Kathryn Roy - "Knowledge Can Be a Problem"
ANGEL INVEST BOSTON PODCAST - episode 9
Whenever I speak with Kathryn Roy I learn something. I learned a lot when I spent an hour talking to this remarkably incisive thinker. Kathryn has advised some of the most dynamic technology companies of our time including Lotus, Kronos, Phase Forward, IBM, Computer Associates, Avid and Constant Contact. The qualities that make her ideas prized in so many executive suites were in full display during this delightful interview.
HERE ARE SOME QUOTES FROM OUR CONVERSATION:
- “The hardest thing about marketing and messaging is figuring out what you're not going to say.”
- Speaking about what she calls The Curse of Knowledge she says: “When you're steeped in a technical domain, you start talking to other people as if they have the exact same context in their heads.”
- Speaking about what companies should put on their websites she says: “What's really important is to let the visitor see, at a glance, what could you do for me? What problem could you solve, and do you solve it for other companies like me?”
- “I always tell the companies I work with: never brag about yourself. You can get a customer quote, and they can talk about you, but when you brag about yourself, it is totally discounted by prospects.”
- “I think that's a challenge I see in a lot of companies, because you get marketing people and they want to work on fun things. They want to work on beautiful graphics. They want to have great events. The real benefit or the most important thing that you can do is understand the customer's needs, no matter how boring they are."
Here are some of the topics covered in our conversation:
- Kathryn Roy Bio
- From Math Major to Harvard MBA
- Early Incarnation of Artificial Intelligence – Kathryn Roy’s First Experience in a Startup – Product in Search of Market – Classic Problem Described by Jeffrey Moore
- Kathryn Roy Goes to a Dungeons & Dragons Company Next – Finds Her True Calling – Marketing & Behavioral Economics
- Not Being Cut Out for Coding or Operations Research Did Not Discourage Kathryn Roy – She Knew Where She Could Better Use Her Acute Powers of Reasoning
- Kathryn Roy Finds That There Is a Market for Her Kind of Thinking
- Peace Corps & BBN Planet by Accident
- By Teaching I Learn – Docendo Discimus – Kathryn Roy Decides to Learn More About Marketing by Teaching Marketing But Ends Up at BBN Planet Instead
- Phase Forward – More Open Communication with Clients Bought Time to Succeed
- One of Kathryn Roy’s Marketing Tricks: Give Away Something of Value to Customers Which Is Relatively Easy for You to Create – It Gets You Mindshare – Two Excellent Examples Given
- Marketing People Want to Work on Fun Stuff – Graphics, Events, etc. – Should Focus Instead on Boring Things that Address Customer Needs
- Kathryn Roy Finds a Natural Fit between Her Approach to Marketing & Consulting
- Angel Invest Boston Brings You Outstanding Guests like Kathryn Roy, with Professional Sound Quality, at No Cost to You and with No Commercials – Give Back by Reviewing Us in iTunes & Spreading the Word
- Kathryn Roy’s Three Bits of Advice for Founders
- One – Make Sure You Have Critical Skill Within the Founding Team – Hard to Get Otherwise
- Two – Narrow Your Focus to a Group of Buyers That Have Common Needs & Consider Each Other References
- Three – Don’t Be Seduced by Fads
- Founders Frequently Get Into Trouble by Not Recognizing the Differences between B2B and B2C Marketing – Taglines: Less Is More
- “The hardest thing about marketing and messaging is figuring out what you're not going to say.”
- How Kathryn Roy Became an Angel Investor
- What Does Katherine Roy Look for in a Founding Team?
- Katherine Roy’s Advice to Founders Hiring Marketing Teams
- The Curse of Knowledge
- Investors, Beware of Giving Advice in Areas beyond Your Expertise
- Messaging Mistakes
- If You Are a Company Under $100 Million in Value You Can’t Afford to Have People Remember More Than One Name for You
- Kathryn Roy Talks about Pixability’s Pivots
- Poly6 Narrow Its Focus
- 3D Data
Transcript of Ep. 009
guest: KATHRYN ROY - Tech Executive, Strategic Thinker & Angel Investor
SAL DAHER: Welcome to Angel Invest Boston, conversations with Boston's most interesting angel investors and founders. I am Sal Daher, and my goal for this podcast is to learn more about building successful, new companies. The best way I can think of doing this is by talking to people who have done it, people such as tech executive, strategic thinker, and angel investor Kathryn Roy. Kathryn, it's awesome you could be here today on our ninth episode. Welcome.
KATHRYN ROY: Thank you. I'm looking forward to it.
Kathryn Roy Bio
SAL DAHER: Awesome. That's tremendous. Kathryn Roy has helped dozens of the most successful and dynamic B2B companies such as IBM, Constant Contact, Avid, Computer Associates, Lotus, AT&T, Kronos, Phase Forward, and the list goes on and on. Very impressive list. She was CMO on the executive team that took Phase Forward through its turnaround and successful IPO. As general manager of the domestic ISP business, Internet service provider business, of BBN Planet, Kathryn helped build a $100-million, nationwide business for BBN Planet. BBN was a spinoff of BBN, Bolt, Beranek, and Newman, a storied R&D firm in Boston that helped design the early Internet.
At Lotus, a pioneering, Boston-based software company acquired by IBM, Kathryn headed up strategic marketing. She published in respected marketing and strategic management journals. Kathryn Roy is a much sought-after speaker on her favorite topic of getting messaging right. Her consulting work is principally in helping organizations develop the messages, strategies, and tools that drive growth. Kathryn is an adjunct marketing professor at Tuft University's Master of Science and Innovation program. She majored in math at Colgate. Kathryn received an MS from UC Berkeley in operations research. Operations research, or OR as it's frequently called, is the application of science and math to solving business problems. She also received an MBA from Harvard Business School.
Kathryn's professional work greatly benefits the startups in which she invests, and I see this first-hand. She is known for deeply considered advice to founders and angels alike. I learn something new every time I speak with Kathryn, and that's why I'm so glad she made time from her busy life to be here. Thanks again, Kathryn. Great that you're here.
KATHRYN ROY: Thank you.
From Math Major to Harvard MBA
SAL DAHER: Now, Kathryn, as a way of helping young people starting their careers, please tell the story of how you went from studying math at a liberal arts college in central New York State to getting an MBA at Harvard University.
KATHRYN ROY: Well, I once gave a talk about the five mistakes I made in my career to warn other people about it, and that's a little bit of the story. I started as a math major. I went over to work at Bell Labs doing computer modeling, where I discovered that I was a bad computer programmer, and then I went and got my MBA. When I was at Bell Labs, one of the things that I did was I worked on building a model for putting in circuits through satellites and undersea cables. When I finished that project, the recipients at AT&T said, "Well, we're not going to use it," and I found out it was because my bosses hadn't gotten the requirements right. So I'd done all this work, and it pained me to no end.
