of advertising which we ended up getting it in content and content based advertising. And and because of that we were ready to make that transition. And so it kind of came at the right time. And you know we ran a process and you know they were the one that wanted it the most. Good for you and good for them now.
Ashkan [00:11:17] When I look at you to and you state about a year or two and then zero launch Spring I mean I wouldn’t call it a serial entrepreneur because 13 years at your first. Was it always a plan that you would leave within a timeline. Or did you try to stay longer because that’s a big adjustment for entrepreneurs when they join in your company. Even if you think you’re going to stay forever. Reality sets in. What was that like.
Peyman [00:11:37] So that’s what was so unique about this is that they they bought NetShelter then and there are people that operate that network and they good. So we didn’t need to there’s no management right. So we were able to basically start inPowered you know right away and start kind of building the prototype and launching it. So 2014 we’re up and running.
Ashkan [00:12:03] Was there ever a desire or discussions to incubate inPowered within the Ziff Davis some prior. Or were you like No I’m leaving want to be independent. I’m gonna do my own thing.
Peyman [00:12:13] It was they wanted the network and the network was basically what was creating this massive asset for them right. Being able to be kind of tech number one we are launching a technology platform for content amplification and so it was that that kind of was pretty aligned. The challenge was the mindset that you have as an entrepreneur going from a company of horn you know nearly 100 people to a startup right back into like building it from pretty much scratch. So we had a technology but we needed to go out there and actually you know build it up. So that was that was tough. Like the mindset is is just different you know how it is you get it kind of it’s like you grow up all the way and then you’re back back back to being a teenager again.
Ashkan [00:13:03] So so you know what I look at startup success I look at Vision ambition persistence execution luck timing and focus. I didn’t include actually hunger and desperation but we agree that there’s hunger and desperation.
Ashkan [00:13:14] Was it hard to once you made a little bit of money or successful you made the trades you sold the company or made men in entrepreneurship speak. Is it hard to start again because that scares me when people say would you start out the business if you sell like Hell no. You know because it’s hard. There’s a lot of luck and timing. Did you find like did you have the same hunger. Did you work as hard. I mean you maybe work different. What’s that like.
Peyman [00:13:40] We had this belief right that you know we’ve been in this industry from the beginning. We had no traditional background of advertising we didn’t come from print we didn’t come from TV so our entire experience was visual advertising and we were part of this whole kind of like mission of making digital advertising work for publishers for independent journalists the whole sort of you know thing that certain ninety nine and we wanted to we we we wanted to kind of we wanted to figure it out right. And Pirouz was on the receiving end of a lot of calls from publishers who are like this and my CPM I keep going down I’m not making money on I can’t really support this because hey and we’re like listen it’s not it’s not really us it’s banner advertising is not working for anybody look at. Look at all these public publishers they can’t survive why. So we wanted to. And so we had this belief in advertising fundamentally could work online and Pirouz had sort of come up with this idea of like what if we completely change the equation instead of kind of interrupting consumers experience pushing stuff out and pop up banners would have you actually give them something that is useful, right? and they find it like you know useful when they’re doing research like content is like they want to read. So it could fundamentally change that equation. Then you click through rate goes from you know point 0 0 5 percent to you know 5 10 you know it becomes about things that they date they can actually use on on their daily lives. So so that belief was a big reason we had some to prove right. And that was a big push behind kind of launching inPowered and. It was like an unfinished business great story.
Ashkan [00:15:28] Okay. So a couple more questions what is what is the one thing that you learned in this journey that you wish you would you would have known. Like on day one when we started in 98.
Peyman [00:15:40] I would say probably the biggest one is venture capital also. So you know it is funny because we went we went through this big time with NetShelter and I know you have your own story but you know we were this company out of Toronto that you know Toronto didn’t have a VC community we would get in bounded by Boston private equity is right and big kind of New York investment firms and it would all come at us and they take us out for drinks and hey you know this is this is this is great.
Peyman [00:16:15] You know and then you know you figure out that they actually had a completely different vision from for where this is going to go from here.
Peyman [00:16:23] You did read and and for us that was there was such a learning cause you’re you’re in in it in a way you’re suing experience that you’re you kind of like a kid right. It would in a in a world where this is an investment community that this is this is what they do for a living.
Peyman [00:16:41] So learning and saying that like it’s a about what you believe is gonna make the company successful saves you a lot of time right. You wouldn’t. You want to spend your time raised. There’s a lot of time you can spend closing deals and doing other things. Ultimately we ended up raising money from three. I would say sort of like. More of a series A type investors in Toronto which was fantastic because they were all about building they’re all about. It’s your vision you’re driving you’re building we’re here to kind of fund you and support you.
