Matthew: Hi, this is Matthew Wise with FounderLY.com. We empower entrepreneurs to have a voice and share their story with the world, enabling others to learn more about building products and starting companies.
So, I’m very happy today because I’m here with Ben Dahl who was a partner at Pelion Venture Partners. Pelion is a venture capital firm, specializing in early stage investments and startups across various industry sectors. Prior to Pelion, Ben was the founder of Unspam, which was a leading anti-spam technology company, that helped the government and families prevent spam. With that said, Ben, I would love for you to give our audience a brief biography.
Ben: As Matt introduced me, I was a co-founder of Unspam and, currently, a venture capitalist. I am, unfortunately, slightly overeducated and have a JD, MBA and all that sort of stuff. But the stuff that really is important, and most formative for me, was founding my own company, along with one of our now CEOs, from our portfolio. We started Unspam basically with the idea that spam email was a very serious problem and that since there had been a lot of success with Do Not Call registries, we decided that we should start a company modeled after Do Not Call, in the do not email space.
Matthew: Excellent. So, can you tell us a little bit about what you’re currently doing at Pelion Ventures? What makes what you are doing unique, who is that for and why are you so passionate about it?
Ben: We like to talk about the fact that we invest in companies that are doing less sexy technology. We like to invest in relatively boring technology, and by boring, it may be boring to the rest of the world, but it’s not boring to us. We’re much less likely to invest in a social network or Twitter or that sort of thing, than we are companies that power it. We have an investment in a solid-state hard drive company, for example. One of our notable investments in the past was in a WAN optimization company. So, things that are sort of boring muffler work that make things run and make the Internet work better and make the experience of using technology more efficient for consumers and businesses.
Matthew: Given your experience as a founder and your knowledge as an investor, what are some of the technology and market trends that currently exist for founders?
Ben: There are a lot of trends that are affecting founders. I think the biggest trend is that the barriers to starting a business, right now, are very small, particularly Internet-based businesses, and I mean the capital barriers. It’s very easy to get something started. Now, it’s hard to make those things successful but, at least, the barriers for getting into the market are relatively minimal.
And I think that’s been extremely important for founders and have really allowed for a blossoming of entrepreneurship that hasn’t really occurred before. That said, I think, you end up with some dilution of quality entrepreneurs by the fact that everyone thinks it’s easy. Everyone sees a movie like “The Social Network” and thinks, I can go found a multibillion dollar company in my dorm room. It’s so much harder than that that it surprises me that everyone believes that.
One of my favorite quotes ever was when I was listening to Warren Buffett’s annual meeting, and someone asked during the open question period, “What do you recommend for a student that wants to be like Warren Buffett?” And Charlie Munger, his sidekick, said, “Lower your expectations.”
I think founders shouldn’t be focused as much on creating the next Facebook as they are making their own companies successful, and their own whatever they decide to focus on, successful, and not trying, necessarily to emulate the success, or be as big as someone else. You should be as good as you can be doing what you are doing, and focus on your business.
Matthew: That’s great advice. Thanks for sharing.
We’ve covered your background and a brief overview of Pelion and the investment market for founders, but we’d like to dig into the details of your story. Can you tell us what inspired you to start Unspam, and how did you come across the idea?
Ben: Like I said, we looked at the Do Not Call Registry that was very successful and launched around the country. Largely, the Do Not Call system that we now deal with, at least, with respect to our phones, was created on the backs of a company in New York, that made a decision that they were going to push Do Not Call registries across the country. They went around the country lobbying for Do Not Call registries and, essentially, they had technology that would provide for these kinds of services. And, we thought that Do Not Call was very successful and what’s as annoying, if not more annoying, than unsolicited phone calls in your home? Spam email, unsolicited, flowing in at any point.
So, we created a technology which allowed for, essentially, a double-blind do not email registry, so that you could keep an email address secret and also the email address of the sender’s list secret, as well. So, to the extent that you had someone that was on the list that maybe, didn’t necessarily want to be revealed, was on a particular list, you in the process of scrubbing that list, wouldn’t reveal those names.
So, it was a way to approach this problem while being mindful of consumer’s desire to keep their email addresses secret, as well as companies’ desires to keep their lists proprietary.
Matthew: Were you the only founder, or did you have co-founders?
Ben: I had two co-founders.
Matthew: How did you come across these co-founders, and what skills or talents were you looking for in co-founders?
Ben: The three of us all went to high school together. In fact, one of them, I had a locker next to and skied with when I was in seventh grade. Part of the lesson of my life is that you should be nice to the people you have lockers next to, because you may be in business with them later on. We were just very good friends. We sort of started this thing as a virtual company. We had an idea and we realized that there needed to be legislative action.
So, one of the co-founders and I spent a lot of time traveling around the country lobbying for legislation to, essentially, create a market for us, which, incidentally, is not the easiest way to create a market. And, certainly for other founders, I think, focusing on the government space, and the government space only, is not the easiest path to revenue, certainly when you require legislative action. [laughs]
Matthew: What time frame was this from idea to product launch? How long did it take, and when did you launch Unspam?
Ben: It took us about two and a half years to get legislation and get the product in the market; get legislation, get the bids from states and then get the product in the market.
Matthew: What year was this?
Ben: I guess we founded it in 2002, 2003; 2003, yeah.
Matthew: What was the most interesting thing about starting Unspam?
Ben: I don’t know if it was interesting as much as challenging. In the process of creating these registries for states, essentially, we had created these Do Not Email registries but they were specifically focused on kids. We got sued by the industry trade group representing the pornography industry, called the Free Speech Coalition. The Free Speech Coalition, there are two.
One is a true free speech organization promoting First Amendment stuff that is not necessarily industry focused, and the other is pornography related and based in the porn capital of the U.S. They sued us, and sued us for violating the free speech rights of the porn industry. They sued us in federal court in the state of Utah.
Ben: Now, we have been very careful about how these laws had come together, to make sure that they did respect the rights of speakers to speak but, also, listeners to cover their ears. The court eventually ruled in our favor, but it was certainly a tough battle. That’s for sure. It’s never easy to face a lawsuit that may shut down your company and calls into question the way that you’re doing business. And, even though we anticipated that we would likely face some sort of legal challenge, going through that was very hard.
Again, probably as a cautionary tale, I don’t know that I would found the company with the specific idea of getting sued. I have seen other companies that actually have been successful in doing that but, for us, it really caused us to cut our expenses, to cut our burn and downsize the team because we had to survive through it, and you can’t really raise money when you’re potentially being shut down by a lawsuit.