Bariş: Dan Siroker, a product manager, took a leave from Google in 2008. He went to work on the Obama presidential campaign.
Adaeze: Ah, the 2008 campaign. That was something else. Very high stakes.
Bariş: Exactly. He was the director of analytics. And you know, he's just looking at their donation page—
Adaeze: For the campaign, yes.
Bariş: The one where people give money. And he just thought, 'What if we just test things?' This was a new idea for campaigns.
Adaeze: Like, A/B testing? Different pictures, different words... I understand.
Bariş: Yes, exactly that. Different images, different headlines... different buttons on the page. And he just did it, systematically, very carefully, you know?
Adaeze: Not just random, he means.
Bariş: Yes. And the results? They found an estimated... sixty million dollars in extra donations.
Bariş: Sixty million. Just from that testing.
Adaeze: Ehh, sixty million naira? No, dollars. Wait. That's a lot. Just from changing some buttons and words? That's mad, honestly.
Bariş: Just from that. And that experience, that's what made him think, 'Okay, this is a tool everyone needs.'
Adaeze: Okay, so this is where Optimizely comes in. The company that came from that idea, yeah?
Bariş: Precisely. He co-founds Optimizely in 2010. And this company—
Adaeze: This is the company from the testing idea?
Bariş: Yes. It wasn't a small one. It grew to be quite big. They had over a hundred million dollars in revenue annually.
Adaeze: Oh! A hundred million.
Bariş: Yes. Big brands, Nike, Uber, IBM, they were all their customers.
Adaeze: A hundred million dollars in revenue? My friend, that sounds like a success story to me. What is the problem then?
Bariş: Well, that's the thing. The article calls it a... a 'valuation trap'.
Adaeze: A valuation trap? What even is that?
Bariş: It's like, they raised a lot of money, you see. Over two hundred and fifty million dollars. And they were valued at six hundred million.
Adaeze: That's a lot, no?
Bariş: Yes. But when you take that much money, Adaeze, the expectation is a massive IPO. Not just... you know.
Adaeze: So, like, the investors are expecting, what do you call it... a unicorn, or even bigger?
Bariş: Exactly. But their core product, this A/B testing, it was starting to get... well, what's the word? Commoditized.
Adaeze: Commoditized? Like, everyone else was doing it?
Bariş: Yes. Smaller, free tools, they were doing some of it. And then the bigger players, Google, Adobe, they were just absorbing that functionality into their own platforms.
Adaeze: Oh.
Bariş: So, Optimizely became too successful to just die, you know? But not successful enough to give those investors that huge IPO return.
Adaeze: Hmm. So they built a good company, making plenty money, helping big brands, but because they took too much investment money, it became a 'failure'? That sounds a bit... harsh.
Bariş: It is harsh, Adaeze. But that's the lens they use. It's not a product failure—
Adaeze: Because the product was good, no?
Bariş: Yes! It was a financial one, according to the article. The money they raised, it set an expectation the market just couldn't meet for a standalone A/B testing tool.
Adaeze: So, what happened to them? Did they just... close?
Bariş: No, no, they were acquired.
Adaeze: Oh, okay. By whom?
Bariş: By another company, Episerver. For an undisclosed amount, but it was reported to be below their six hundred million dollar valuation.
Adaeze: Below? So the investors...
Bariş: Yes. And here's the wild part. The wildest thing. Episerver then renamed their entire company... Adaeze... 'Optimizely.'
Adaeze: No!
Bariş: Yes! Because the brand was so strong, you see.
Adaeze: Wait. They bought them for less than they were valued, but then they liked the name so much they changed their own name? That's... that's a kind of success, no?
Bariş: Well, it shows the strength of the brand, yes. And the product, absolutely. But 'a kind of success'? For the investors who put in hundreds of millions, expecting an IPO, this was a down-round exit.
Adaeze: But for the company?
Bariş: For them, maybe. But for those who invested, it was not. A decade of genuine growth, but not the return they needed.
Adaeze: It's like, you build a really good house, but then the person who buys it says 'oh, it's not a mansion, so it's not good enough.' Even if it's a perfectly good house!
Bariş: Yes, that's actually a very good way to put it. It reminds me of all those single-feature apps, you know?
Adaeze: Which ones?
Bariş: Like the ones that used to be paid products. Screenshot annotators, or those really fancy calculators.
Adaeze: Oh, yes! I remember those. You would pay five dollars for a good one.
Bariş: Exactly. But now, that functionality is just... it's built-in, you see? It's a free feature of macOS or Windows. Or your phone.
Adaeze: Ah, I get it.
Bariş: It's almost, what do you call it... the natural lifecycle of software, sometimes. The feature just gets absorbed into the bigger platform. And Optimizely's A/B testing, it was a bit like that.
Adaeze: So the lesson is, if your idea can be absorbed into a bigger platform, then you must be careful with how much money you take, because you might not be able to give the investors what they want?
Bariş: That's what the article implies, yes. It says, be brutally honest about your market.
Adaeze: Okay.
Bariş: Is it big enough for an IPO? Or is your core feature just going to get bundled for free by Google or Microsoft? Because the money you raise, Adaeze, it really does set the expectation for your exit.
Adaeze: But my friend, is it truly a failure? They built a category-defining company, a hundred million in revenue...
Bariş: Yes, they did.
Adaeze: They had all the big customers, and their brand was so strong the acquirer renamed itself after them. How is that a failure, Barış?
Bariş: From the perspective of the capital structure, yes, it was. They took hundreds of millions, and that money comes with the expectation of an IPO or a multi-billion dollar acquisition. Anything less is a failure for that specific type of investor.
Adaeze: But isn't there another definition of success? Like, did the founders become rich? Did they build something valuable? Did they make an impact? Because it sounds like they did all those things.
Bariş: They certainly built something valuable that had an impact. But the article's point is that in the venture-backed startup world, 'success' often has a very specific definition tied to investor returns. And if you take that money, you enter that game.
Adaeze: I don't know, Barış, it just feels like we're being told that building a very successful, profitable business that gets acquired for a good amount is somehow... not enough. It's like, what is the point of even trying if that's a failure? It just... it makes you wonder. I'm Adaeze.
Bariş: And I'm Barış. This has been Startups RIP's Station.