Benja's ad network was initially a success, but fundraising troubles led to unethical decisions. Here's what happened.

Description

Hi Andrew! Who are you and what are you currently working on?

I’m a 34-year old tech entrepreneur who spent the better part of the last decade building and writing in San Francisco.

I was the Co-Founder and CEO of the Benja Commerce Network, which delivered premium outlet shopping online through a gamified shopping mobile app, a shoppable media ad network, and a collection of direct-to-consumer e-commerce shops.

My core responsibilities were all business tasks, from ideation and bringing people in, partnership sourcing and negotiation, and general operations.

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What’s your background and how did you come with Benja’s idea?

My career prior to Benja was focused on tech business development, primarily in user acquisition and sales. I spent a lot of time thinking about discovery and how we find the products or services we buy.

That was at the center of the company I worked at immediately before Benja, Feathr, which is a marketing stack product for events and conferences. At the time, Feathr did a lot to super-charge in-person networking which is, of course, discovery.

One night while swiping on one of the popular dating apps, I started sketching ideas for how to use the same swiping front-end user experience - one thing at a time, yes or no - in other verticals.

Personalized shopping seemed to be an obvious opportunity given all of the data at your fingertips - product information like size and colors, of course, but also the constant yes or no signals you’d receive from customers and the information you could pull through the mobile app like location.

It wasn’t the sexiest entrepreneurship story. There wasn’t a bolt of lightning. I didn’t come across a wise old man in the desert.

I stepped up to a whiteboard and hashed it out. It made a lot of sense and seemed like a clear opportunity, especially in the outlet space where many major players struggled to go digital. They’re still struggling in that way.

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How did you go from idea to product?

The idea was rattling around in my head for a few months before I told anyone about it. When the company where I worked went through a merge, pivot, and re-organization event, I felt the universe was telling me to go for it.

I approached one of my talented technical co-workers who was also leaving - he responded in the exact way I hoped he would, by asking questions that demonstrated a real curiosity.

The initial product was fairly straightforward and was ready in a matter of four or five weeks - it was a dating-like swipe app for apparel. We leaned on a backend-as-a-service that was popular at the time, Parse, and a fairly typical stack, including Stripe. My co-founder handled database structuring and it all came together really nicely and rather quickly.

The launch was so-so, reaching a couple hundred users following a good run on Product Hunt and in some earned media that was popular in the mid-2010s. I don’t recall exactly how much product we sold but it was enough to know there was something there.

Which were the strategies to grow your business?

I realized, as many do, that it’s hard to get someone to install an app, especially when you ask them to do so without a specific call to action.

I was asking people to come to the app and simply browse. It wasn’t like anyone thought, “I need to buy running shoes” and opened our app because they weren’t sure what they’d be shown in the app. I didn’t realize how big of a hurdle that was until after the company closed its doors - the benefit of hindsight.

We received positive feedback when people actually tried the app - it was just hard to get them to that point. Tired of working the room at networking events, I vented that I wished there was a way to show people the app experience without installing the app. I didn’t realize that would lead to the birth of our second product.

My co-founder got to work on developing a single-product, interactive ad format where people could have that simple yes or no shopping experience inside of an online display advertisement.

We worked to make the product offering contextual and personalized. If you hit no, more products would show up. If you hit yes, you would be taken to a low-friction checkout - there were a few different iterations, but the idea was that we didn’t want to take you away from what you were doing.

What started as a mobile app user-acquisition strategy became the product. This became the opportunity to scale as it didn’t rely on people downloading an app or making a purchase. We re-positioned as an ad product where we charged X for a brand to reach an audience and paid X less some percent for placements on websites and platforms. These were the kind of unit economics that investors love to see.

I started purchasing as much ad space as I could, launching an independent ad network. If an e-commerce brand came to me, I’d list out the publishers that we worked with and if we didn’t have a great match for their product, we’d go out and find that traffic. The business worked.

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When did things start to go in the wrong direction?

Ad networks can be a cash-flow nightmare. I’m over-simplifying, but there are instances where the network will pay for traffic on day 1 of a campaign, invoice its customer on day 30, and get paid for that traffic on day 120 or day 150. Those are long cycles that can be a great challenge, especially in an early-stage environment.

