Kevin Ryan, the ‘Godfather’ of NYC tech, on serial entrepreneurship, Gilt’s IPO and a possible run for mayor
Few tech entrepreneurs in New York have created a billion-dollar company. None, other than Kevin Ryan, have created multiple billion-dollar companies. Ryan co-founded DoubleClick, which went public and then sold to Google (GOOG) for $3.1 billion; MongoDB, which last Fall raised money at a $1.2 billion valuation; and Gilt Groupe, which was valued at $1 billion in 2011 and is expected to go public any day now. He’s also created Business Insider, which raised money this year at a $100 million valuation.
He can take a good deal of credit for the growth of New York’s burgeoning tech scene, which in the last decade has gone from just a few notable companies to surpassing Boston as the country’s second-largest tech center in terms of investment dollars. Not only do his companies employ thousands of New Yorkers, but they’ve started an ecosystem of second-generation tech companies. Some companies founded by ex-DoubleClick employees include Narrative Science, RollUp Media, FindtheBest, GroupCommerce, Freewheel, Catchpoint, and Minivid.io. There is an entire blog dedicated to the doings of DoubleClick alumni. Likewise, Ex-Gilt employees have created a mafia of their own, founding startups like Vaunte, GroupMe, Moda Operandi, Placemeter, Timehop, and Vine.
Ryan is not stopping there. Last Fall, he launched his next startup, a mobile wedding registry company called Zola. Currently Ryan splits his days across eight different responsibilities, including his four companies and the boards of Yale University and Human Rights Watch. He also works on the “general policy and politics of NYC,” liaising between the city government and business and tech communities. That position – a lynchpin between the three areas – is what made him a potential mayoral candidate last time around. The next election cycle might be more amenable for Ryan to run, he says, while denying such ambitions.
For now, he’s dedicating around 10% of his time to planning ideas for new companies, possibly in fin-tech or healthcare. What’s one more? The first few have worked out pretty well.
In an interview with Fortune (lightly edited for length and clarity), Ryan discussed his entrepreneurial process, his failed startups, the future of his most visible company, Gilt Groupe, his take on NYC Mayor Bill de Blasio and a possible mayoral run of his own, and why he never enters the same industry twice.
Fortune: Would you say you’ve created a career around being the idea guy? That seems to be a lot of peoples’ dream in the tech world.
Kevin Ryan: Yes and no. In the last 15 years, probably nine of them I was personally CEO, managing more than 1000 people. There are few other companies in NYC with more than 1000 people. I’m actually the operator who’s managed the most people in the last 15 years from a person-to-years point of view. There are people who I consider real idea people, who don’t manage people. They say, “I have an idea, I get it off the ground, and I hand it off.” That’s not me. I manage.
Most of the companies you’re known for are big wins. Any ideas that failed?
Not so much companies, but as part of DoubleClick, or as part of Gilt, we’ve launched businesses that didn’t work. Park & Bond [a part of Gilt Group] was something we launched that didn’t work. At Gilt, we made acquisitions that didn’t work. There are all kinds of things we did that didn’t work.
We launched a company called ShopWiki, which worked a little bit. Everyone made a little bit of money. We sold it for $17 million. Let’s call it a bunt single. It was okay. Panther Express was a company Dwight [Merriman, co-founder of DoubleClick] and I started which was definitely a mostly strikeout. It got to 40 people, $50 million in revenue. The dynamics in the industry shifted on bandwidth prices, so we said, “Let’s sell it,” and we lost 50% of the money that anyone put in. Not a total write-off but definitely not a good outcome.
Along the way, you hire people that don’t work. I have four CEOs in place. I am working with them and talk to them all every single week.
You’re far more involved with your companies than other investors are –
— I’m not an investor.
Is that because you consider yourself a co-founder?
I don’t consider myself a co-founder, I am the founder. It’s very different. That’s what people don’t realize. I don’t invest in other companies. The Gilt idea was 100% my idea. There was no one else involved. Then I went out and started hiring people. The same is true for Business Insider. It was my idea, I was out interviewing six different candidates for Business Insider and Henry [Blodget] was one of them.
