Evan Williams: How Odeo Screwed Up

39 Comments

Public hindsight about startups’ missteps generally comes after a good amount of “traveling in Europe with my fiancée” or whatever it is that failed CEOs do. However, Evan Williams just gave a refreshing talk about the dangers of combining money and startups at the Future of Web Apps conference in San Francisco. Not only was he candid about his time running and selling Pyra Labs, he turned a critical eye to the company where he currently serves as CEO: Odeo.

Last year Williams wrote a widely read, much-bookmarked post titled “Ten Rules for Web Startups.” “Be Narrow,” he said, “Be Tiny.” Today, he flat-out admitted “I was working on Odeo at the time I wrote that, and I was ignoring most of those rules.” Incited by excitement about podcasting and an early demo at the TED Conference leading to a front-page New York Times article (behind pay wall), Odeo got unfocused and bloated, according to Williams.

Williams went through a tidy list of the top five Odeo screw-ups:

1. “Trying to build too much” – Odeo set out to be a podcasting company with no focus beyond that.

2. “Not building for people like ourselves” – For example, Williams doesn’t podcast himself, and he says as a result the company’s web-based recording tools were too simplistic.

3. “Not adjusting fast enough” – The company thought its comprehensive web-based strategy would win out over the competition, primarily Apple, in the long term. “It turns out long term is not soon enough for a startup if you’re trying to get a foothold.”

4. “Raising too much money too early” – Williams seeded the money with $70,000 of his own money, and after the TED excitement added another $100,000. After he tied up over a million in angel funding, a term sheet came through from Charles River Ventures at three times the angel round valuation. They took the money.

5. “Not listening to my gut” – “When you’ve got a bunch of money and you’ve hired a lot of people and you’re talking to your board and you’re talking to reporters, your gut can get drowned out.”

The interesting part is Odeo still exists, and Williams is still CEO. So what’s he doing to fix these mistakes? Not refunding the VCs their investment, that’s for sure. And not even trying to earn revenue; Williams freely admitted Odeo hasn’t yet settled on a business model.

However, the company did downsize, dropping a couple managers from a high of 14 employees. Its target audience is now people who listen to podcasts, especially on the web, something Williams actually does himself. Odeo still isn’t singularly focused – Williams’ list of products at the opening of his presentation was daunting – but projects like the mobile social app Twitter are isolated to a full-time team of two.

All in all, we can’t say we came out of the presentations convinced Odeo is set to conquer the universe, but Williams’ honesty and humility are admirable. The best part is, his advice has a chance of making an impact while it’s still relevant to today’s startups.

39 Comments

Lynne

I love Odeo! It’s easy to use, it’s free (although now I would be willing to pay a bit – like with Flickr). And it’s mostly reliable, even though right now I can’t log in! Grrr

Still Odeo and the sites like it are what the net has always been about. Communication, not just making money.

Hashim

Revenue model? Please – they’re looking to be bought. That’s why there’s no revenue model!

Mark S

Evan,

I was the guy challenging (not really you) but the concept of not having a business model which I believe is much more than simply a revenue model.

I agree on the point of risk. If an individual can afford the time and opportunity cost to start a website with no idea of other business basics then cool…as I said.

Nevertheless, I don’t believe this is sound advice as a general rule just as I didn’t believe ‘eyeballs’ was a solid metric to evaluate a business’ performance. In the end, as you know, it’s about cash flow. Out of cash, no matter how cool or useful you are, you’re out of business.

I think you will also see companies developing over the next two years that earn money outside of subscriptions or advertising yet are very much tied to consumer-side service.

Here is a link to my blog on this subject:
http://markeseremet.blogspot.com/2006/09/bubbles-business-birds-of-feather-and.html

btw – I have a lot of respect for you. Your presentation was otherwise superior. You shared success, failure, and many sound ideas. In all, I felt you came off human, experienced, and very entrepreneurial.

Bob Aman

I was always surprised that Odeo didn’t try to offer inexpensive audio hosting on the side. Twitter, while actually being more useful than the parent application, never struck me as a sensible side project, but hosting, well, at least that makes sense.

