MBA Partners

July 13, 2014 10:30 pm

A business plan and two very determined entrepreneurs

Tube Mogul, Brett Wilson (blue Shirt) & John Hughes (gray shirt) at Tubemogul in Emeryville Ca Karl Nielsen Photography www.karlnielsenphotography.com (805) 570-3395

Brett Wilson (left) and John Hughes of TubeMogul

Earlier this year TubeMogul signalled its intention to join that elite group of new technology companies that have done well enough to float shares on a stock exchange. The video advertising software company is aiming to raise $75m in its initial public offering.

Things have certainly come a long way for the three MBA alumni from Haas School of Business at Berkeley, who formed the company in 2007 with a small amount of money they won in a Haas business plan competition. But their journey to their current success has not been straightforward.

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“One day you think you’re going to take over the world and the next you think you’re going to go out of business,” says John Hughes, co-founder and president of products. He and co-founder and chief executive Brett Wilson agree, however, that they could not have done it without their business school.

“There would definitely have been no TubeMogul if it had not been for Haas,” says Mr Wilson.

The three men were in the same cohort at Haas. “We identified each other fairly early on as people who wanted to do something really great after we graduated,” says Mr Wilson. Mr Hughes and Mr Wilson were in an entrepreneurship class together and started talking about business ideas with another student, Mark Rotblat, who was also to become one of TubeMogul’s co-founders.

Mr Hughes and Mr Wilson entered their initial idea into a business plan competition in their first year, but it did not win. The pair went on to do summer internships in Silicon Valley. Mr Hughes had a role with Adobe and Mr Wilson was with Yahoo.

“We used to get the train down together to these great companies and get the train home again after work,” says Mr Wilson. They used that travelling time to bounce ideas off one another.

In their second year their business idea gelled around the first incarnation of TubeMogul, which was originally conceived as an analytics platform for YouTube. They started to build the site and enlisted Keith Eadie, a first-year student friend, in January 2007, persuading him to write their new business plan.

“We were literally building it while we were at school. Every single class was an incubator,” says Mr Hughes. They found software tech interns from Berkeley and paid them out of their own pockets.

Mr Rotblat started working with them in earnest in February 2007 in a customer development role. Customers were signing up for free access to the data analytics, he says. “I would figure out who the customers were and what exactly they cared about. I’d take their pain points and share that feedback with the team.”

“We were able to do a lot with a little,” says Mr Wilson. Their efforts paid off and they were able to provide a software demo of a functioning entity in the business plan competition. The plan won, and Mr Hughes, Mr Wilson and Mr Rotblat found themselves with $20,000 from Berkeley and the use of a “grungy basement” in the Haas start-up incubator.

Mr Eadie, who ought to have been one of the co-founders, had another year of MBA study and, on graduation, went to Boston Consulting Group. However, three years later he joined TubeMogul. “He now runs marketing for us. He would have had a lot more equity had he joined back then,” jokes Mr Wilson.

In fact, the grubby basement was not an easy decision for any of them to make. “It’s difficult starting a company and working for free when you have just invested quite a lot in an MBA education and then find yourself jumping off a cliff into the unknown,” says Mr Wilson. Both he and Mr Hughes remember turning down a number of attractive job offers.

But the basement won out and they set about trying to raise more money for the business. One of the first investors was a classmate from Haas, but they also managed to persuade friends and family to put money in. These angel investors between them contributed $750,000, enough to get TubeMogul off the ground.

The Lester Center for Entrepreneurship at Haas was integral to their early progress, says Mr Wilson. It provided a forum for them to talk to investors and build a “map” of the company. They practised their pitch on other students and received valuable feedback. The centre also hosted events that attracted angel investors and venture capitalists.

“Our first board member came from one of those meetings,” says Mr Wilson.

The business plan competition was also integral to their later success. Their pitch on the winning day eventually yielded their first venture capital funding. Someone in the audience on that day made a personal commitment to follow their progress.

“We had some street cred because he had watched us do exactly what we said we were going to do,” says Mr Wilson.

Listening to their initial outline would have given a clue to what was to happen a few years down the line, when the company changed tack. Mr Wilson and Mr Hughes had said they wanted to create an industry giant.

“We did not see the analytics as a major disruptive business and we wanted to build something really big,” says Mr Wilson.

“It’s part of the evolution. Customers were saying to us: ‘It’s great that you’re tracking my video but I really want people to watch it’,” explains Mr Hughes.

As a result, in 2010 they convinced their board and made the “pivot” into being a brand advertising sales
platform for video, mobile and even television. They then sold the original business.

“A lot of credit to Brett for making the bold move,” says Mr Hughes.

“It’s nice of John to give me the credit but it’s been a great partnership over the years. We all argue like spouses,” says Mr Wilson.

 

From a start-up to the stock exchange

 

2005: John Hughes, Brett Wilson and Mark Rotblat meet at Haas.
2006: Mr Hughes and Mr Wilson enter a business plan competition at Haas for an unrelated company idea but are unsuccessful.
Summer 2006: Mr Hughes and Mr Wilson start detailed planning for a new idea.
2006-07: build a prototype website using their own money.
January 2007: enlist Keith Eadie and persuade him to write TubeMogul business plan.
February 2007: Mark Rotblat joins in customer development role.
Spring 2007: TubeMogul team wins business plan competition, is given space in a start-up incubator and $20,000.
2007 to early 2008: raised $750,000 in seed/angel funding.
Q1 2009: $3m in series-A venture capital funding led by Trinity Capital.
Q3 2010: $10m in series-B funding led by Foundation.
Q4 2012 and Q1 2013: series-C funding led by Northgate, Cross Creek & SingTel in two tranches. The first in 2012 was for $20m, the second in 2013 for $10m and earmarked for Asian expansion.
Now: the company is in its “quiet period” before its IPO and executives must abide by strict regulations on what it can reveal to the public. However, in its official S-1 filing with the Securities and Exchange Commission, TubeMogul claims total spend by customers on media purchases and fees amounted to $112m in 2013, more than double the $54m achieved in 2012. In addition, the number of clients who spent more than $10,000 on the platform over the year rose from 86 in 2012 to 208 in 2013. The S-1 reveals TubeMogul has yet to show an annual profit, however, it claims the company executed campaigns in more than 35 countries and generated 33 per cent of revenues outside the US.

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