That’s why I don’t consider myself a founder, I am a founder. So I feel very differently. I consider myself to be the only real steward of the company.
Let’s say Gilt could go public at some point. Five years from now, none of my board members will be on the board, but I will. Because they’re investors. They’re going to distribute their stock and they’ll be done. The senior team, many, hopefully a lot of them, will be here. But in five years people turn over for whatever reason. The only person I know who will be here five years from now will be me.
So Gilt was your idea. With flash sales going out of vogue, do you still believe it was a good one?
I don’t accept the general interpretation there. What Gilt does today is exactly what it did day one. Literally the first week, we had a sale of Zac Posen at 50% off. Today we sell basically the same thing. Along the way, we’ve had 15% [of inventory] sell at full price which has worked very well in travel, and we do it in a few other places. We tried it in Park & Bond and with food and it didn’t really work. So we haven’t actually shifted.
What about the knock that, after the recession and recovery happened, the high end luxury brands didn’t want to discount on Gilt anymore?
That is absolutely, provably completely untrue. In the first two years of Gilt, did we ever have Armani? Did we ever have, name 20 luxury brands and the answer is “no,” we did not have them. And today we have them.
The second thing is people also forget that in the first nine months of Gilt, it was a boom. We didn’t start in the recession. We started in 2007 and it was so hot, it was growing — we did $25 million in our first year. It was growing unbelievably well.
When I was raising money right at the end of the boom, and the recession was just starting, the number one question was, “Obviously Gilt works, but we’re going into a recession, we don’t think it’s going to work. People don’t buy luxury in a recession.”
A year after that, we were raising money again. People said, “Kevin, obviously it works in a recession, but can it work in a boom?” You can’t have it both ways. Revenues in 5 years of Gilt never have gone down. They’ve grown the entire time.
So why the delay?
Delay of what?
The IPO has been talked about for years.
We’ve never said that. You have said that.
That’s because investors who are close to the company have for years told me, “Okay now Gilt is ready, they’re almost going to be profitable, it’s happening.” Then nothing happens, and they say it again six months later.
Bankers talk to everyone all the time. We’d never filed to go public. We never went down the process of going public. No one has come to you a year ago and said “They’re picking bankers right now.” What you always heard is very high level, every press conversation we’ve had is like, “When are you going public? We’re always like, “I don’t know, at some point. At some point we’ll go public.” [Note: In February, Bloomberg reported that Gilt had chosen Goldman Sachs to lead its IPO.]
The window might be closed now.
Don’t forget, I have a different perspective on this. So, it doesn’t matter whether we go public three years ago or a year ago. If you said five years from now, why does that matter?
IRR for investors?
I don’t care about that.
I don’t think they would like to hear you say that!
I don’t care about that and I have super voting shares. So, that’s not my goal at all.
So hypothetically, when Gilt goes public, what will the story be that you want to tell Wall Street about the company? I’ve noticed the company has been playing up its tech innovations, which makes sense because investors value tech companies more richly than they do commerce or retail companies. Is that intentional?
Gilt is an online retailer that uses technology extremely well. By my definition, it’s not a tech company. My definition of a true tech company is one that sells technology. If your product is technology, you’re a tech company. Mastercard (MA) for me is not a tech company even though they have thousands of engineers. JP Morgan (JPM) is not a tech company, even though they have tens of thousands of engineers. Mongo is a tech company. The product we sell is technology. So, Gilt uses technology and Amazon (AMZN) uses technology extremely well, it’s a competitive advantage. Which, I don’t know anyone in e-commerce that uses it better than we do.
But it’s not a positioning thing. When you’re a more mature company, investors don’t care about any of those things. They care about revenues, and profits, positioning, size of market, things like that.
How’s Gilt doing on that?
Great, it just keeps growing. What you’ll see is that for four years, the bottom line gets better and better. It starts negative and gets to positive, exactly what you want to see, and the revenues just keep going.