Peyman [00:17:16] And again that even that has its own challenge right as then the minute that you raise money you are now creating expectation for you know an investor that you know if things are going great it’s fantastic. As you know if things are not going great they have to report back to their help is right.
Ashkan [00:17:35] The hook is I would say so.
Peyman [00:17:37] So it just changes that dynamic and I feel like if for first time entrepreneurs that whole process. You know how it is a lot of first entrepreneurs feel like raising money success.
Ashkan [00:17:51] Which is of it.
Peyman [00:17:52] It’s absolutely as traction is good. But a lot of time we’ve seen I mean it’s good but in our industry adtech we’ve seen how many companies because of the amount of money that they raised they couldn’t actually prove it out right. They did they did they weren’t given the time to execute on a plan that could have actually made you know billion dollar companies. Right. So I mean look at the Tradedesk. Yeah. One of many but you know they had the time to execute.
Ashkan [00:18:17] Yeah. It’s like the YouTube who’s successful I’m like look at the Million that are starving. Right. Couple last question.
Ashkan [00:18:23] So you you’re Iranian you Canadian you’re American.
Ashkan [00:18:28] Nowadays in the States you hear a lot of talk about immigration and you talk you see others and just as San Francisco is ground zero for the homeless and there’s a lot of layers here. But what are your thoughts about you know entrepreneurship immigration that the disparities between the haves and the have nots. You know what is the role of government. What is the role of business. What is the role of entrepreneurship just want you to take all that and run with it.
Peyman [00:18:53] Well it’s ironic in San Francisco so when we move in 2009 right. A lot of sort of the problems that you see right now is much less the homeless problem all of that stuff was much less. And frankly there were a lot less companies that were you know unicorns. And now we’re saying you see all these unicorns and all this money that is in the valley and you see the homeless situation is actually worst.
Peyman [00:19:20] And we think of that from a perspective of like what could these companies do right to help this city. And I know Marc Benioff has been out there and there’s there’s champions but there is little action right and you think of Alec the new mayor of San Francisco and you know she’s sort of looking at it and trying to make some moves but there’s nothing tangible that he point to and you know I think that ultimately comes down to does the tech community care enough.
Ashkan [00:19:52] Does the tech community care. Because I was at Anthony Scaramucci she’s held recently. Yeah and it was a bunch of billionaires and finance people who all of a sudden are like oh listen to me. Yes I exploited the system capitalize on the system to make a shitload of money but because I’m afraid of these socialism tendencies I’m going to not propose like I got the solution.
Ashkan [00:20:11] Tech not to the extent of the financiers but similarly they kind of took the tax credits and the tax gains and the loopholes in this and that. And now it’s like because it’s coming back in front of their mansions.
Ashkan [00:20:23] Symbolically the homeless are on the outside.
Peyman [00:20:26] They’re trying to seem like they can do it. Does the tech community really care or is it paying lip service. You know it’s it’s like.
Peyman [00:20:35] Tangible things that could be done right is for example. Lunches. Think about all the lunches and benefits right. If you’re in the valley right. Every recruiter every H.R. department is talking about you know creating benefits. And you’re thinking about all these employees that you have for making a lot of money. I mean we’re in the valley. Salaries are right and costs are high too. But could. Every startup in San Francisco take that you know a portion of some of those benefits lunches things that are not necessarily doing much and actually put that in you know a pile of money that goes to this city and creates a much healthier you know kind of helps the homeless situation which would in turn make it much safer for the employees by the way right. Absolutely right. I think the question is leadership. It leadership was a big big problem right. I mean if you think of who is leading these initiatives right.
Peyman [00:21:36] I know that we have a new governor. You know Gavin Newsome happens to you know live in where I where I live in Marin. We used to live there now is in Sacramento.
Peyman [00:21:46] But but you know you know he’s is he’s got some great ideas right says and there is definitely some leadership that’s coming from his ideas in terms of like you know just dealing with you just make like action right on and taking action on things that haven’t been done.
Peyman [00:22:04] So there’s real there’s leadership coming from from him for sure but I can’t really say that at a local level. I think we’re still lacking that and it needs to be drastic. You know I mean like it really needs to be putting people on spot and putting companies on the spot. Look listen you’re in the city you want the city to be better. You’re doing well you know make you better.
Ashkan [00:22:26] Setting aside the lockup period for Uber shareholders to sell. I think clearly seeing Buzzfeed and Vice valuation challenges and uber doling out options at a certain price and you know a lot of those options being underwater doesn’t have any impact on hiring recruiting and compensating employees.