Paul

Hi dun think Evan does too badly with Odeo. Odeo has a great place to look for podcasts, everything is nicely tagged which is great! If Odeo continue to enhance its offerings, it will no doubt to be the place to go for podcasts… Both for PCs and Mac users alike. If Flickr can make it. Really no reason why Odeo can’t.

Ads sales seems to be main option for revenue. Why not think out the box? This I dun get. Do a TV show to enhance the podcast, a training workshop, showcase new products, interviews celebraties, etc.. That’s so much variation, but everyone just want to sell ads.

Hm… :(

Erik Schwartz

Odeo’s lack of (defined) business model is less troubling than their product strategy.

They spent an enormous amount of time and resources building a flash recording studio when there’s a plethora of quality, mature, free recording/production products available on the vast majority of OS’s.

Podcasting as a platform, has major problems that need to be solved before it becomes more than hype. How to record and produce audio is not one of those problems. Those open issues are what Odeo should have focused on.

Dave Winer

It should now be clear — Odeo is over.

Williams scores big points for honesty and openness, but he just said the company has failed.

Podcasting doesn’t need a company to do what his company set out to do. It doesn’t need one to do what Podshow does either.

Basically podcasting was designed to sustain itself without tech companies, because the technology is so simple, by design, that it doesn’t need support from companies.

Either Wlliams didn’t understand this, or chose not to see it, or didn’t act on it. The money that was being thrown at him must have confirmed his suspicion that his idea, weak as it was, was gold. If all these other people believe in me, I must be right.

To his credit, he’s not the first to believe internal BS in Silicon Valley.

On the other hand, there really wasn’t anything wrong with their first efforts that a bit of pied piperism wouldn’t have solved. But Williams couldn’t become a podcaster (and he even knew he had to become one to win).

Another example this law:

It’s easier for a user to become a manufacturer than it is for a manufacturer to become a user.

http://tinyurl.com/gfr49

Dave

Ev.

Thanks for the write-up.

Re: “But I still think if you don’t have a business model, you shouldn’t be building a business.”

There was a similar sort of attitude from one of the questioners after my talk. As if, building a business and not having a business model from the get-go is somehow morally irresponsible.

First of all, there’s nothing wrong with it, even if it were true. It may be risky, but presumably the people involved know the risks.

Second of all, I’m just going to start answering the question of whether or not we have a business model with, “Yes, it’s advertising.” Because the fact is, if your business so far consists of a free web site, you plan to make money from either advertising or subscriptions or both, nine times out of ten. So when you say you don’t have a business model, what you really mean is that you don’t yet have revenue, because you haven’t built that part of the system yet, because you’re focusing on getting enough users so it matters.

If you create value, you can make money. There are very few companies (if any) these days who have created something wildly successful but fail as a company because they can’t make money from it.

Startups.in/India

How could he have not known the golden rule for startups – “Do not seek funding when not needed”. Didn’t some one say “Practice what you preach” or is it just easier said than done. Not being critical but wondering how can a person who preached the 10 commandments..err, rules for startups screw it up!

Ted

It is very interesting. Evan is a great writer, very frank and is generally a very sharp guy. I remember chatting with him way back at the very dawn of Pyra and realizing he was one level above everyone else’s ideas about the future of web-based communication. He envisioned myspace long before anyone at myspace did.

But I still think if you don’t have a business model, you shouldn’t be building a business. The model, and moreso fighting to make it work is a yoke which teaches you all the lessons Evan is still struggling to comprehend– albeit gracefully and with way more insight then anyone else in his position.

Yaron

Kudos to Evan. His “screw up” list is even more valuable than his now infamous “ten rules” list.

All of us Web 2.0 startup founders could use a regular dose of humility and reality/gut-checks in the middle the race, not at its end. Hopefully we’ve learned that its a fast-paced marathon building solid businesses, not a sprint, and that the only “rules” that can lead to success are ones we actually follow or have the wisdom to bend.

Thanks for the mid-race reminder Evan, and for bringing it to our attention Liz.

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