SAL DAHER: Oh, jeez.
KATHRYN ROY: I said, "Okay, this big company approach is not great." Bell Labs had paid for me to get my master's in operation research to help with the computer modeling work. Then, I went and got my MBA with the desire that I would get closer to the customer.
SAL DAHER: Bell Labs is the research arm of AT&T?
KATHRYN ROY: It was, yes.
SAL DAHER: The monopoly phone company in the United States. An enormous company. We cannot imagine how influential and how significant it was, because it had the monopoly of all local telephony in the United States, and long distance, as well, at one time.
Early Incarnation of Artificial Intelligence – Kathryn Roy’s First Experience in a Startup – Product in Search of Market – Classic Problem Described by Geoffrey Moore
KATHRYN ROY: Correct, and I was there just as the decision came out to break them up into pieces. Eventually, Bell Labs was dispersed into different research institutes. When I graduated from my MBA, I went and got a job with a startup company. It was about '85, and artificial intelligence was in its first wave of being really hot. We had Kleiner Perkins and Venrock put $25 million into this startup. I went in as a product manager working on a product that used some of the operations research that I was familiar with to do modeling for manufacturing. It turned out that we were a classic Geoffrey Moore case of a product in search of a market. We were able to get a dozen companies to-
SAL DAHER: Geoffrey Moore, author of Crossing the Chasm. Tremendously influential. Everybody who's in tech marketing or tech at all should read it.
Kathryn Roy Goes to a Dungeons & Dragons Company Next – Finds Her True Calling – Marketing & Behavioral Economics
KATHRYN ROY: Yes. As I say, the smart people left after a year, and I hung on for two years. That was my first experience in a small startup. From there, I went to a game company. It was one of the first Dungeons & Dragons-style roleplaying games, the product called Ultima, a series called Ultima, which I worked at and started being responsible not just for the product and support but also marketing. I think that's how I slid into it and getting involved in helping to communicate to people. I've been in a variety of product management, product marketing roles since then. I realize what's really interesting to me was when I was in school, math major, science, all sorts of things, I always liked doing things that were fact-based, that you could prove things. I actually stayed away from economics, because I was really worried that you work on something, you predict something, and four years later, you find out you're completely wrong.
SAL DAHER: Economic predictions are highly unreliable.
KATHRYN ROY: I always like being able to do the analysis and come up with things that are going to work. I stayed completely away from psychology, because I thought it was like Rorschach tests and ink blots.
SAL DAHER: Too subjective.
KATHRYN ROY: Looking at your dreams. I thought that was a complete nutty thing. The interesting thing in my career as I work with companies to help them communicate their value to their customers is psychology in the form of behavioral economics is one of the most important things that I have come to use as a tool.
SAL DAHER: So understanding that people don't make decisions according to the theory of the homo economicus that's sort of calculating and so forth. People make decisions in very emotional ways that are not always what classical economic theory would predict.
KATHRYN ROY: Yes, that's a good description.
SAL DAHER: One of these is the confirmation bias that I think you rail against all the time.
KATHRYN ROY: Right. Understanding the psychology through the lens of behavioral economics, it's not just about understanding your prospect and how they think and how they make decisions. That's important, but it's also really important to understand how we make decisions. When we do confirmation bias, we're talking about how you do research. If you simply rely on your notes, you're going to take notes about the things that confirm your hypothesis, as opposed to keeping a transcript and being able to review and catch things that you otherwise would have missed.
Not Being Cut Out for Coding [KR1] Did Not Discourage Kathryn Roy – She Knew Where She Could Better Use Her Acute Powers of Reasoning
SAL DAHER: Very good. Just a little bit on when you discovered that you weren't good at coding, how did you feel about that? Did you immediately say, "Oh, but there are other things I can do." How did that affect you?
KATHRYN ROY: It didn't discourage me at all.
SAL DAHER: It didn't?
KATHRYN ROY: Absolutely.
SAL DAHER: Because you had the confidence that you knew you could contribute in other directions and so forth?
KATHRYN ROY: Yes.
SAL DAHER: Ralph Wagner went through something very similar. In the beginning of the interview, he says to me, "Sal," and then a pregnant pause, then said, "Calculus killed me." Then he confesses he couldn't do calculus, he couldn't code, and yet, he had a very successful career in technology. This is becoming a theme. It's not that you couldn't code, it's just that that wasn't exactly the thing for you. I'm sure you could code. You were a math major and you could do calculus. You got past that barrier. Then, you found that you could apply your kind of thinking, your rational thinking, to an extremely irrational area, which is decision-making in business.
KATHRYN ROY: Yes.
SAL DAHER: …which is a wonderful thing.
Kathryn Roy Finds That There Is a Market for Her Kind of Thinking
SAL DAHER: How did you discover that you could most contribute in helping companies develop their messaging and strategy rather than optimizing their operations or doing some traditional OR work or coding and so forth? When is it that it dawned on you that there's this enormous need for that particular discipline rather than the more technical discipline that you trained in?
KATHRYN ROY: I think it started when I was at Lotus, and I was moved over to be head of strategic marketing. It was the first time they had someone doing that. I was responsible for pricing and licensing but also market research.
SAL DAHER: Let's just take a second. I just want to explain to the audience what Lotus was. Lotus was an enormously consequential company in Boston that developed a spreadsheet program called 123 that was enormously successful before Microsoft Excel became the norm. It wasn't the first. VisiCalc was the first, but it was the one was the most successful, because it was used in the computer, in the PC, in the personal computer, which IBM launched and eventually Microsoft took and made very common. That's Lotus Corporation. Very innovative company. Brilliant founder. Please continue.
KATHRYN ROY: They had me be responsible for market research, and that wasn't my area of expertise, so I had to go and learn a lot about it. I started looking at some of the work that we were doing, some of the surveys we were running. Sometimes I would look at the questions, and they wouldn't be clear to me. I would ask the person commissioning the research what they were trying to get at. Then, I would go and ask someone random what this question meant, and there was a total disconnect from how the person commissioning the research was doing this. I realized we were gathering all this research. The questions were flawed, and we were taking the results, and we were making decisions from it. That's sort of like decision-making based on false information. It drove me nuts. That's when I started to put together principles that I've been using. That was the start. Finding that it's too easy for us to find data to support our opinions or make decisions that are completely baseless.
SAL DAHER: So variations of the confirmation bias that we discussed earlier?
KATHRYN ROY: Yes, although in that case, it wasn't people cherry-picking. It was that they were relying on flawed data. Once we format data and it comes in a nicely formatted report, it looks reliable. I just found examples after examples throughout my career of where people are misusing data.
SAL DAHER: I think there's something, I think it's called endowment bias [Endowment Effect]. Something becomes endowed, sort of like the stock that your grandfather gave you, so it has special significance. Or data that's been nicely tabulated and so forth. It acquires a special significance beyond what it should really have. You should be questioning it and trying to look at it in different ways, look where it came from. How about your work at BBN Planet? Did that provide any valuable lessons for you?
