#28 Is This Entrepreneur Ready to Take On Facebook?

I’m Josh Muccio and we are back! From Gimlet Media, this is The Pitch, where real entrepreneurs pitch to real investors.

Daniel: Hey.

Cesar: How you doing?

[intros]

Phil: Hey Cesar, I’m Phil.

Today on The Pitch: entrepreneur Cesar Kuriyama pitches his startup, One Second Everyday—an app he thinks could topple the king of social networks: Facebook.

Pitching a startup meant to go toe-to-toe with Facebook would normally be a pretty risky proposition. Mark Zuckerberg practically owns the Internet. But Cesar’s timing couldn’t be better.

Clip 2: An exodus from Facebook had already begun with 2017’s 4th quarter daily users seeing a dip for the first time ever according to Facebook data.

Clip 3: Tonight, Facebook stock taking yet another hit, down more than 2 percent. A backlash brewing after data firm Cambridge Analytica allegedly accessed the personal information of 50 million unsuspecting Facebook users. 

If Cesar wants to take advantage of this moment and bring Facebook’s users over to his app, he’s going to need some serious cash. And he’s going to need it fast.

Here’s who he needs to convince:

Daniel: I’m Daniel Gulati

Daniel is with Comcast Ventures. 

Jillian: Hi, I’m Jillian Manus

Jillian is with Structure Capital

Phil: Hi, I’m Phil Nadel

Phil is with Forefront Venture Partners. And we have a new voice on the show...

Michael: I’m Michael Hyatt and I invest my own money.

Michael built and sold two Canadian companies and now he invests for himself. 

Okay, on with the pitch. Here’s Cesar.

Cesar: All right. Great. How’s it going guys? It’s a pleasure to be here. So let me just tell you a little bit about my background. when I left school I started working in advertising in New York City

After a few years working in advertising, Cesar realized, you know what? This is not how I want to be spending my life. So he left his job and took a year off to soul search and figure out what was next for him. But instead of focusing on the future, he found himself thinking about the days that were passing—days he didn’t want to forget.

Cesar: I realized that a lifelong frustration of mine has always been my memory. And every time throughout my life when I’ve tried to keep a journal, an actual written diary about my life, I would do it for three or four days and then I would stop. And I realized, man, I don’t want to turn 40 one day and looking back at ten years prior, my life was already becoming such a blur, I didn’t want to suddenly turn 40 one day, and only sort of remember this year off when I was 30.

So instead of trying and failing yet again to keep a journal, Cesar turned to that little high-def camera most of us carry around every day: his smartphone. He figured there must be a way he could build a digital journal. 

Cesar: So what is the minimal amount that I need to do to be able to capture enough information about a day so that I never forget a day of my life ever again? So I started recording One Second Everyday.

Once he had a year of recordings, Cesar was able to stitch them together chronologically... and he found that all these little one-second clips actually told the story of his year. It was then he knew what he had to do.

Cesar: I dedicated my life to trying to build a product that made it easy for anybody to do what I was doing for myself.

Cesar launched a Kickstarter to fund One Second Every Day and it caught on - in a big way. Over 11,000 people backed it, the most people that had ever backed an app on Kickstarter. That was six years ago, and Cesar’s been bootstrapping the company ever since. But it’s only been recently, when everyone is kind of waking up to the dark side of Facebook, that Cesar realized what he might have. There’s just one detail that needs to be cleared up:

Daniel: What is the actual product? 

Cesar:Basically, I built the app that I wish I had when I was doing this myself by editing literally one second videos together.It automatically sorts all your photos and videos by the date in which they were created. And it allows me to go into any given day, whenever I feel like it, and just select the one moment that I want to use for that day. And we store it into the app and that’s it.And then whenever you want to watch it, you just press play. 

What’s crucial to note here is that One Second Everyday is not a network. In a lot of ways it’s just a storage library where you can record the story of your life, one second at a time. If you want to share that story on another social media platform, great. But if not, no problem.

The fact that this was a choice to share, not an automatic feature, really helped distinguish One Second Everyday. It seemed to strike such a chord that it became the number one paid app in the app store for the first week of 2018, and then it hit number one again a month later.

Michael: What was the revenue in 2017?

Cesar: 1.3 million.

Michael: Okay.

Daniel: What does usage and engagement look like on the app?

Cesar: So we have about 400,000 monthly active users right now. About 100,000 daily active users.

Daniel: How many total downloads?

Cesar: Total, over 2 million.

Jillian: Mmmm

Investors are skipping right over asking about the app and are instead diving into the business of One Second Everyday.

Daniel: And what kind of metrics are you most focused on? So there are some apps that are obviously become daily habits, or some apps that are less frequent just by category. What do you think are the key usage metrics for your business? What do you track?

Cesar: So one of the things that we track, for example, is just moments logged. Lifetime, we’ve logged about 65 million kind of moments or something. But just in the past nine days, we’ve logged 19 million of them. So we know that there’s this gigantic rise.

Michael: What’s your age group?

Cesar: We’re, I mean, I think we fall into the usual category of like anywhere between 20, 24 - 35 is actually probably our core thing. Because a lot of our users are moms, and new parents are using the app to log the life of their kids, instead of themselves.

