Lookery's Scott Rafer: Advice in the Aftermath

Written by Dana Oshiro / November 7, 2009 11:10 AM / 5 Comments

This post is part of our ReadWriteStart channel, which is dedicated to profiling startups and entrepreneurs. The channel is sponsored by Microsoft BizSpark. To sign up for BizSpark, click here.

After successfully selling MyBlogLog to Yahoo, it was surprising to see Lookery founder Scott Rafer write a blog post announcing his company's "orderly shutdown". In heartbreaking detail he took full responsibility for the company's demise saying, "In chronological order, the sins Lookery committed under my leadership were continuing our dependency on a large partner, not knowing when to cut bait on a failing asset, and building ahead of the market." While Rafer is still advising half a dozen startups and API management company Mashery continues to thrive, the loss of Lookery has taught the entrepreneur some hard lessons.

"It's important for a company to exist at all," said Rafer, "But once you've gained some traction you should work to reduce your dependencies." With Lookery, Rafer's company was completely dependent on working within the Facebook ecosystem. Said Rafer, "I've ranted for years about how bad an idea it is for startups to be mobile-carrier dependent. In retrospect, there is no difference between Verizon Wireless and Facebook in this context."

After realizing that Facebook would not release anonymized data in a timely fashion, the CEO changed the scope of development. The team first began cloning the Facebook targeting system and then sold the network to build out Lookery's universal cookie mechanism. Rafer admits that this second project was created well before the market demanded it. Since announcing plans to close down Lookery, the entrepreneur offers sage advice to others.

Lessons Learned: Advice to Others

1. Ramen Profitable: Rafer maintains his belief in the "ramen profitable" model of business. He says, "If you can, bootstrap for as long as possible. You need to build something solid and meet those needs first. Then try to postpone fundraising until you've got scaling issues, not survival issues."

2. Understand Expectations: As a precaution for those who do take on funding, Scott Rafer explains, "You need to know what you owe your investors. If you've already built on one platform, do you owe it to them to build elsewhere? Know their expectations before you take their money."

3. Gain Control: Rafer believes that one way companies with largely Facebook-based audiences can mitigate risk, is to utilize Facebook Connect. This way they can gain access to at least a portion of users in the event of a devastating platform change or alteration to the terms of service. Says Rafer, " Basically you need to exist first and then think about how you're going to get out from under the thumb of a single entity."

Photo Credit: David Sifry and Boris Veldhuijzen van Zanten

Microsoft BizSpark is a startup program that gives you three-year access to the latest Microsoft development tools, as well as connecting you to a nationwide network of investors and incubators. Click here to apply.

Comments

Subscribe to comments for this post OR Subscribe to comments for all ReadWriteStart posts

Scott writes: "Rafer believes that one way companies with largely Facebook-based audiences can mitigate risk, is to utilize Facebook Connect. This way they can gain access to at least a portion of users in the event of a devastating platform change or alteration to the terms of service. Says Rafer, " Basically you need to exist first and then think about how you're going to get out from under the thumb of a single entity."

A great way to incorporate not only Facebook, but also Google, Yahoo, Twitter, MySpace, AOL, Hotmail, Windows LiveID, etc. is an aggregated login and social publishing platform like JanRain's RPX, http://rpxnow. You users can login with many accounts and publish their activities on your websites back to Facebook, Google, Twitter, and MySpace. There's a live demo at https://rpxnow.com/demo/social

Posted by: Brian | November 7, 2009 3:21 PM

This post is very kind, thank you.

But to call Mashery "mine" isn't fair. Calling it "Oren's" at the beginning would would have been closer, but that was 3.5 years ago. Now there's a big hardworking team over there that jointly deserves the credit.

Posted by: Scott | November 7, 2009 3:26 PM

Scott, this is a bittersweet post to read - thoughtful introspection on what has to be a tough topic. As a vocal champion of entrepreneurs, I'd love to hear more about your thoughts on seed financing via convertible notes, specifically why it is advantageous for the entrepreneur and what signal it provides for future financing.

Posted by: xbox 360 zubehör | November 7, 2009 9:25 PM

This is one of many unfortunate stories created by our current market. That said, there are many lessons to be learned.

Posted by: Lawrence @ CRB | November 8, 2009 12:52 AM

it truly is a bittersweet post as previously mentioned, and we appreciate the personal sharing you have provided here. Its definately a tough topic, and glad its one that is being discussed finally. At least we can learn from our mistakes...that helps.
Scott

Posted by: lice treatment | November 9, 2009 3:44 PM