Peace Corps & BBN Planet by Accident
KATHRYN ROY: Well, I came to BBN Planet by accident. I was at Lotus and starting to look for my next opportunity and was actually looking outside the company as well as inside. My husband convinced me to apply to go into the Peace Corps. We had friends who had just come back from Nepal, and they served in Kathmandu. They had a fabulous time. I said, "Oh, what the hell!"
SAL DAHER: This was after you left Lotus?
KATHRYN ROY: No, when I was at Lotus and I was looking for my next opportunity. I'd been doing… I had headed up strategic marketing for a couple years. We applied, and I had the opportunity to go and teach marketing at the National University in Ulan Bator. Now, my husband and I had been white water kayakers doing some-
SAL DAHER: Ulan Bator, Mongolia?
KATHRYN ROY: That was in Mongolia.
SAL DAHER: Right.
By Teaching I Learn – Docendo Discimus – Kathryn Roy Decides to Learn More About Marketing by Teaching Marketing But Ends Up at BBN Planet Instead
KATHRYN ROY: We had been white water kayakers and gotten pretty good. We'd done the Grand Canyon, some rivers in Idaho, Costa Rica, and various places. We were asked to teach. I thought I would be a fine teacher because I did very well on the river, but it turns out I was not a great teacher. A friend of mine who lost it on big water was actually a great teacher. I realized she did several things right. She broke things down into smaller pieces. She was able to diagnose what people should focus on to fix and model correct behaviors. When we got drafted to go to the Peace Corps, I thought, "This is great. I will have two years to teach marketing to stop and reflect on it and get better at it." When I taught white water kayaking, my own skills went up a whole level. You're modeling the right behaviors, so you refine your technique, and I thought I would get the same out of marketing.
At the time, my husband couldn't leave his job fast enough for that opportunity. The person who at Lotus had recommended me, been my reference for the Peace Corps, had gone over to BBN Planet. They'd just munched together three regionalized pieces. When I told them we got the offer but we weren't going to take it and we were going to wait for the next one, he said, "Oh, if you've got a few months, come over here and help me, because we've just munched this together and things are really crazy and I could use your help." I went over thinking it would be a few month assignment, and I think I stayed there well over a year. When I got there, I went into a team meeting with engineering, QA, services, marketing, sales, everybody together, and it felt like World War III. Everybody was angry with each other.
SAL DAHER: QA is quality assurance.
KATHRYN ROY: Not agreeing on things. You know, there's three levels of disagreement. I don't know if you heard this.
SAL DAHER: No.
KATHRYN ROY: One is people have different facts. The second one is people interpret the facts differently. The third one is at least one person in the room is an asshole. When I got there, it was pretty clear people didn't have the same facts. In fact, they had very few facts. What I went and did is go and do research. I went and found out what our competitors were charging for pricing. This is where a little bit of my experience at Bell Labs and operations research degree and understanding queuing theory came in. I worked with the engineers and someone from finance, and we built a spreadsheet of all the investments. From that, we were able to present the data to the whole team and get agreement on halving the number of cities we were rolling out, doubling our pricing, and starting to do some marketing to get new customers. That made a huge difference. I had to go out with a lot of sales people and apologize to a lot of customers about raising their prices, but those were the fundamental things that helped make them successful. To me, the big lesson from BBN Planet was understanding the levels of differences of opinion and how to get people all on one page.
SAL DAHER: And getting rid of the jerks.
KATHRYN ROY: I can't think of a jerk that we had. A lot of bright, talented, hard-working people, but you can still get disagreements when they don't have enough facts.
SAL DAHER: So getting more facts can help?
KATHRYN ROY: Yes.
Phase Forward – More Open Communication with Clients Bought Time to Succeed
SAL DAHER: Excellent. Please tell the story of Phase Forward and its turnaround. What role did messaging play in that, if any?
KATHRYN ROY: Phase Forward was a company that sold software for pharmaceutical companies to run clinical trials. That was their primary focus. Before I got there, they had combined two companies. One was older technology, which ironically was another spin-out of BBN[KR2] . That helped the pharmaceutical companies manage massive data that was being collected during clinical trials. When clinical trial software, the way it was done in the legacy world, was that you would send out triplicate forms to doctors, who would meet with patients in the clinical trial and then fill out the forms. That would get sent in. They would be separated. Different people would enter the data into the system, and that would get combined and cleaned in the back-end systems. When the Web and the Internet became popular, there was the ability to create an application so that at the doctor's office, instead of them filling out paper, it could be online, and that was a big advance.
So these two companies, the old, back-end world and the new world combined, all of the software didn't work together. When I joined, they had an asset which was extremely valuable, which is many large pharmaceutical companies had their software installed, were paying a lot, and it was hard to pull that software out, it was so integrated into their systems. At the same time, many of their customers were very angry with them. They had made promises that they hadn't fulfilled. I came onboard with a whole new set of executives. One of the things I worked with the new Head of Development was developing a product road map that with could communicate to customers and that we would keep our promises with. That was the first thing that we did to change the mindset. Luckily, we had enough time to turn around their opinions.
SAL DAHER: Similar to the Microsoft strategy of vaporware, of announcing features to intimidate the competitors, features they didn't quite yet have but that they would announce them ahead of time so that they would keep their competitors intimated? Then, they would eventually fulfill them, or sometimes not.
KATHRYN ROY: This was more robbing Peter to pay Paul. They'd make a promise to one pharmaceutical company that they'd put this feature in, and all the resources would shift over to delivering that, but then another customer would get angry and the resources would shift back, so they were upsetting a lot of customers along the way. By being more open and honest about our product road map and communicating that in a way that people could understand, we got their buy-in. That gave us the time to work. We didn't have to just keep our existing customers, we had to get new customers. That was pretty hard, because we were really targeting, in this arena, the 50 largest pharmaceutical companies, and a third of them were on Oracle, a third of them were on our software, and a third of them were on homegrown. We had to be top of mind and be positioned for every six years when they would review their technology strategy and make investment decisions.
SAL DAHER: This illustrates very clearly the very deep connection between marketing and product development and sales. Your product was deficient, and what helped you was communicating to your customers how you were addressing those deficiencies in a way that satisfied them and in a way you could fulfill, in a road map that was realistic enough for you to fulfill, and that you weren't kind of promising perfection and then denying other customers resources so they could try to achieve perfection in that particular instance. Rather, doing something that everybody could be reasonably comfortable with but that you could perform on.
