Building a Fat Startup in Corporate Training: Karl Mehta, CEO of EdCast (Part 2)

Sramana Mitra: What happened to the first company?

Karl Mehta: We built it all the way. We had a great Series A from Mayfield Fund. Palm, which at that time was a mobile device, was an investor. We built it to about 70 people. Then, 9/11 happened. We had a hard time. Nobody was funding any company. We had to shrink it down to almost 20 people. We refocused on B2B instead of B2C. We, again, rebuilt the company to about 75 to 80 people. We turned it into a $20 million run rate. In 2005, it was sold to Wireless Matrix.

Sramana Mitra: When you did the turnaround, what was the business model?

Karl Mehta: We had started out as a B2C and were giving our app to wireless carriers. They would offer that as an additional $9.99 service on your mobile plan. It was a B2C business. Think of it as TeliNow. We were a similar service but instead of providing navigation and traffic, we would push personal content. You may have your own Yahoo! page or Google page. We would push that content as voice. It was a consumer service.

Nobody was paying for it because post-9/11, consumers stopped spending money. Carriers stopped doing deals. We mainly refactored and refocused on a B2B business where we took the same technology and large enterprises and said, “We can give you this platform for all your field service people.” Field service people are out on the road all the time.

When they need access to enterprise content, they need it pushed to their phone. We brought in a lot of Fortune 500 companies. British Petroleum was my biggest customer. Another is Verizon. Verizon has 20,000 staff running around in trucks and vans everyday.

Sramana Mitra: It’s a much better strategy.

Karl Mehta: Yes. We took the same technology and platform and changed the whole value proposition. It was real revenue including profit as opposed to just waiting for something to scale and then bring in money.

Sramana Mitra: To whom did you sell that company?

Karl Mehta: Wireless Matrix.

Sramana Mitra: That acquisition happened in what year?

Karl Mehta: 2005.

Sramana Mitra: What happens next?

Karl Mehta: I took a self-paid sabbatical. I stumbled on an idea with my son about a virtual economy that was growing rapidly inside MMORPG. We started a father and son company out of my home. It was a weird idea where I was rejected by almost 65 VCs on Sand Hill road over a period of one year. The idea was to actually provide a monetization and trading platform for gamers to trade their virtual assets.

Those virtual items had real world value. It was such a weird idea that nobody could get it. Most of the investors would not get it. They would say, “How can you make money out of things that don’t even exist. You can say that this is a multi-billion market, but all that multi-billion is in the heads of these gamers.”

Sramana Mitra: But they do value it.

Karl Mehta: The rest of the world doesn’t value it. What is the value of a sword in a World of Warcraft. We started out with the core idea and kept on building upon it. Eventually, we hit something big. The underlying technology that we built to support all that was pretty sophisticated because digital goods can have a very high fraud rate. If you’re selling digital goods, there are no FedEx tracking numbers on it. There is not any real world property rights on it. If people make payments for digital goods, and if the other party just says, “I didn’t receive the goods”, it’s very easy to request chargebacks.

This segment is part 2 in the series : Building a Fat Startup in Corporate Training: Karl Mehta, CEO of EdCast
1 2 3 4 5 6