Is Aereo working on a Plan B?

Supreme Court Hears Case Pinning Startup Internet TV Company Aereo Against Major Broadcast Networks
NEW YORK, NY - APRIL 22: In this photo illustration,, a web service that provides television shows online, is shown on an MacBook Air, on April 22, 2014 in New York City. Aereo is going head-to-head against ABC, a major television network, in a court case being heard by the Supreme Court. (Photo Illustration by Andrew Burton/Getty Images)
Andrew Burton—Getty Images

“Of course. What else would I do? Just sit around and wait?”

That’s Aereo founder and CEO Chet Kanojia after being asked if he’s still going into work each day, despite being just days away from learning if the Supreme Court believes that his company’s controversial television streaming service is legal.

At issue is whether Aereo can employ its army of tiny antennae to capture and store the signals of free over-the-air broadcast affiliates, and then effectively provision each of those antennae to customers — without paying anything to the original content producers (much like a homeowner wouldn’t pay ABC, NBC, etc. for using an on-roof antennae).

But clearly it’s not business as usual at Aereo. For example, Kanojia admitted during an interview last Friday at the Boston Private Bank CFO Conference that hiring has become more difficult as the Supreme Court ruling has gotten closer. And certain expansion activities are on hold so that the company needn’t fight court battles jurisdiction-by-jurisdiction.

Even by the standards of boom-and-bust tech startups, Aereo appears to be starkly binary After raising its first round of venture capital funding in 2011, Kanojia told his investors that they should initially value the company at zero, adding that Aereo eventually would become either a total loss or the most successful investment they’d ever made. After all, what other company’s future is contingent on what nine non-customers think about their sole business model? Perhaps more importantly, what other tech startup (in the age of ‘pivots’) has managed to raise nearly $100 million in VC funding while publicly stating that it has no Plan B?

So what does happen if the plaintiffs manage to win in Washington? Does Aereo just close up shop and sell off its assets?

The answer remains unclear. Kanojia reiterated his optimism and lack of an action plan in case it’s misplaced. At the same time, however, he also suggested that Aereo could explore several alternate options in the case of a loss, including perhaps even paying some sort of retransmission fees to broadcasters. In other words, he’s at least given passing thought to a Plan B, without having actually formulated one.

For Kanojia, the determining factor would not so much be how much money could be salvage for his investors, so much as if a hypothetical Aereo 2.0 could be truly transformative, or just a way to eke out a few more million dollars. If the former, then he has interest. If the latter, not so much. Kanojia already made a bundle selling his last startup to Microsoft and launched Aereo to solve a problem, rather than to be an iterative add-on to what he believes to be a system that is price-abusive toward many of its customers.

A few related notes from the interview, which took place on Cape Cod:

• Kanojia says that the company had multiple term sheets for that Series C, and that the round was well oversubscribed.

• Even though Aereo has largely raised VC funding from East Coast investors – including Highland Capital and FirstMark Capital, which both backed his last company – he seems to have disdain for most of a cohort that he believes are bankers masquerading as venture capitalists.

• Kanojia is not in favor of much financial complexity, such as dual-class stock.

• Following the Supreme Court arguments in April, Aereo reps provided a few seconds of commentary on their way down the steps and then said no more. The plaintiffs, however, spoke with reporters for quite some time. Kanojia believes that differential in access and explanation was reflected in much of the post-argument press analysis, which often tended to suggest that the justices were more sympathetic to the plaintiffs than to the defendants. “I’m obviously biased, but I felt a bit like I watched something different than a lot of [reporters] did,” Kanojia says.

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