KATHRYN ROY: Yes. We did do a little bit of smoke and mirrors to get the new customers. At that time, our code base was old, which meant that our software engineers were hamstrung and couldn't be as efficient as if we were on a new code base. We also had different code bases for Asia versus the US. We were hamstrung about fixing problems that we had, so we had to make some strategic choices about what we were going to invest in. Because we were targeting the 50 largest pharmaceutical companies, that meant that we could focus on what was specific to their environments. In discussions with them, we found out helping them connect our data with their other back-end systems was a huge headache, and the more that we could solve that or promise to solve that, we could actually under-deliver on other aspects of the software that our competitors were good at. Picking the strategy on which we were going to compete was important.
One of Kathryn Roy’s Marketing Tricks: Give Away Something of Value to Customers Which Is Relatively Easy for You to Create – It Gets You Mindshare – Two Excellent Examples Given
To get new customers, we had to think about ... This is one of my mantras, which is you always have to think about how can you give something of value for free? To do that, this is where insight comes in. If you really study your customers, you start to understand what they care about. Sometimes it's something that you couldn't care less about. You just have to learn to care about what they do. Turns out, there were two things that they cared about. In the clinical trial arena, there's a federal regulation called 21 CFR 11. That's, like, 150 dense pages guaranteed to put an insomniac to sleep. What was unique about this industry is that if you violated any of those laws, you could go to prison. Do you remember the film The Fugitive?
SAL DAHER: Yes.
KATHRYN ROY: The whole premise of that movie was that someone figured out someone was faking data in a clinical trial, and that's why the wife was killed and that's what led to everything else. They were covering that up. That's how important it is in the critical trial arena. You have to be really careful about getting the right data, keeping it clean. That's the premise, but people didn't understand 21 CFR 11, but they lived in fear of going to prison. What we did is we found someone who was a regulatory expert. We worked with him to digest all of 21 CFR 11, put it in a digestible form. What we ended up with was a pretty large poster that laid out the different sections of 21 CFR 11, explained what the intent was, and who had to care about it. This became a really valuable poster. It turns out it ended up on the walls of the FDA, so pharmaceutical companies would see our name and our logo when they went there. That was an important thing that helped us get attention and mindshare and allowed our sales people to go in and talk to customers. The other thing was there was this movement towards data exchange standards, another thing that can put an insomniac to sleep.
SAL DAHER: Oh, I can imagine.
KATHRYN ROY: I had to study those and understand why our customers were confused about them. Was there anything in there that was important that they didn't recognize? If you can teach someone something that they aren't aware of, that's how you earn their trust and become an advocate for them. We found out that there were four data exchange standards. Two were in conflict, and nobody was talking about it. So we exposed that. We got in a lot of trouble. We got yelled at by the standards agencies for dissing their standards, but it really helped. At that time, the CEO was Bob Weiler. He's now one of the top execs at Oracle. He came back from talking to a pharmaceutical company that we were trying to engage with. I think it was Wyeth. I asked Bob, I said, "How did the meeting go?" He goes, "It went great. We are one of two finalists now." I said, "Well, what worked?" He said, "They think we know more about data exchange standards than any other company out there."
Marketing People Want to Work on Fun Stuff – Graphics, Events, etc. – Should Focus Instead on Boring Things that Address Customer Needs
I think that's a challenge I see in a lot of companies, because you get marketing people and they want to work on fun things. They want to work on beautiful graphics. They want to have great events. The real benefit or the most important thing that you can do is understand the customer's needs, no matter how boring they are.
Kathryn Roy Finds a Natural Fit between Her Approach to Marketing & Consulting
SAL DAHER: Extremely valuable lesson. After Phase Forward had its IPO, you returned to consulting, an activity you've pursued successfully for decades. What led to that decision?
KATHRYN ROY: I have always wanted to take on new challenges, so even when I was at Lotus and I headed up strategic marketing. I was, in some ways, an internal consultant and I would be given problems to fix. I've never kept a job more than three years, and whenever I was in a company for more than a year, I would find new jobs within that company. When I was at Phase Forward, I had to overhaul marketing. There were a lot of people that weren't appropriate, and one of the most valuable people that I had, the first day I showed up, said he was quitting. It had been in the works, I shouldn't take it personally, but that really hurt. I had to build a whole marketing organization, and I had to overhaul the messaging and how we communicated with customers and how we would do all that. Once you get that right, it's not like it changes every month or every quarter. In fact, with the road map, we had a pretty long set of things to deliver, so I felt like the people that I'd brought onboard could handle it. Indeed, when I left, my job actually got splintered up to different parts and assigned to different people, and they did fine.
Angel Invest Boston Brings You Outstanding Guests like Kathryn Roy, with Professional Sound Quality, at No Cost to You and with No Commercials – Give Back by Reviewing Us in iTunes & Spreading the Word
SAL DAHER: Coming up next, I will ask Kathryn Roy what she, as one of the sharpest business strategists I know, considers the most important piece of advice to give a founder of a startup. First, however, I wish to invite you, dear listener, to review our podcasts on iTunes to help to get the word out about Angel Invest Boston. So that you can see I keep my promise, I will read interesting reviews in future podcasts. In particular, for example, this review came in. GreatThingsHappenAtUMass, that's the name of the reviewer, left a review titled "Very Information." The review says, "I was fortunate enough to receive an advanced copy of episode one," that's the interview of Michael Mark, "and I'm very pleased with this podcast. Sal and Michael give informative accounts of their ventures that will surely help both investors and entrepreneurs alike. This is definitely something you don't want to miss." Thank you, GreatThingsHappenAtUMass.
Kathryn Roy’s Three Bits of Advice for Founders
SAL DAHER: So, Kathryn, what's the most important advice you would give a founder?
One - Make Sure You Have Critical Skill Within the Founding Team – Hard to Get Otherwise
KATHRYN ROY: I think I would give them three pieces of advice. One is making sure that you have, within your founders, the critical skills that you need. I came across a startup that a young founder had passion about the product and the opportunity, but it required developers and it required understanding of social marketing. Those aren't things that you can easily acquire as a startup, so you've really got to make sure that you've got the right skill sets on your team.
SAL DAHER: Those are areas where there's tremendous demand for people who are knowledgeable. Unless you have some of that yourself, you're not going to have the resources to hire capable people that you need to develop that.
Two – Narrow Your Focus to a Group of Buyers That Have Common Needs & Consider Each Other References
KATHRYN ROY: Right. The other one I find quite often is that they try to be too greedy, try and approach too broad of a swath of potential buyers. The more different segments you address, the muddier your message becomes and the harder it is to reach them. I caution them against going too broad. Geoffrey Moore, we talked about him earlier. He talks about the bowling alley approach. A market segment is a group of buyers that have common needs and consider each other references.
SAL DAHER: Yeah, referenceable is the term.
KATHRYN ROY: Focus on getting a dominant share in a particular segment and then go and expand.
SAL DAHER: The market segment is defined by referenceability, meaning that one person at a conference can talk to another person at a conference and say, "Oh yeah, I used the product and it's pretty good." Non-referenceable means that they don't go to the same conference and they don't talk to each other or they don't understand the business.
