Bootstrapping a RegTech Venture to $20M: PerformLine CEO Alex Baydin (Part 3)

Sramana Mitra: During the period that you’re describing, vertical ad networks were starting to be fairly big. I remember we were covering companies like Adify and vertical search engines like Kayak. In this period that you were describing, a vertical ad network was starting to develop.

Alex Baydin: A couple of signals started happening. Because we were delivering this report which entailed screenshots of all the user experience that generated the lead, we started hearing from our customers that the quality of what we were selling was good and the volume is low. They said, “But that report is super interesting. How do I get that report when I buy from the vertical ad network or I buy from the large ad networks?” They were very interested in that.

That was the first time the light bulb fluttered. Maybe there was some bigger play in providing transparency. I started to ask why that’s important. They said, “I’m in marketing. I buy your leads, but I send this report to our Director of Compliance.” Companies in regulated industries were telling me that – healthcare, finance, and online education.

I got on the road and started asking my customers to introduce me to the Chief Compliance Officer. They would walk me back to the back of the office. There would be a team of three or four people. They would have multiple monitors in front of them. They’re looking for our placements on our partner sites. They were just manually running Google searches to see how their affiliates were promoting their offers.

The reason they care is they had truth in advertising laws that they needed to adhere to even if it was their partner doing the marketing. We came back and said we can do better. I asked them what tools they were using. They were literally screenshotting the findings, and uploading the screenshot to their email using Excel. That appeared to be a greenfield opportunity that the other software companies were ignoring. We started to believe that we could have a really good chance of being early and, ultimately, be big winners there.

Sramana Mitra: Now you’re talking about SaaS to the compliance teams.

Alex Baydin: That’s right. We sold the media business, got a little bit of money from that. That funded the reboot of the business. From that point on, we were self-funded through our sales.

Sramana Mitra: What year was this sale of the previous media business and reboot?

Alex Baydin: 2010 and 2011.

Sramana Mitra: Let’s take it from there. You have now identified a pain point that was going to be a software service business. You got a bit of money from the sale of the media business.

Alex Baydin: But it wasn’t enough. We were working on building the first version of our software business. Funds were really low. I remember a day when we were down to $11,000 in cash. I happened to have started conversations a few months earlier with a customer who was running an agency in the online education space and was very concerned about sales and marketing compliance.

The government under Obama had started taking a close look at deceptive advertising from non-profit schools. If you remember, three of Google’s largest advertisers were the University of Phoenix, Kaplan University, and the EDMC school system. 90% of their enrollment was backed by title four funding. They also relied heavily on affiliates and opaque traffic sources. There was already a lot of deception happening because they were paying for leads on a performance basis.

This customer wanted his agency to elevate itself amongst its peers. We cut a deal where he helped fund v1 of the platform for limited exclusivity. That saved the company.

This segment is part 3 in the series : Bootstrapping a RegTech Venture to $20M: PerformLine CEO Alex Baydin
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