When you walk into Clarify’s office in Austin, Texas, it may not be immediately obvious that you’re stepping into one of the most innovative technology companies in the United States. Some of the space’s more unique features: Corrugated steel walls (which don’t always keep the rain out) and a wood-burning fire pit (which compensates for the lack of a furnace in the winter).
It’s certainly a funky spot. But its uniqueness makes more sense when you consider Austin’s culture and founder Paul Murphy’s ambition for the business: To grow into the platform for searching audio and video files (think Google for audio and video).
“I believe it’s inevitable that what we’re doing is going to be huge and I didn’t want to move every six months,” Murphy says. “That’s something I’ve been through and it can be incredibly disruptive. I’d rather move into a larger space and make it more and more habitable over time.”
As part of our Austin Founder’s Corner series, Murphy recently sat down with Mass Relevance founder and Spredfast board member Sam Decker to talk about why he moved his business from London to Austin in 2014, the realization that led him to distill Clarify’s founding product down to a single feature, and the challenges he faced raising capital as a platform business.
Watch the Interview
On Building a Business Around an Innovative Feature
“You have to find a way to communicate to prospective employees, customers, and investors that what you’re doing is inevitable. You have to help them see and feel your vision.” Tweet this
- Initially, Clarify was founded as a call recording tool for individuals in small businesses. But Murphy and his team discovered that there wasn’t much value in having all of your phone calls archived if you couldn’t go back and actually search through those calls.
- Building a search engine for audio and video. Rather than try to incorporate a new feature into a bigger product offering, Murphy decided to contract the business, sell off some of its intellectual property, and build everything around Clarify’s audio and video search capability.
- Refining the team around that singular focus. While it wasn’t fun having to let some of the company’s sales and marketing staff go, Murphy says it was critical for the company to free itself of those unnecessary functions and build instead around a small group of engineers and data scientists.
On Moving the Company from London to Austin
“We took out a map, looked at the cities we could go to, and narrowed the list with a handful of criteria. Austin had everything we needed.” Tweet this.
- Clarify was founded in London, but Murphy ultimately decided that the US market was critical to the company’s success. So, in 2010, he and his co-founder took out a map and looked at potential cities for relocation. They considered the usual suspects (Silicon Valley, New York City, Boston, and others), but ultimately settled on Austin because it had everything he wanted: A supportive startup ecosystem, a plethora of creative and technical talent, relatively low cost-of-living, and good weather.
- Before the company could move, it had to adjust its corporate structure. European companies tend to have very complex corporate structures and cap tables, and Murphy initially considered creating a new holding company in the US. What he found, however, was the US investors had little interest in dealing with that kind of complexity.
On the Challenges of Raising Early Capital as a Platform Company
“Platform companies generate income in a derivative way — you make money when people sell a solution built on your platform. That’s difficult to predict because you don’t have much control over what customers do with your technology.”
- Selling a platform to developers is very different than selling a product to consumers, or a service to enterprise. Which is why the first hire Murphy made in Austin was someone who knew everything about selling a platform.
- Platform companies generate income in a derivative way. Instead of making money from the customers that use your product, most platform companies make money when partners (in Clarify’s case, developers) sell a solution that’s built on that platform. As a result, forecasting revenue can be incredibly difficult because the business doesn’t have much control over what partners do with the technology.
- Why platform often plays turn into a volume game. Ultimately, some percentage of a platform company’s customers will do nothing and some percentage will generate revenue. For CEOs like Murphy, the challenge is generating a volume of partners that’s large enough to scale the numbers in their favor.
On Overcoming the Highs and Lows of Being CEO
“The lows are very low. At one point, I realized I had four months to restructure the company or we wouldn’t survive. That was terrifying.”
- The lows are very low. Murphy says his most challenging time as CEO came when trying to raise a seed round for Clarify. At one point, an advisor (who also works at a big VC firm) told him that his business was too complicated, his cap table was scary, and his story was too complex. Even worse, Murphy believed Clarify had only four months to change all of that or the company wouldn’t survive.
- Overcome stress with routine. When the noise becomes too intense, Murphy goes back to the smaller tasks he can tick off his to-do list. This allows him to distance himself from the bigger issues and slow down his brain. Murphy also starts each day with a workout — typically, a swim in Austin’s Barton Springs Pool.
- Advice for other entrepreneurs. “Nothing is insurmountable or impossible if you have a good support system and can reach out to the right people for help,” Murphy says. “It’s a matter of persistence.”