KATHRYN ROY: Or if they saw a review that quoted that person, they wouldn't care.
SAL DAHER: They wouldn't care, right. That, for me, was one of the lights that went off in my head about market segmentation from reading Geoffrey Moore's book.
KATHRYN ROY: I would say Phase Forward, when I got there, we weren't focused on the top 50 pharmaceutical companies. They were going after every pharmaceutical company. I went and got the data on how many clinical trials different ones did, and it turned out 87% of the clinical trials were done by the top 13, and the rest were done by the top 50. Below that, they were doing it on a spreadsheet if they were doing it at all.
SAL DAHER: Right.
Three – Don’t Be Seduced by Fads
KATHRYN ROY: Understanding who's really buying is really important. The third one is not to be seduced by fads. I can't tell you the number of examples I could give you where people are doing things because they see other companies doing it. What I always counsel them to think about is for this to work here, what has to be true. When people were going crazy over in-bound marketing and I was working with companies that were going in a B2B sale, high-priced items, smaller set of prospects, I warned them. I said, "This takes a long time, and you're unlikely to reach a large percentage of your buyers." Also, you can't take techniques where people are saying, "Reach out to your customers on Facebook." One of my clients was selling to engineers, a company in New York City. A board member, who had been very successful at IBM, was very proud of how he brought IBM up to speed on the Internet as it was coming of age, and he told this company he was on the board of, "You need to be really big on Facebook." Everyone in the company had to get all their family and friends on Facebook to like them and like the company. They got 7,000 and it had no impact on sales.
This is just an example of board members, smart people, successful executives who tell people to do things, and they can be the wrong thing for the wrong time. You always have to understand. I never pay attention to any market research that talks about this percent of people are using Facebook, this percent of people are using LinkedIn. Who cares? I only care about for this company, what are their customers using. One time, I was doing work with a company that was selling to hospitals, and we were asking the buyers in the hospitals, chief medical officers, chief nursing officers, where they got their information to help with technology decisions. It was interesting to me to find out that the chief medical officers stayed away from LinkedIn. They said if they go there, they just get bombarded by recruiters, and they can't take it. There are whole sets of executives that we don't realize that stay away from some of these things. You can't believe the fads or the promotions of the gurus who get on the bandwagon of these fads. You've got to really look at what's going to work for this company.
SAL DAHER: I guess in a B2B situation, you have few enough prospects that you can actually go and talk to a substantial of them and really find out where they're getting their information and what motivates them. You can actual approach them in a more informed way rather than trying these things that really are geared for consumer, B2C, sales, because you cannot really reliably poll consumers and so forth. It's very hard to understand what they think. Consumers themselves don't know. Whereas, B2B customers, you can go and sit down with them and find out what their information sources are and so forth. I guess doing some little homework particular to your circumstances instead of just blindly following a fad.
KATHRYN ROY: Right. David Ogilvy, the big advertising executive, said, "People don't think what they feel, they don't say what they think, and they don't do what they say." I mean, we see people doing surveys or interviews and they ask people what they feel about something or what they would buy, and if it's not concrete enough, they can't really tell you, but they will make up answers. We have examples of people looking at the first minivan and saying, "Oh, I would never drive that." It wasn't until they had it for a week that they drove around and they found out their kids don't fight when they're sitting further apart that they wanted to buy them. The same with the Aileron chair. This notion that you would want a chair that didn't have cushioning was totally anathema to people, but when they started sitting in it, that's when it became a fad.
SAL DAHER: I remember reading The Hidden Persuaders. One of the points that I remember from that book—it's a book that came out in the '50s about marketing and advertising and so on—was just how difficult it was to figure out what consumers really wanted. Consumers didn't know. When they knew, they wouldn't tell people. It's exactly what David Ogilvy, in the quote, talks about. They're really unknowable. That's one of the things that scares me about marketing to consumers and which gives me some comfort that the focus on B2B companies, which there still is a lot of irrational stuff going on, but at least the scale is such that you can actually sit down and understand the basis of the decisions that are being made.
Founders Frequently Get Into Trouble by Not Recognizing the Differences between B2B and B2C Marketing – Taglines: Less Is More
KATHRYN ROY: I think that's one of the places that founders get into trouble, is that they don't recognize the difference between B2B and B2C marketing. I often find first-time founders getting really excited about having a beautiful graphic logo like that's really important and that's going to help them with their sales. Or they think that they need a tagline. I show them logos from top companies, and they can see that half the top companies no longer use a graphic element in their logo. That's just not important. I ask them to tell me a competitor of theirs tagline. Nobody ever remembers taglines. I've tested this over and over again. If you're going to do something to describe your company, it should be 7 to 15 words, and it should be clearly stating who you help and with what problems.
SAL DAHER: I read your article. It's really excellent, and you actually tell people to remove taglines because they distract from the message.
“The hardest thing about marketing and messaging is figuring out what you're not going to say.”
KATHRYN ROY: Yes. One of the problems I find with first-time founders is that they try to throw every conceivable argument at a prospect for why they should buy. That goes totally counter to the way that our prospects actually behave. They're very impatient. They give us only a fraction of their attention at any time. The more text we give them, the less likely the key points are to be absorbed. The hardest thing about marketing and messaging is figuring out what you're not going to say.
How Kathryn Roy Became an Angel Investor
SAL DAHER: How is it that you came about to invest in your first startup?
KATHRYN ROY: The same place I met you, through Walnut Investors. I don't know why it ended up being my first, and it was not a successful investment. It was also a B2C investment, and probably the last one I will ever make. I also am much more comfortable with B2B, because if you can understand the value that you're delivering, it's much easier to communicate it. Whereas, B2C things tend to be about identity and what it says about you as a person. I think that I was inspired by the metaphor that was presented. People said, "Okay, this is an audio device that would be like Android was to Apple." They would be like that to Sonos. Something that was much less expensive and could be promoted by multiple audio companies.
SAL DAHER: Yes, I remember the startup. Yes.
KATHRYN ROY: It was very appealing. Then, I watched for a long time as they struggled and struggled.
SAL DAHER: I saw them at Techstars. They came out of Techstars.
KATHRYN ROY: Very enthusiastic.
SAL DAHER: Very enthusiastic.
KATHRYN ROY: Hard-working.
SAL DAHER: Very hard-working founder.
KATHRYN ROY: Careful with their money. They had made considerable progress. I think there were 50,000 people using their device. They had interest in deals internationally, but didn't really understand the space enough.
SAL DAHER: I think we'll see the founder again. Very energetic and very capable founder.
KATHRYN ROY: Yes.
What Does Kathryn Roy Look for in a Founding Team
SAL DAHER: What do you look for in a founding team?