There’s been a pattern, at least in New York’s tech scene, where a hot company’s narrative changes. People start losing interest, or they write it off. It happened with Gilt, with Foursquare, with Tumblr, and many of the big New York tech companies. Suddenly the media turns on them.
The media has to write about something but that’s an issue the company doesn’t get to control. Companies that don’t get a lot of press don’t go through that. Etsy, people write very little about Etsy relative to how important and how big it is. They’re doing great and they’ve always done great.
Some just never get covered. Indeed sold for $1.4 billion. I would say 50% of the journalists I know have never even heard of the company. Priceline (PCLN) is much bigger than Twitter (TWTR), much more valuable than Twitter. Kayak (KYAK), same thing. ZocDoc, Mongo… Mongo is the most valuable company in New York City and you read very little about it. How many people know that Mongo is the most valuable private internet company here? Most people don’t know it.
So did you think that New York Times story about the disappointments of the New York tech scene was bullshit?
Yeah. There’s nothing that fundamentally has changed at all. Five years ago, there was one company in the entire New York area, private company, worth $500 million. It was Kayak. Eighteen months ago, we did a piece looking at New York City and we had 11 companies that had done private rounds at more than $500 million. That’s a big difference. I don’t know what that number is today.
On that list of eleven companies, since then Kayak, Tumblr and Indeed all sold for more than $1 billion. Mongo did a round at more than $1 billion. Four of them are clearly worth more than that. Fab is going to go to zero and Foursquare, I don’t know how much they’ll be worth, but they may not be worth $500 million. And you’ve got bunch still doing fine, ZocDoc, things like that. [Note: Fortune reported last week that ZocDoc is raising a new round of funding at a valuation of $1.6 billion.]
If you look at a five-year trend, it’s unbelievably good. If you look at a five-year trend anywhere else, it’s not as good. San Francisco had, at the time, 10 companies and now they have 20. Good, everything is growing, the whole sector is growing. No one is growing as fast as New York. And then underlying that, there are dozens and dozens of companies that are doing well, the Business Insiders that may be worth $100 million or $200 million, and BuzzFeed, things like that. So, it’s all good. I don’t see anything bad happening at all.
It’s not San Francisco. You can’t be there in [only] ten years. When DoubleClick set up shop in New York, the number question was, “Why aren’t you in Boston?” Every time I mention that, people laugh. “Boston, what are you talking about? No one asks you that.” Every journalist asked me that. Because Boston was the center of high tech on the East coast, you should be there. You can’t be successful anywhere else. Already people have forgotten that now, if you go to Boston, it would make you laugh, because Boston is nothing. That shows you the context I have over time. So it’s going incredible.
Are you a supporter of Mayor de Blasio? What’s your assessment of how he’s done so far liaising with the New York tech community?
I was reasonably involved. I hosted 60 Internet CEOs to meet him. And I did a smaller event at my house for 25 people. So I had known him for years. I keep in touch with all the Democratic politicians, so I know all of them.
When he won the primary, I went out to the tech community, and said, “Look he’s going to be the mayor. Your thoughts on that, in a way, are irrelevant. So unless you’re planning on moving somewhere else, it’s important that we work with him and important that we do a great job in helping him to be successful.” That’s how I approach all politicians in place.
Yeah. I feel he’s doing a lot of good things, having said that. We need to work with whoever the mayor is. In your first five months, when you’re putting your team together, no one can accomplish much at all.
He’s focusing on bandwidth which is very important and Bloomberg did not focus on. He’s trying to focus on creating jobs in all the boroughs, and hopefully that happens.
Would you ever consider running for mayor? There have been rumors about that.
I’m certainly definitively not running in the next election and I am probably never running.
I think it’s a great job. I think it’s the best job in politics, much better than senator, or those things, because you actually are CEO. I’m a CEO, so I like to run things. Managing the city is a really, really interesting thing.
It’s much more likely over time I continue what I’m doing now, which is help out in various ways, on boards and advising. Maybe at some point, if there was the right Deputy Mayor position.
