David Gold has experienced huge success and failure. The entrepreneur from LookSmart, Dstore and Azure talks about how he made his millions – and what’s next. By AMANDA GOME.
David Gold is one of Australia’s most successful young entrepreneurs. He’s been behind LookSmart, Dstore and Azure. Now he’s on to some brave new ventures.
To listen to the lunch with David Gold, click here. To download this mp3 file and listen to it later, right-click this link and “Save target as…” to your computer (Macs; option-click).
Amanda Gome: David, your most recent success is Azure, which you sold in December last year for $15 million.
David Gold: I’m not allowed to disclose that but …
Between $15 and $20 million?
It’s probably not that inaccurate …
OK. So tell us about Azure. It was sort of cutting-edge wireless and you had Lloyd Williams as a shareholder.
Hudson Conway had a majority shareholding in the business.
What niche did you see?
It was right after the market had crashed. People weren’t really investing in technology and I was looking around for the opportunities in the technology space.
I looked at high-speed wireless and at the time there were a number of competing technologies and one of them was wifi, which hadn’t been backed by any big companies. The only company that had meddled in it a bit was Apple.
How did you go about educating the market?
That wasn’t dissimilar to my past experience at both at LookSmart and Dstore where we were training people to do things in new and different ways. It’s always hard when you’re one of the early players in a space. You know, when you have competitors entering into a space, people say it must be really bad for you or bad for your business.
But I actually welcome it because it means that you’re not the only ones spreading the concept or getting a message across. Otherwise you’re really spending your money, not only educating about your business but trying to educate about the concept as well so…
How much did a business like yours spend on educating the market?
With Azure we could see the people getting involved in the space in the US were really consumer focused and that was a heavy marketing spend. So we decided to adopt a wholesale strategy and build and own the network and then sell access to ISPs and telcos who then would go out and spend their marketing dollars that would be … that saved us a lot of money without compromising in terms of the traffic that we could generate.
And what was the revenue of Azure when you sold it?
Annualised it was in the $10 to $12 million kind of range.
OK, and how long had it been profitable?
Well the network had been profitable for some time. The core wifi network that we operated had been profitable probably for about 18 months to two years before that.
So you were pleased with the price you got?
You were involved in LookSmart in your early 20s and you probably would have made what, between $5 to $10 million from that?
Somewhere around that amount.
And then you did Dstore and there was a dotcom bust and that was a spectacular failure in the end wasn’t it?
Sure. Well for investors, yes.
And then you came back and did Azure. So you’ve had success, a great learning and then another great success. What did you learn from those two experiences that you applied to Azure?
They were very different experiences. When I first started LookSmart it was similar to Azure: we had one shareholder that owned a majority of the company and that at the time was Readers Digest.
With Dstore I had over 50 shareholders and many of those were funds made up of many other shareholders, so we actually were a public company even though we weren’t listed. It was a very different experience. With Dstore every investor coming on board wanted a board seat so we ended up having to give away a lot of board seats to investors and we ended up with pretty much no one independent other than myself and the chairman, who was Nick Greiner. It wasn’t ideal. We had a good mix of venture capitalists, private investors, strategic investors … but when the market crashed, none of them were in deep enough to really care enough about the business which is a disadvantage when you have a lot of different shareholders.
What else did you do differently with Azure?
Also with Azure I tended to outsource a lot of stuff, whereas with Dstore pretty much everything was inhouse. With Azure, I really wanted to be able to focus on the core of what we were trying to do and rather than deal with organisational politics and a large team and having accounts people and technical people and sales people and business development people and all that, I just wanted a smaller team that could really focus on the core of what we were trying to do and outsource everything else.
That meant I could focus and follow the right strategy and not have to deal with all sorts of organisational issues along the way; that’s why I structured Azure like that. I’m not saying that I think that’s the right way to do things. I think for me it was at the time, given that with both LookSmart and Dstore, we grew from zero to hundreds of employees within months.
What a shock.
Yeah, so you know, I was really looking with Azure to do something that was out of the media spotlight. It didn’t have all the attention. It didn’t have all the staff requirements and I could really just focus on building a business.
What else did you learn that actually helped you get the business model right and strategy right?
People are very important and getting rid of bad people quickly is important. Often you tend to hang on to people that aren’t working out for too long and they can just be a drain in terms of the business not being able to achieve its targets, and on staff morale. Also, hire people who are multi-skilled, that are willing to get their hands dirty and willing to get involved in areas beyond just their expertise. In a smaller company, and certainly in a start up company, you can’t have someone that’s just focused on finance, or technical or sales. You need people that can adapt to various roles and do various things.
And how can you pick them in an interview?