KATHRYN ROY: That they have the right mix of talent. That they are not overly unrealistic. You want people to be ambitious, but you don't want them to be wildly chasing everything that moves. I personally like to see track record, that they've made some progress. That's really important to me.
Katherine Roy’s Advice to Founders Hiring Marketing Teams
SAL DAHER: What advice would you give a founder about hiring marketing people?
KATHRYN ROY: That's an interesting question. When you are a startup, you are going to hire probably people who can execute, and you are going to be responsible for picking the strategy and setting the direction for marketing. I think that the important thing to look for is someone who is open to learning. This is a quote from Andy Jassy, what worked at Amazon. He said, "People that think they have it all figured out just don't learn at the pace you need them to." That is so true. It's really dangerous to have somebody in a marketing role who is confident. I call this “checklistosis”, one of my seven infectious diseases of B2B marketing. You have people who came in and they did things a certain way at one company, and they came into this company and they're going to do exactly the same thing. That's a dangerous thing. You want to have people who are thinking about what's going to work here and open to learning. Those are the key things that I would look at in a marketing person.
SAL DAHER: So someone who has experience, who's done it before, but who is not so wedded to the experience they've had that they're not open to the situation, your particular situation they're going to make to a hammer, everything looks like a nail sort of solution.
KATHRYN ROY: I think HubSpot actually avoids hiring people with experience because of exactly that issue that we talked about. If you think you already know how to do it, you're not open to learning, and it's harder to get you to change. I don't know that experience is as important as ambition and self-motivation to learn. People who go out there and learn things well on their own are going to be much more successful. The other thing I look for is people who have developed a network. In this arena, you can't just learn from people in your company. You really need to have a network that you can get ideas from. I run a CMO forum for companies over 100 million in the Boston area. Being able to hear them talk about what's worked and what hasn't worked helps me protect myself from the fads that are flying around.
SAL DAHER: What's the form of that forum? How often do they meet?
KATHRYN ROY: We meet a few times a year. It's hard to get the schedules aligned.
SAL DAHER: I can imagine. How many participants, typically?
KATHRYN ROY: 7 to 12 show up at a time.
SAL DAHER: 7 to 12. Is that the optimal number for this kind of exchange do you think?
KATHRYN ROY: I think so. We can't have competitors.
The Curse of Knowledge
SAL DAHER: Right. Tremendous. You've written about the curse of knowledge. What is that, and why should founders care?
KATHRYN ROY: Well, the curse of knowledge is when you get steeped in a technical domain, and I see this in clients of all sizes. When you're steeped in a technical domain, you start talking to other people as if they have the exact same context in their heads. This happens in companies that I work with. They're talking to each other, and they're all steeped in the same technical domain. Then, when they go out, they talk in the same way externally.
SAL DAHER: When they're talking to their colleagues in the field, it saves a lot of time, lots of shortcuts in the language, acronyms.
KATHRYN ROY: When they're talking to people within their company, exactly. Exactly.
SAL DAHER: But when they get outside, they get into the habit of doing that.
KATHRYN ROY: They don't recognize that they need to change mode.
SAL DAHER: They need to unpack what they're saying and to make sure that their audience is really understanding what they're saying. They need to speak in words that their audience finds intelligible.
KATHRYN ROY: Right. It's a combination of the curse of knowledge and the halo effect. The halo effect is when my brother-in-law is a surgeon and he has a lot of money. Then, I take his investment advice, even though he may be a lousy investor. It's the halo effect at play. The halo effect works with us, too. When we are smart, when we are accomplished, we trust our gut more. I had this one experience where I was working with a startup company in Boston. They brought onboard a very senior, very successful sales exec. He goes out to visit customers, has a conversation with the customers. At the end, the prospect says to him, "Oh, so this is like virtual body language?" describing it. You hearing that, you probably have no idea what that product is, but that sales person thought that's a very nice summary of what I just was explaining to this customer. Now, we need to take that phrase and go and use it externally, but because I haven't explained it to you, you could see how bad an idea that would be. That's a case of what I call one-directional language.
SAL DAHER: Are you saying that by using jargon, people can obfuscate and get away with faulty thinking because the jargon sounds so impressive?
KATHRYN ROY: I think that that's one aspect, but the curse of knowledge actually has many threads to it. One is using jargon, using three-letter acronyms. We talk about analyst speaking and coining a new category. Analysts have to keep coining new categories, because if they write about the same old stuff, why would people renew their subscription? They take each little minor change in an area and they coin a new phrase. Now, those companies start using externally, but the problem is that their prospects are often not familiar with those phrase, and it's totally going over their heads. That's another example of where the curse of knowledge gets involved, coining categories.
SAL DAHER: Now, the knowledge question that I deal with all the time is my state of knowledge, what do I know? I often feel the temptation to think I know more than I do in almost anything, because I come from the investing world. In the investing world, there is a tendency to project to prospective clients this sort of thing that you have, a tremendous track record, that you know more than the market does. That's what it means. The reality is these things are unknowable. Markets are unpredictable. Nobody can really predict markets.
KATHRYN ROY: That's the halo effect.
SAL DAHER: It is, but in a different way. It is because it is garbed in professional knowledge. These are people who should know about investment. This is not a surgeon, who's in a different discipline and is in this. Markets are unknowable. Someone who pretends to have knowledge of what markets will do tomorrow, I don't know what the market's going to do tomorrow. I could never know, because it's indeterminate. It's completely unknowable. The people who guess those things lose money. I've actually invested in my life, and I've made money. The reason I've made money investing is because I was mining a trend. It was an enormous imperfection in the market, and that trend was likely to be durable or a long time. There was a reason for that discrepancy to be there, a reason for people now to be able to access it. Then, you find a tremendous imperfection in the market and then you can make money reliably in the market. In markets that are highly competitive, which are very transparent like the stock market, the US Treasury market, guessing the direction of those markets is impossible. Warren Buffett can't do it. Nobody can do it. What he does is he looks for long-term value of companies, so he's a value investor. That way, you can do well.
There's a tendency, in the investing world, of people pretending to know. Not even pretending. Just thinking they know more than they actually do. This is the problem of knowledge that I contend with all the time, and I'm telling myself, because I come out of that world, what do I really know?
Investors, Beware of Giving Advice in Areas beyond Your Expertise
KATHRYN ROY: That's why I said the startups that I work with can get bad advice from their investors. Investors are very smart people with great experience, and they extend that into areas that they really aren't familiar with.
SAL DAHER: When the investors are talking about something that they know about, areas that they've worked in, I think they're valuable in pointing out obvious things that a young founder may not understand, an obvious pitfall.
KATHRYN ROY: I'm not saying that all their advice is bad, but sometimes they venture into areas where they don't have expertise.
SAL DAHER: Then it becomes really... Once again, state of knowledge. Part of the vast area of what you call the curse of knowledge. Really, really good. Kathryn, would you like to talk about messaging mistakes, since your favorite topic is getting the messaging right?