A bunch of people approached me when they were looking for a business candidate. The logic on their side was, they wanted a business candidate, but it couldn’t come from Wall Street, brand-wise. Tech is the fastest growing industry and also a theme for everything. Twenty-first century. And they wanted someone who was old enough that could be mayor but still plugged in and doing stuff, so current.
That makes a pretty small Venn diagram of candidates.
It’s very small. So really they were like, “We don’t have anyone else. It’s just you by process of elimination. We wish we had eight candidates and we got no one.” (Laughs.)
The reasons I didn’t do it are:
1. My kids are at home for four more years, so I structure my life so I spend a lot of time with them. Four years from now, I have a lot more flexibility. All of these jobs are not family-friendly jobs.
2. My companies are going great and it’s really interesting and I really enjoy it, so you have to give that up. Two of them in particular over the next four years might end up going public or getting sold, so I’d like to see that through.
3. There was no chance a businessperson was going to win. Zero. Polling data said, “Do you think Michael Bloomberg is doing a good job?” and roughly 44% said “yes” and 42% “no.” Which is not bad after 12 years. Then they said, “Do you think the next mayor should do more of the same, or something very, very different?” And they said “something different.” Which is very unusual – usually they go together. If the mayor is doing well, they think, “This is good, we want more of this.”
Everyone liked him, but they were sick of him.
They were sick of him. So anyway, I am not running for mayor. I am very interested in public policy and I like playing a role in trying to help out.
Every company you’ve started since DoubleClick has been in a totally different field. Are you interested in ad-tech anymore?
No. I haven’t had a one hour meeting on ad-tech since 2005. I don’t do it. My father worked for chocolate factory to help him get through college. He has never eaten chocolate since because he can’t stand the smell of it.
It’s true that arguably, [co-founder Dwight Merriman and I] were the most significant people in ad-tech in the world. It’s rare that you get to that tiny place in the world where you are actually the guy. Criteo — I was in the room with Dwight in 2000 when we created behavioral targeting. That was 100% one meeting we came up with it, decided to do it, it’s now worth $3 billion, just that product.
So why walk away?
Because I’m totally bored with it. It’s a good sector. Ad-tech is a perfectly good sector. It’ll keep growing, that’s fine. I want to find things that I think are interesting. Most things I find interesting are new. I haven’t done them before.
So what is interesting?
Fin-tech, I’m looking at that. Intellectually, I’d love to do something in fin-tech or healthcare, which I don’t know much about. They’re big areas that interest me, but I don’t have the right idea that I’m passionate about yet.
Fin-tech is the Bitcoin, p2p lending, banker area. It’s the last trillion-dollar area that has hardly been disrupted by technology. That’s where there’s an opportunity. Both are industries that you have to know a lot about them to get into it. I never know anything about these industries.
You knew nothing about fashion starting Gilt?
I was in a brand meeting and they said, “Don’t you love what’s happening at Bergdorf’s on that 3rd floor?” And everyone’s like, “Yes, love it, love it.” And I was sitting there going, “I’ve never been to Bergdorf’s. I’ve been here 15 years and never gone.” The next day I went.
That goes against conventional wisdom that says you have to know the industry you’re disrupting. You shouldn’t be this swashbuckling 19-year-old drop-out looking to disrupt. When you give people advice, what do you tell them?
A lot of the great companies come out of people not knowing the industry at all. Most companies, it’s just a guy saying, “I see a pain point and I think I can solve it.” Some come out. In ’96, no one had any background in anything because nothing existed.
I think its better for most first time entrepreneurs (to know the industry), because it’s their first time. But most businesses are not that complicated. And also, you don’t do everything yourself. When I started Gilt, I knew how to run companies and how to manage people. Which is the key skill. I am not a distribution expert and a making dresses expert and a personalization expert and a merchandize planning expert.
What is most interesting is not a single one of the flash sales companies was started by traditional retailers. It was never somebody from Saks, never.