I struggled with how difficult it was to get our heads above water and run the business. I was constantly on the phone trying to raise money. That became what I did more than half of the time I was running the business.

The rejection and repeat conversations that come with fundraising can be an incredible challenge for the psyche of an entrepreneur - fundraising beat me up and I couldn’t wait to be done with it.

After a few too many investors told me they liked the business but couldn’t consider it until I crossed a certain revenue or partnerships benchmark, I snapped and made a series of unethical and illegal decisions.

If an investor told me they wanted to see us reach a $5 million revenue run-rate, for example, I decided I would simply show them we achieved that goal. After all, I figured, I had employees to employ, I thought we’d reach that revenue target in time anyway, and I believed the company was building toward a great outcome.

I was comfortable doing the wrong thing because I believed it was for the right reasons and I couldn’t fathom this promising company would fail because of a simple fundraising challenge.

At the same time, the product was suffering because I was distracted by this fundraising. My lack of focus meant the company operations were - objectively - no longer building toward a positive outcome.

The timing of me taking my eyes off the ball is impressive because shoppable media - the space we helped define in its nascent days - was just starting to have a real moment. I caused us to miss the boat we helped build.

What began as a minor financial misrepresentation became many of increasing size and importance. It snowballed, and it wasn’t long before I was making material misrepresentations on financial statements to the tune of millions.

Which were the causes of Benja’s failure?

I made those financial misrepresentations, raised the money through investors and debt financing, and resumed building the network. But our partnerships suffered due to neglect during fundraising. The once-promising Benja ad network was irrevocably damaged.

I stubbornly refused to show weakness, projecting the kind of strength that our entrepreneurship community celebrates. I acted as-if and tried to fake it until I made it.

Regrettably, I refused to communicate honestly or objectively with the investors, my employees, and even my co-founder. I felt I could pull the company out of its nose-dive. All I needed, I thought, was a little time.

While I worked tirelessly on fixing the business, parties around the table smelled trouble. After several years working together, our debt partner wanted out. Some of our investors asked if there was a way to exit their positions.

They sniffed out the company wasn’t reporting accurately in a material way - one thing led to another, and some individuals did what one should do in that situation, reporting what was happening at Benja to the SEC and FBI.

I wasn’t aware until the Monday before Thanksgiving in 2020 when I was woken up with a loud knock at the door - there were a dozen FBI agents there with a warrant for my arrest.

The company ceased operations.

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If you had to start over, what would you do differently?

When I stood in front of the judge for sentencing following my guilty plea for securities fraud, bank fraud, and wire fraud, she said “It appears you just didn’t know how to fail.”

Bingo.

I incorrectly believed my solution to fundraising roadblocks - lying about the health and state of the company - was demonstrating the tenacity that successful entrepreneurs possess. At the time, I believed this was the heroic act of staring failure in the face and finding a way to beat it. I was wrong. In truth, I took “fake it ‘til you make it” to an unhinged, insane place.

I had internalized decades of stories like Fred Smith playing blackjack with the last $5,000 FedEx had to save the company, Cornelius Vanderbilt scoffing at the feedback that his plans broke New York state law and executing his plan regardless, rideshare companies flaunting the law, and public companies like Twitter grossly misstating their user numbers.

I drew a false equivalency between my misrepresentations and stories like those, thinking things like “everyone’s doing this.”

My thinking was broken, and my ethical compass was askew. Had I communicated my struggles honestly with the stakeholders, I could have either rallied the troops and had help resolving the business challenges, or I would have heard voices saying it was time to throw in the towel. I like to think I would have listened.

My advice to communicate honestly may seem simple to those who have never been confronted with such a situation - it is - but it’s also easy to find yourself in a situation where these little lies snowball. Understand that one lie leads to a thousand.

I lied during fundraising to protect the people and company but in the end, the results of my dishonesty were much more damaging than if I would have found a way to wind the company down.

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Which are your favorite entrepreneurial resources?

In the aftermath of Benja, I spent a lot of time reading and thinking through what went wrong. I found many entrepreneurial resources that offer the same poison seeds that encouraged my broken justifications, especially with stories of people faking and getting away with it.

Part of my charge is working with creators like Failory that own failure and speak about these things in a responsible way. That’s a long way of saying I don’t have many to recommend at the moment, but I’m focused on making sure that changes soon.

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