Jillian: I would think also to log travel.

Cesar: Travel is huge for us, yes.

Jillian: Right. I would see that would be one of the biggest. 

Jillian: And what’s your burn?

Cesar: Less than 100,000. About 90 plus.

Daniel: A month?

Cesar: A month. That’s our burn.

Michael: Sorry, that’s not a burn, that’s your spend. So you’re not going negative cash. You don’t have a burn?

Cesar: No. We make more than we spend. We’re profitable, yes. Sorry. 

Michael: How much is the app?

Cesar: It’s a 4.99 app. 

Michael: One time?

Cesar: Right now, it’s a one-time fee. So that’s obviously not a long-term good monetization strategy. We’ve been building a subscription tiers that is, yanno, has a bunch of the features that people have been asking us forever, so that we can actually have a recurring revenue.

Michael: Like what? Go into that?

Cesar: Like a lot of the stuff that we’re coming out with, hopefully in the next six to eight weeks, is pretty simple stuff, like backup, being able to add music, being able to have longer seconds, being able to have more seconds per day. So there’s just a bunch of stuff. We sent out a survey to our users saying hey, here’s 16 things we’re thinking about building. What are the most important things that you want and put them in order. And then a thousand people replied, and after they replied we said, would you be willing to pay a fair yearly fee to actually have these features? 50% said yes.

This is a pretty radical change to their product. Cesar wants to take an app that right now doesn’t do a lot — and doesn’t cost a lot — and make it into a robust social app. One that could actually be a viable alternative to the other social networks. But he’s betting it all on a hope, that these people who said they would pay a yearly fee for these new features, actually will. 

Michael: So let’s go back to this idea that you have. Why do you think people are going to pay a subscription? And how much and what are you thinking for?

Cesar: So right now we have the yearly subscription price at $30 a year…

Michael: Wow.

Cesar: What we’re trying to build right now is the value for our current users based entirely around features.So this is just about our power users,who are dying for some of these extra things, and abilities to do, who have five years of their life logged in with us and just want more. They don’t want less.

Michael: So, you know, there’s a billion apps out there.Most apps would love to charge a subscription but they can’t and they won’t because people just don’t pay for them. I mean, if you just picked up everybody’s iPhone in a mile radius from here, what you notice is that they only pay for maybe two things, Uber once in a while, and Spotify or some music. And every other app they don’t actually subscribe. No one actually pays for anything because they just don’t. So tell us why it’s so compelling that you are going to be one of the first and only apps to get a subscription out of these people?

Cesar: I agree 100%, which is one of the reasons why we’ve avoided raising money for a long time. Because we knew that raising money would essentially mean we have to become the thing that we’re probably kind of trying to be not.

Michael: So you’ve never raised a dime?

Cesar: We’ve never raised a single dime. We’ve only hired when we could afford it.

Cesar: Yeah absolutely. I mean it keeps me up at night, right? Part of the reason why I’ve just, we were like, hey, I think there’s a lot of good things happening here. I think we finally need some rocket fuel because we’re moving pretty slowly.

Daniel: I do feel liketrying to outcompete Snapchat and Twitter and Facebook and Google on the digital ad side is just almost an impossible game. If you look at digital ad dollars, those four platforms are getting more and more market share. And so I think that’s why you see more of these media companies, social networks trying to monetize in different ways. And I think subscription is kind of the obvious alternative to advertising. So I kind of, I think that actually is a feature of your business, not a bug. At the same time, I do think that the velocity at which the large platforms copied features and implemented them successfully,We saw it with stories. With Instagram, and what happened to Snapchat. It’s happening at a rate that we’ve never seen before. And soHow do you think about Facebook doing their own version of One Second Everyday and giving it away for free, and having it sit on top of their existing social graph?

Phil: I mean, I get that that keeps you up at night, but what do you do about it?How do you build any kind of moat here?

Cesar: I can’t, I mean the best answer I can give you is that I’m really passionate about what I wish existed in the world right now that doesn’t. And I think that Facebook and Twitter have become these, you know... Their entire business model is about grabbing people’s attention right now. And to me there’s a gap in the market. I see so many friends of mine who just quit social media altogether. They’re like, I’m out. I can’t do this anymore, here’s my phone number, if anybody needs me.

Jillian: I agree.

Phil: That’s happening. 

Cesar: And Facebook just recently in their last quarterly said they lost a million users. And I talk to some of these people, and I’m like, what do you wish existed? What is a social media version that works for you? And I think a lot of what they say is so much connected to what we are as a platform.And so, I think that there’s a lot that we’re trying to do with an ad-free model, the same way that people love Netflix and people love Slack, because you’re paying a subscription and now they can dedicate all their time to giving you value, instead of dedicating all their time on how to sell you to someone else.

Cesar’s finally giving them an answer for how he could compete with a mammoth like Facebook. He’s saying: look, for the first time since Facebook’s been around there’s a chink in their armor, and I’m ready to take advantage of that - if 1 Sec Every Day can get some momentum. It’s now or never folks. 