KATHRYN ROY: I find a lot of companies confuse what they want to say to prospects with what the prospects are willing to hear. I see examples where companies talk about their mission, and you haven't given the prospect any reason to care about your mission. That's not what you should start off with. Companies will say, "Well, we're the first to do X, Y, and Z." I could tell you from my experience at Lotus, we weren't the first to come up with the spreadsheet, but we got the market, so that's what really mattered. Or you find people bragging about how innovative they are. I always tell the companies I work with never brag about yourself. You can get a customer quote, and they can talk about you, but when you brag about yourself, it is totally discounted by prospects. We talk about being selective about what you say.
There's this whole horrible fad that's spreading across where marketing departments or founders want to say so much and they're unwilling to choose the key things to say that they have these carousels on their website. There's a slide with some text, and then after three seconds, it switches. When I go in and I look at their Google Analytics, I often find that the time visitors spend on their home page is only a fraction of the time that it takes to go through that carousel. It's a huge waste. Getting agreement and the key messages to get across and not having attractive-sounding bytes.
It's really interesting. Many times, people talk about the technology-
SAL DAHER: In messaging, you would say less is more? 15 words. Distill it down to 15 words, because it requires a lot of discipline, so they have messaging that tells the story of your company in a way that your customers care about, and you do it in an accessible way.
KATHRYN ROY: I like the 15 words. You don't want to tell the story of your company.
SAL DAHER: No, no, not the story of your company. Your value proposition.
KATHRYN ROY: Let me put it this way. What's really important is to let the visitor see, at a glance, what could you do for me? What problem could you solve, and do you solve it for other companies like me? We were working with a startup that has a new device to help people who are sleeping who are distracted by sound. They first started their messaging talking about adults who have difficulty sleeping, but if you think about it, I could have difficulty sleeping ... My sister-in-law has insomnia. She sleeps two hours a night. No sound-masking device would ever help her. It's people who have difficulty sleeping because noises distract them that they were addressing, so be specific. It's like when you're walking through an airport, if somebody says, "Hey!" what are the chances that you would turn and pay attention?
SAL DAHER: Right, everybody's-
KATHRYN ROY: If someone went through and said, "Hey, Sal," they're being specific. It's something that you relate to that gets your attention. The same sort of thing on the websites. If we are not being too greedy about who we're trying to approach, then we can simplify our message and have it speak directly to the people that we care most about. That's how you get down to the 15 words to describe the problem you solve and who you solve it for.
SAL DAHER: It requires, first, understanding who you're addressing it to, narrowing your focus, and then doing something that addresses their interest, solves a problem for them, rather than tells a story or whatever, which is interesting for you but not-
KATHRYN ROY: Or brag about your technology or how smart your people are, all sorts of things like that. Those are really important things.
SAL DAHER: There's an article that I read, 15 words, getting your message in 15 words.
KATHRYN ROY: Yes.
SAL DAHER: Very good.
KATHRYN ROY: The other thing is not testing, and this goes back to the curse of knowledge. A company that you and I both looked at, Poly6, they had the opportunity to market directly to consumers, to make theirs an ingredient brand that would be recognized like Sunbrella. You've seen Sunbrella advertisement. It's a type of fabric people put on awnings and it doesn't fade. It's a pretty recognized consumer brand, but it’s an ingredient brand. They were looking at promoting their brand as an ingredient brand to consumers who value the fact that this was really good for the environment. We were testing words like eco-friendly. What we would find when we test them is that one reaction to it was, "It's good for the environment. That means it's probably not as effective as the other options." Testing messages and the words that we think communicate our value is really important.
The other thing is not focusing on the technology but thinking about the job to be done. Clayton Christensen and Scott Cook wrote an article called Marketing Malpractice in Harvard Business Review. They told a story, and this is a consumer product story. They told the story of how McDonald's noticed that a lot of people were buying milkshakes in the morning, so they went and interviewed people to find out why. They discovered that people were buying milkshakes because they had long commutes and this would be something that would last longer and help them stay awake.
SAL DAHER: It did a job for them.
KATHRYN ROY: That was the job. Other's marketing geniuses have said, "People don't buy a drill, they buy a quarter-inch hole." If you understand what the job people are doing, then you are more likely-
SAL DAHER: People don't buy a drill, they buy a ...?
KATHRYN ROY: A quarter-inch hole.
SAL DAHER: Ah, they buy a quarter-inch hole, not a drill?
KATHRYN ROY: Yes.
SAL DAHER: Exactly. Clayton Christensen of the Innovator's Dilemma?
KATHRYN ROY: Yes.
SAL DAHER: Whenever you say "disrupt," you need to read Clayton Christensen before you actually use that word, "disrupt."
KATHRYN ROY: Yes, to understand what you really are.
SAL DAHER: What you're really saying.
KATHRYN ROY: Yes.
SAL DAHER: Excellent. We mentioned Poly6. You passed. I decided to invest through one of my LLCs. Actually, the LLC wrote a check for them yesterday. It's a company that you know well. They have a patented process for creating plastic from citrus rinds that they call Citrine. Reading your articles, I want to play CMO here, chief marketing office, and I'll say, well, Poly6 has Poly6.com, which is a very cute, short domain name. They have this registered trademark, which is Citrine, which talks about citrus, because it's made from citrus. It sounds really nice. Citrine sounds very crystalline and kind of clean and wonderful. Yet, they call themselves Poly6 and the product is Citrine. The product is not one product. It's going to be many variations of product. It's based on this technology that they have, creating plastic from this material that comes from orange or lemon rinds. My advice to the company, with my CMO hat on, is rebrand yourself as Citrine. I checked. Matt Stellmaker has citrine.com registered name and so forth. Just get rid of Poly6, which doesn't really say anything to anybody. As you wrote in one of your papers, IBM, $100 billion company, can only afford to have five brands. If you're a tiny startup, you cannot afford to have anything more than one brand, if that, if you're lucky enough to get it.
If You Are a Company Under $100 Million in Value You Can’t Afford to Have People Remember More Than One Name for You
KATHRYN ROY: I think you're making a really important point. If you're under $100 million in value, you can't have the luxury of people remembering two things. They can’t remember your product name and your company name if they're different, so you have to pick one. Remember I said before, you have to always be thinking for this company, for this to work here, what has to be true? What makes Poly6 different is that they are an ingredient brand. In many cases, it will not be visible to the end user that this ingredient is in them. I think, for them, it's actually less critical that they have two.
SAL DAHER: So I've been fired as CMO. I was wrong.
KATHRYN ROY: I think it's less critical. I had my students at Tufts this semester do some market research around Citrine, and it was very interesting. They went to furniture stores, and we had some little made-up tags that they would get reactions to. Citrine itself had some issues where people were like, "Oh, is it going to smell citrus-y? I don't want any scent in my furniture." There are some drawbacks to the name.