Peyman [00:22:46] Because of the IPO that that’s you know sort of not going well. Well I think you know from a standpoint of why is it not going well.
Peyman [00:22:56] And I think from a standpoint of like the expectation has been set for as self-driving kind of car company and and things that are not necessarily there right now I mean if you think about it ultimately you have you know you have investors that or looking for groups and you have Uber that that growth is definitely slow down. And so then they look at profitability and they kind of try to kind of paint this picture of is this going to be profitable in the future. And the answer the answer is yes if it turns into you know if self-driving cars you know start. You know being there then then absolutely right. But if not then not not so much. So I think I think it’s a case by case basis. I you know I don’t think is a blanket but at the same time I think you know you’re going to have a lot of these other companies that are going to think twice now like his Airbnb be like you know all these companies that are kind of on the fence they’re going to think twice. That’s a good thing though. You know I was actually getting a little bit kind of like you know that the dot com era like companies that fundamentally should not be because of profitability. You and I know this that when you know when the shit hits the fan what happens is are you profitable or you not. And these companies like when you look there is no way that they can be. But you know I think you know in our sector in in that in the kind of the sort of the more tech to add tech I actually think there there there will be more public companies. I I I know that the Trade Desk has been kind of the gold standard now as a 10 billion dollar company and I think they’ve done extremely well. But I really feel that AI is fundamentally creating a very very efficient you know sort of technology landscape for efficiency drug driven for marketers that wasn’t there before. I feel like the ad tech a lot of ad there was there there wasn’t enough tech.
Ashkan [00:25:03] Last question what’s the one thing about NetShelter that you’d like to see carry forward with your new company and what’s the one thing that you’re like having learned from my first experience. I want to be different and better. A hundred percent the culture.
Peyman [00:25:20] Right. So you know with NetShelter for us it was a growing as entrepreneurs. Right. Hiring the most talented executives are not necessarily the best thing you got to do hiring the best executives. We’re also a culture of fit. Who. Or in it to build what. You’re trying to build read who are in it because of the vision because of the values because of what you’re trying to create. That’s what it’s all about. That’s really what we focus on. And is harder said and done like I always say we have this interview process where you know you have let’s say five people that are interviewing a candidate and we sit down almost like a family and have a discussion about the candidate. And it is in that conversation that we’re making that decision. And it’s not like hey we’re voting. It’s a conversation. And in that conversation things come up. Just like when you’re having a conversation like as a family that you’re like yeah maybe not. Or we’re so excited. This is absolutely you know she will fit fantastic here. So to me I mean honestly that’s really been the biggest thing that we focus on. I think the second thing is being very mindful of raising capital. In fact we’ve literally bootstrapped. All the way. And you know it it makes you a lot more disciplined. Right. You just you focus and you focus on building what’s what’s the most important thing. And you know everybody else in the company and all the employees they also you know they understand that this is not about you know raising money and and flipping this is about building something meaningful something game changing that’s going to last hopefully forever. Right.
Ashkan [00:27:07] It’s just as you brought it up. Yes. Why do you feel that most entrepreneurs today are in a mindset to flip versus building things that last over decades.
Peyman [00:27:15] I think there is there is that mindset. I think that the the fantasy about entrepreneurship as you know it which is like you know whether it’s the Silicon Valley show is it’s just it is very different and the reality read the reality of a grind a billion company without any outside capital going through the ups and downs the emotional ups and downs the craziness of just being able to kind of as it as a leader as entrepreneur get everybody else continually focused and excited. Right. That is never part of you know the mindset of some of the new entrepreneurs that are you know they come in and they’re like we got to go out there and kind of raise money and I’m like I always talk like on policy 100 which is the Canadian entrepreneurs that are kind of like you know help them move to the valley and raise money in the valley and it’s all the question is always you know raising money is really important for. For success. And I’m like well why. Right. And pretty quickly you realize it’s actually not right. Was actually really important is get it get to that MVP and make sure that you have customer attraction and then references.
Ashkan [00:28:25] Yeah I mean I don’t want a lot of people that need to raise because I was very fortunate to have money from my first venture as a V.P. of sales and a minority shareholder. But if anything it’s a deficiency in your body. It’s the startup that you need capital in a historical you look at the greatest companies built. It was hustle finding revenue finding clients. It’s just we’ve created this. You know I call it. You have entrepreneurs want sharpeners and venture. And those are all very doubtful. Peyman it was a pleasure chatting fantastic likewise. Thank you. Thank you.