Serial Entrepreneur David Steinberg’s Four-Startup Journey (Part 6)

Sramana Mitra: These companies that you brought together to get the base level offering going, how did you identify them?

David Steinberg: That’s a great question. I took a core team from my last company who focused on M&A and corporate strategy. That team started looking around and calling everybody on earth. For example, we started the company in October of 2007, but we didn’t do our first deal until April of 2008.

Sramana Mitra: They were looking for companies within a certain domain. What constraints did you give them?

David Steinberg: We wanted companies that have tremendous amount of data but were undervalued because they were focusing on the wrong vertical or the wrong distribution methodology. The ideal companies for us were partially digital and partially telemarketing. Because telemarketing was undervalued at that time, we bought the asset very cheaply and shut down the call center business because we didn’t even want it. Then once we controlled that business, we needed a high quality distribution platform to replace all of the customers.

We hadn’t shut down the call center overnight because we didn’t want to make our customers unhappy. So we found an email marketing company and we migrated all of the customers who were using telemarketing onto our new email marketing platform at a much higher margin and much higher data creation. We ended up building this self-sustaining process for growing and building data, which ultimately was our biggest value inside of two businesses that we bought.

Sramana Mitra: I’m sure there are lots of different things that you did in building the business. Can you pick two or three strategic things that you did in the course of building this business that are worth discussing and something that people can learn from?

David Steinberg: The first important thing we understood is what the value proposition is to your ultimate customers and how you are going to service that in a way that was different than the way it’s currently being done. When we looked at it, most of our large customers were being serviced by agencies to run their marketing. The agencies don’t really win or lose based on the success on the campaign. It’s traditionally paid on dollars spent. If you’re bad enough, they’ll fire you but that’s not generally how it works. We came at it and asked who our ultimate users are.

When we started this, we felt like our ultimate end users were large companies that could ultimately benefit from better data and analytics understanding to better understand how to create customers. Strategically, we felt like data and large amounts of data were mission critical to our ability to do that. But how did we do that strategically? I told you we bought the marketing companies that were undervalued. We then went out and built a company called Digital Publishing Corp, which was a publishing asset to really grow our data very rapidly. Strategically, we were focusing on how much data we could create that was high-quality so that we could then utilize that with our clients and our partners.

Sramana Mitra: Your combination of value propositions is both data-based? That’s the comprehensive as well as the analytics, and marketing campaigns that you enable people to run using your software. Is that correct?

David Steinberg: That’s exactly correct. We didn’t build the software until after we had all the data and the distribution. We actually looked at building it but it was cheaper for us to go buy another company that was very small and that was primarily using a SaaS platform for integration of data analytics, email, social, and mobile display. It was a really interesting plug-in. It was a great business but super small with great technology. Then we plugged that into our greater business, which at that point that had a lot of data and customers. That’s when we exploded – about two years ago.

This segment is part 6 in the series : Serial Entrepreneur David Steinberg’s Four-Startup Journey
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