SAL DAHER: Citrine, okay.
KATHRYN ROY: Again, the couple principles to keep in mind are always say for this to be relevant here, what has to be true and to go out and test and not trust your gut.
SAL DAHER: Very good. I'm going to have to make my living some other way. A pivot is when a startup realizes that its original plan is not working and comes up with a new one. I always have a pivot question. I like to have a question about career, how you got started to help young people and getting started, and to address the pivot junkies like me. If there's a pivot channel, I would binge-watch pivots. Kathryn, do you have a favorite pivot story that you want to share with us?
Kathryn Roy Talks about Pixability’s Pivots
KATHRYN ROY: My favorite, which I don't know if someone's already covered with you, is Pixability.
SAL DAHER: Pixability? Michael talked about Pixability somewhat in his interview, but give us your take on the Pixability story. There's so many facets to that.
KATHRYN ROY: Yes, well, I have great admiration for Bettina. She has a tremendous amount of energy, initiative, and drive.
SAL DAHER: Bettina Hein, founder, CEO of Pixability.
KATHRYN ROY: Yes. They started out working with handheld cameras helping e-commerce businesses do video to help sell their products. At the time, Bettina was talking to me about joining their company, but I'm looking at this whole idea and thinking I don't think this is going to go far enough. Sure enough, it didn't work out, but because of Bettina's drive and persistence, she figured out where things were going with video and totally reposition the company. Now, they are one of the leading players in B2C advertising automation. I think they've done a tremendous job helping major consumer brands figure out how to get effective use from things like YouTube and Facebook.
SAL DAHER: According to Michael, they're one of the fastest growing startups out of New England. They're doing really well. I remember a presentation. When I invested in Pixability, Michael was on the board. This is before the venture round. Michael is now an observer, Michael Mark. A super Angel, also a colleague at Walnut Ventures. Bettina used to tell the story about the haul girl. Do you remember what a haul girl was? A haul girl was a young woman in Hong Kong who went to the mall and got a haul of clothing and came back to her small apartment in Hong Kong and with a selfie stick would model the clothes that she bought. Then, she would put them on the Internet, and she found an audience. She was getting advertisement on this and so forth and had a very, very significant impact with no advertising budget. I mean, nothing. She was just a selfie stick, a phone, and an eye for clothes. Yet, there were brands spending hundreds of millions of dollars creating original, very compelling videos that had a much smaller impact than this young woman with no resources whatsoever. So Bettina's approach was really to try to understand, at the time, first to measure, the impact that the videos were having, and then to really figure out how the videos could be seen more often in the right place and so forth.
KATHRYN ROY: Right. They brought analytics to understanding.
SAL DAHER: Analytics to that, to understanding it, so she's kind of reversed that. It's made it very hard for someone without the analytics savvy to succeed competing with these larger brands. This basically has empowered the brands to really have the money they spend in creating very impressive videos pay off.
Poly6 Narrow Its Focus
KATHRYN ROY: I think there were also companies ... That's a particularly stark and telling story about a pivot, but many companies, as they start up, they're really faced with when do pare back. When you initially start, you're experimenting with different market segments, different value propositions. When do you pare back and focus? So Poly6, I think, was looking at wood coatings for furniture, investigated that. I think they're doing really well now with 3D printing, where you have to be really careful about toxics being emitted from the ingredients and you want fast curing times. They have a lot of assets that they bring to bear to that in addition to being environmental friendly. What they did is they went out and they invested enough the get a better understanding of the market dynamics, the opportunity, and then they pared back.
Another company I really like a lot is 3D data.
SAL DAHER: Yes! Explain what they're doing.
KATHRYN ROY: Their value proposition is that they help tax assessment departments who want to get a bigger share of the fair assessed value of the buildings in their district. They want to maximize their tax revenue. At the same time, they want to do it at the lowest possible cost. They have actually two parts. One is they've created this iPad app that is just really helpful for collecting the data. The second part is that they've taken their understanding from machine vision and robotics, brought that to bear, and built technology that can assess the square footage of a house up to 10 stories, of a building up to 10 stories, by simply having someone walk around the perimeter.
SAL DAHER: A municipal worker, instead of measuring and so forth, can just walk around the house with a device that records images of the house, the laser bouncing off the structure, and then their machine learning can tell you…
KATHRYN ROY: They can create a 3D model, an accurate 3D model.
SAL DAHER: Enormously time saving.
KATHRYN ROY: Enormously time saving and more accurate. It's not just the person walking around the building that you're saving their time. I think they could do five to seven buildings a day if they're just doing it the old-fashioned way, and with this device, they could do 20 or 30 buildings a day. I mean, that's tremendous time savings. Also, because they're delivering an electronic model, there's no reentry of data, so they've really pulled a lot of the hard work out of the whole process of tax assessment. At the same time, because of their accuracy, they're capturing more of the tax value. They can split up the two parts that they sell, so if people aren't quite ready for moving into the laser measurements, they can use the iPad device. This is a very clever way of getting deeper into the market early on.
SAL DAHER: What is the essential technology behind this? This is just one of the verticals that they've decided is most successful to them right now, the municipal assessments.
KATHRYN ROY: I would say there's three parts to their technology. They've developed a very intuitive, much better than the competition, iPad app that understands the workflow of the people doing tax assessment. The second part is that they've taken the elements that are used in machine vision, which is the laser pointer you talked about. They also take photographs. They were able to use those things. They used some GPS to be able to get the dimensions and be able to assemble the 3D model. Then, there's the software that puts that into the other tax software systems that municipalities use that send out the bills.
SAL DAHER: But also the software that interprets all of that data, that makes sense out of it, which can have other applications beyond municipal assessment, tax assessment.
KATHRYN ROY: Yes. They've got some great opportunities looking at big construction projects.
SAL DAHER: Now, I'm going to take another look at that company, because I like the team, which is an important ingredient in the decision, whether you like the team or not, because you're going to be interacting with them for so long. It's a good thing that you brought that up, 3D Data. There, you have one founder is a very good technical person. The other founder is a very experienced ...
KATHRYN ROY: Sales exec.
SAL DAHER: ... sales person, and they work very well as a team.
KATHRYN ROY: Yes. They've made a lot of progress.
SAL DAHER: They have customers and so forth, which is really impressive. Kathryn Roy, I'm most grateful to you for participating in helping make this a great podcast. Thanks a lot. I'd like to invite our listeners who enjoyed this podcast to review it on iTunes. I'm Sal Daher. This is Angel Invest Boston, conversations with Boston's most interesting angels and founders. Thanks again, Kathryn, for being here with me.
KATHRYN ROY: Thank you. It's been a lot of fun.
SAL DAHER: I'm glad you were able to join us. Our engineer is James Willetts. Our theme was composed by John McKusick. Our graphic design is by Maywood Art. This is Angel Invest Boston. I'm Sal Daher.