It’s a matter of looking at their background and what they’ve done in the past. I think generally it’s pretty easy to see how much someone’s willing to get their hands dirty. Assessing people’s skills across a broad range of areas is more difficult and you don’t always get that right, and that’s why I made the comment about getting rid of people that aren’t working, quickly.
You didn’t gear Azure up as quickly as Looksmart and Dstore.
No, but that was also a function of where markets were at. And certainly I learnt about how fickle markets can be. The first six to eight months of Dstore everyone was bugging me about not growing quickly enough … you’re not growing fast enough … get more market share … get the brand out there more … get big fast. All that kind of stuff.
No one was asking about profitability. But as soon as the markets came away, everyone’s talking about what’s your path to profitability. When are you going to be profitable? What’s the business plan to achieve that? Whereas a week earlier it was, you’re not going into Asia fast enough. You’re not doing acquisitions, as many acquisitions as you should be.
It was just amazing how things changed literally within weeks and we really had to sort of redo our whole business plan because of demands and even from the media. People like you were calling me up. When are you listing, when are listing? Everyone wanted a scoop on when we were going to list and then all of a sudden it totally changed within a short period so it’s difficult because you can’t totally insulate yourself from what’s going on externally.
I don’t think I would really want to get involved in any business that didn’t have a clear path to profitability and one of the downsides with tech businesses is that generally they do require heavy upfront investment. You’ve got to invest in some kind of infrastructure. You’re got to invest in R&D, you’ve got to invest in development of a website or whatever it might be and it is going to take time to recoup those costs.
Developing a website is not that expensive now.
It is if you’re talking about websites that have high-volume usage and globally focused. We learnt that with Dstore, which cost as much to set up a warehouse and a website as what it cost Amazon.
The difference was that Amazon was targeting hundreds of millions of people and we were targeting a market of 16 million people. Granted, they had more distribution centres than us…
What was the cost then? What was the cost of that whole set up?
Probably in the $1 to $2 million range at the time.
But that wouldn’t be anywhere near that now.
No, but one of the problems that we had was a lot of people complaining the website was slow and we needed multiple servers and multiple sites.
The better websites now are implementing Web 2.0 technologies and before we know it there’ll be Web 3.0 technologies. I just don’t think it’s as trivial as perhaps what a lot of people might think, even just to set up a website.
So what’s next for you?
I’m involved in a business at the moment called Simply Sold that I own half of, that sort of does eBay consignment stores, so if people want to sell stuff on eBay they can bring them in to one of our stores and we do everything for them and just take a commission and they just get a cheque in the hand.
The core of what our offering really is consumer focused and is targeted at … we’ve got retail outlets and people can come into the retailers. We do a lot of work with schools and charity groups – for the Brotherhood of St Laurence, St. Vincent de Paul, etc. It’s a good mix.
We get a lot of retailers coming in and at the start they were bringing in stuff they couldn’t sell and because they were getting decent prices for it, they’ve now started to bring in stuff that they do sell on the floor because they’re getting better prices or turning over more of it than what they do from their retail frontage, so it’s been interesting.
And where does that leave them? Are they considering shutting their doors and just doing eBay?
We’re looking at actually dealing with that by setting up a separate sort of consulting business where we can lend our expertise and knowledge that we’ve learnt through selling now thousands of products on eBay. A lot of them might test us out and once it actually works for them we lose the business because then they’ll go down a separate path, so we’re actually looking at pricing plays and consulting services to supplement our business so that we don’t lose that business longer term.
How many employees has Simply Sold got?
I’m a non-executive but I think it’s around the 20 to 30 mark. Through a number of different stores.
Just a nice growing business?
There’s four stores around – only in Melbourne and we’re about to open in Sydney before the end of the year. We’ve got multiple stores actually planned there so it’s going along quite nicely.
And what else have you got on the board?
I’ve been looking at a couple of non-technology concepts, retail concepts, and also been looking at cutting-edge technologies in the semi-conductor space and a couple of other things. I’m still sort of deciding. They’re overseas companies I’ve been looking at, so it’s sort of still deciding about how much I want to get involved in stuff, especially stuff outside Australia. We just had our fourth child about three or four months ago so I …
You’re 36 and you’ve had your fourth child?
I can’t be on a plane overseas all the time. I don’t think my wife would allow that.
But you’re fairly addicted to the start-ups?
Well that’s right: the freedom and excitement that comes with it drives me. I think that’s what I’m good at and I think I’ve learnt a lot from being involved in multiple start-ups and I’ve also come to a conclusion that not every one is going to work and that’s why I want to get involved in a few different ones.
Well, I remember asking Lloyd Williams why he got involved with you in Azure and he said because you’d had such a big failure and he said, This is a young man who learns from failure.
Thanks and good luck.