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Building a Cool Technology Company from Chicago: Narrative Science CEO Stuart Frankel (Part 7)

Sramana Mitra: Fascinating. Other than the 50% of revenue coming from financial services, are there any other dominant sectors? Obviously, media continues to be one?

Stuart Frankel: We continue to do a little bit in media. Our business with the US intelligence community is a fair chunk of our business today. We also have customers in marketing services. We work with advertising agencies to automate the preparation of campaign performance reports. You’ve experience in that area, so you’ll understand this. Account managers have all of this data associated with advertising campaigns, and they spend a lot of their time analyzing that data and preparing reports for their customers. Quill can do that for them. >>>

Unicorn in the Making: Avi Steinlauf, CEO of Edmunds.com (Part 7)

Sramana Mitra: Does that mean that you can charge higher rates for the leads? Are you even able to take a transaction commission? What does that give you in terms of financial metrics?

Avi Steinlauf: All of the above. It allows us to work much more closely with our partners, and depending on the individual relationship, allows us to just just have a much better sense as to what’s going on. In a way that works better for us and our partners, and candidly, better for our shoppers, because it provides them with a better solution.

Sramana Mitra: What about your strategies for acquiring traffic? I understand that you have relationships with the manufacturers and direct relationships with the dealerships? What is the strategy in acquiring the consumers?
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Building a Cool Technology Company from Chicago: Narrative Science CEO Stuart Frankel (Part 6)

Sramana Mitra: Do they pay a subscription?

Stuart Frankel: Yes. I’ll tell you how much the business has evolved. Given our customers today and given what we do, it’s a much more relevant model for us rather than selling volumes of content. When we were creating news content, that’s how news content is bought. That’s how we sold it.

Sramana Mitra: You said you got some early customers. Are we talking of 2011?

Stuart Frankel: 2010.

Sramana Mitra: In 2010, you got some customers and you were selling to them in this per piece mode.
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Unicorn in the Making: Avi Steinlauf, CEO of Edmunds.com (Part 6)

Sramana Mitra: Did you have venture capitalists in your early rounds?

Avi Steinlauf: There were some small venture funds that were portions of larger companies but none of the blue chip VC funds that you would be familiar with today.

Sramana Mitra: When you were raising money at that time, was this part of the conversation—that the family plans to keep majority ownership of the company and you wanted to keep the company private?

Avi Steinlauf: I’m not sure how evolved our thinking was at that time. We didn’t quite know what was in store for us. We were in an environment where all sort of things were going on. I think the same values were in place then that are in place now. The long-term orientation was in place, but I’m not sure I could say that we had the understanding that we do today 17 years ago. >>>

Building a Cool Technology Company from Chicago: Narrative Science CEO Stuart Frankel (Part 5)

Sramana Mitra: How does it work? Can you explain the science behind it?

Stuart Frankel: We would have to fast forward a little bit as well, because at that time this was a baseball story writer. That’s the prototype that was built in the lab. It worked really well but all it did was write stories about baseball games. Ultimately, we have turned this into a horizontal technology, which I’ll tell you about in a minute. In short, the idea is that you’ve got lots of data and within that data, there’s a story to be told. In this case, it was a baseball story writer. It would look at relevant data associated with the baseball game—game data and also contextual data—and the system would write the story.

Sramana Mitra: Are you talking about all structured data? Is this software working on all structured data and then turning that into a natural language story?
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Unicorn in the Making: Avi Steinlauf, CEO of Edmunds.com (Part 5)

Sramana Mitra: The Internet business model that you were settling on was CPA lead generation or was it just straight up advertising?

Avi Steinlauf: CPA lead generation would be a fair description using Internet lingo. That was just the beginning because we were also being approached during the later part of the ’90s by a number of the automotive manufacturers as well as their ad agencies. They said, “You’ve got this audience of several million people on your site monthly. We’d like to put our advertising messages in front of that audience. We’ll pay you for the ability to do that.” Candidly, in the early days, we weren’t comfortable with that. Advertising has not really evolved where we felt it was reputable or legitimate. For many years, we deferred. >>>

Building a Cool Technology Company from Chicago: Narrative Science CEO Stuart Frankel (Part 4)

Sramana Mitra: Then what?

Stuart Frankel: This was in the Fall of 2008.

Sramana Mitra: The financial crisis was coming up.

Stuart Frankel: Yes. I book-ended my time at DoubleClick. Just prior to closing the transaction with Google, I liked the idea of joining another PE-backed company. I wanted to join a company that was already in business with a good franchise and opportunity to grow. >>>

Unicorn in the Making: Avi Steinlauf, CEO of Edmunds.com (Part 4)

Sramana Mitra: What I’d like to do next is to track the major strategic moves that were responsible for that growth to the extent that you can remember them.

Avi Steinlauf: There are two major things that I would refer to. I sometimes refer to these as the business model and the evolution of the business model. Let me talk about those two. Essentially, I mentioned that from the earliest days on the web and the gopher site before that, we made our information available for free. We built up a fairly large audience. As a result of having the audience, we got a call from a gentleman by the name of Pete Ellis. Pete was an auto dealer here in Southern California who had sold off his dealerships and had started a business called Autobytel. The premise of the business was that he had dealers around the country who wanted to sell cars to people who were doing research on the web. >>>