My last major job was the VP of Technology at a company called Coco Communications. At Coco, we developed the COMP -- Cryptographic Overlay Mesh Protocol -- and communication applications which used the protocol. The protocol was built with security at the core, and aimed to address the communications breakdowns during the 9/11 terrorist attacks. Even though government agencies are known to have long sales cycles, we felt that they were the best initial market, and the market with the most critical need for our technology. Yeah, that and the fact that you get to add a few extra zero's when you're selling to Uncle Sam or his partners abroad.
Now, many of you folks at Clique are intimately familiar with long sales cycles, as cable and telco companies are also famous for their bureaucratic sales encumbrances. But, like government contracts, a good partnership with a leading cable or telco operator can "make" a company, and ensure its long term success. Indeed, our 10 year partnership with Comcast will hopefully prove to do just that. Back to Coco...
At Coco, we had a lot of successes. The DoD, DoE, Navy, Coast Guard, and other agencies were keenly interested in our product suites. As were the states of Alaska and Texas, Iraq's Coalition Provisional Government, UAE, and Kuwait. Oh it was all very exciting! We did secure some government contracts. Which we couldn't talk about. Indeed, we had millions of dollars in revenue from what we affectionately called "spooky" contracts, deals with shell organizations in Virginia who had obvious, but unknown, ties to Uncle Sam. Unfortunately, we couldn't share more than the fact that these deals existed, and initially we had no "reference-able" customers. But we persevered, and turned away lots of smaller deals. Mind you, we're talking government, so don't forget that even those smaller deals had an extra zero or two.
Hit the waaay back machine, and you'll find that before Coco I started a company with Jordan Mitchell. Yes, the same Jordan who is now running Others Online. Our company, Siaxx , was very lean and mean. Jordan and I were convinced that we could build an initial version of our product, and find paying customers to use it. And that's what we did. Those customers financed the next version of the product, and helped prioritize our feature set to meet their real world needs. Jordan has taken this mentality to Others Online, and currently has a revenue stream which helps cover operating costs.
Coco was fortunate to have those initial spooky deals, but they were one time sorts of things. Which was ok, because we were convinced that we were going to close the state of Alaska. After all, we helped convince Alaska of the need, and helped guide Alaska to write their RFP. But, for various reasons, we lost the Alaska deal. So suddenly, money was tight. Our investors put in more money, but demanded we score good reference-able deals. The CEO was convinced that we should only take deals which implicitly valued the company in the billions, and which could be "pilot deals" springboarding into huge agency-wide deals. We did get the Coast Guard on a pilot. The initial revenue was small, but it would get us in.
Eventually, I left Coco, got married, moved back here, and started to work for Clique. But, as an investor, I kept tabs on Coco. And the prospects kept looking poorer. One day, I got an email from a former colleague telling me that Coco had locked out the employees, and fired all the engineers. It sounded draconian. But then, on my last birthday, Coco announced what they were up to. The investors had ousted the CEO and his brother, and put in new management. The new management was focused on market relevancy, and quickly began executing on several deals which could sustain the company.
Blah, blah, blah Coco, blah Siaxx, blah Clique, blah blah. What's the point of all this? The point is that Coco almost died trying to get huge government deals. Even after securing huge government deals, Coco almost went out of business because they couldn't afford to keep the lights on long enough for those monster deals to pay out. And Coco was unable to close other huge government deals. This was due, in no small part, to the fact that Coco didn't have real customers using the products from the beginning, real customers determining what the relevant features and use cases were (the Coast Guard deal used some of the core product line, but also had a bunch of one-off stuff). Coco's greedy CEO turned down several $500,000-$2,000,000 deals, believing those deals to be below him. So Coco almost went out of business. Coco ran out of working capital while waiting for the ultimate $150,000,000 deal. If you ask me, a couple of $500,000 deals would have been able to keep the company in business long enough to secure a couple more deals. And, based on my experience at Siaxx, $50,000 deals can be enough to keep a small company alive and building interesting technology.
But there's another point here as well. The other point is that initial customers help keep a company focused, keep a company on track and keep it relevant to real needs. Coco's spooky customers were great from a working capital perspective, and the $15,000,000 or so allowed the company to grow and acquire some much needed, but pricey, equipment. However, these customers were black holes. We shipped them some product and never even got a thank you. Not a word of feedback ever came back. Nobody ever knew if what we shipped worked, if it was used, if people liked what we did. Heck, for all I know, the spooky customers may all have been some rich creep who thought our CEO was cute! As a result, when it came time to close the Alaska deal we were completely unprepared. The stakes were high, $20 million initially which could balloon to upwards of $650 million, and it was a total disaster. We made everyone look bad. They wound up giving a pared down deal to another company who had horrible technology, and one off, custom everything, whose focus was in a completely different field. But this was a company who had dozens of customers, and had managed to make every one of those customers happy.
So what should Clique do? I do not believe that Clique is on the same trajectory as Coco, but I do think that the lessons can apply here. We have landed our flagship deal. But we must make sure that it isn't another Alaska, we must make sure that we make our customers happy. Our direct customer is Comcast, and we're good at managing them. But, ultimately, their happiness will be based on their users. If their users love the product, all is well. But in the regard, Comcast is a little like Coco's spooks. We don't have access to the customer. We don't have direct access to the customer base to understand what they like and don't like, and what their future needs and desires might be. And the Comcast revenue doesn't ramp up immediately. We are going to need working capital to bridge that gap.
Sure, that working capital can come from our glorious, magnanimous owners. It could come from outside investors who risk jerking us around and pretending like they understand our business better than we do. Or, it can come incrementally from revenue. Can you tell which option seems the most appealing to me?
We currently have a few near-term opportunities to start building incremental revenue streams. A partnership with Others Online could allow us to monetize our (Comcast's) users via profiling and highly targeting advertising. A similar model could apply to the Audio Key project. These projects would allow Clique to monetize our technologies and properties while simultaneously making them more powerful and appealing to the users. They also give us more information about who our users are, and thus greater ability to meet their current and anticipated future needs. And the great thing about direct revenue opportunities afforded by profiling and advertising is that these kinds of opportunities lead to very seductive business models. Indeed, profit sharing models often feel like "found" capital, because there is minimal up front cost (aside from some engineering integration costs). In addition, all parties become strategically aligned to meet the users needs and improve their experience because everyone profits from increased adoption and utilization.
Clique has numerous other intriguing business opportunities, like productizing CRUSH, ImageIQ, STICKO, and Clique Mobile. All of these opportunities have merit, and can lead to independent revenue streams. They can allow the company to grow, and expand our business domain and dominion, providing the breadth necessary to sustain continuing future growth. However, when looking for incremental revenue streams, the kind of opportunity that can help sustain a company by providing working capital in the near term, it is important to look for short-term opportunities that can grow, and keep these opportunities aligned with our core business strategy.