Daniel: How do you think about taking on VC? So, at least the few founders that I’ve backed that have bootstrapped their businesses for a long time, they’re kind of switching over to VC,it hasn’t necessarily always been the easiest switch. Like you’re going from prioritizing profitTo putting all of your eggs in the growth basket.Like your focus is completely changed. you’re choosing to go from the local train to the express train. And I feel like once you get on that express train, it’s hard to get off the express train.Like why is now the right time to step on the express train? And is it the express train forever where now we’re on the path to raising bigger and bigger rounds to build this really big company.

Cesar: I’ve been asking myself the same question, especially the past two years, as really things have been really moving. I would say the first two years it was just me. I just thought, hey, I’ll build an app, that goes on the app store and I’ll get some passive income from it. And then slowly, things kind of crept up.It took a while [06:17:00] to see maybe this is a ___ company.if we do raise it then we do it right. And so yesterday, I had a meeting with GreyLock* who reached out to me and said, hey, we’ve been paying attention, we’d love to talk. And I said cool. We had a conversationAnd you know they painted out some scenarios that actually make some sense to me. So for example if they were to put in a bunch of money, they want a billion dollar company. They want the next Facebook right? But they’re like, there are some seeds that you can take that will give you one and a half, to two, to three mil, like you’re thinking, where the pressure is not going to be as much, where you can test the waters and see if this is something that can become the next Facebook.

Michael: What do you want? You’re the founder, you’ve done this terrific job, you own this company. It’s all up to you. What do you want?

What Michael’s asking is: do you even want to take our money? Normally, this isn’t a question an investor needs to ask a founder, particularly one who’s standing in front of them, in the middle of their pitch. 

Cesar: Well basically, I’ll be honest, I don’t want to completely... I’m trying to avoid the get to Facebook level or die trying. I want to test the waters on what we’re trying to do in a way that if it doesn’t work,then what we’ve built is still there so that we can continue to just grow at the pace we’ve been growing at continue to build the stuff that we’re trying to build.

Phil: So isn’t that the type of experiment that you should do before taking on outside money?

Cesar: I mean, we’re doing it. We’re working on it. 

Phil: Isn’t that the type of experiment that you should complete, I’m saying, before...

Cesar: If that’s the case, if no one is willing to invest at our stage, at a 1 - 3 million, for us to throw all this fuel into building this quickly, then we’re prepared to do it, we’re getting enough revenue to do it ourselves.

Phil: I’m saying from your perspective, from your perspective, doesn’t it make more sense to say, let’s try this ourselves. Let’s experiment, make sure the subscription thing works. If it works, great, then we go and raise. And if it doesn’t, then we’ve got a great lifestyle business that’s not, I don’t want the pressure of the venture capital scale requirements, and let’s just go on with it. I mean, I understand that you want to step on the gas now a little bit. But that to me is the kind of experiment you want to do on your own dime. You’re profitable already, you have the cash, you could do it. And then, if you see success, then you go out and raise. Because then the story is much different, I feel like.

Cesar: I agree. I think the only variable for me that’s there is that if we do do it on our own, it’s just going to take us longer. And that’s the only problem.

Daniel: You have to balance that with the fact that once you sell a part of your company, you kind of on the hook to sell the whole company. And so what Phil’s saying is you don’t want to sell part of your company. You don’t want to be half pregnant. Which is like, you sell a little bit of your company, you’ve got all these investors that are expecting some liquidity event at some point, and you kind of step back and say, hey, actually I want to run this as a non-venture backed business. So I actually totally agree with you which is you want to go in eyes wide open and say, if we’re going to do this we’re really setting a timer on eventually exiting the company.

Cesar: Right. Yeah, and I think a lot of what we’re doing right now is having these conversations.maybe we’re not a venture capital business. Maybe we’re just an awesome 100 million dollar business some day with a lot of people who passionately love what we’re doing and how we’re trying to do it.

It’s decision timeeeeeee. Cesar’s indecision over whether he even wants to take VC money could have a negative effect on whether the investors want to go in - or it could make them more eager to get involved. Either way, we’re about to find out. 

Phil’s up first. 

Phil: I just feel like it’s sort of, it would be a disservice to you at this juncture to invest. I just,I don’t know that you should ever take venture money. But certainly I think you should prove out the subscription model first, then make that decision. That’s my view of it.But I just can’t get over the fact that Facebook could do this so easily and once you become significant, then turn it on and it’s free and then that’s it. That’s the ball game. And so, I think it’s a great idea. I really like it. And amazing job, you’ve done a great, I have great respect for the fact that you’ve built a good sized profitable company. So I give you kudos for that. But I just can’t invest given the competitive threat, at least at this stage.

Phil’s willing to give Cesar kudos, but no dollars. It’s onto Michael. 

Michael: Let me just paint a different picture. This is what I would do if I were you. You know, I bootstrapped my companies, I founded two software companies and we didn’t take VC for a long time, but we ended up doing itSo first off, never taking capital is usually not a good idea. Capital builds companies. You need money to really scale a company. I found that out; it was tremendously helpful and in both cases we remained the majority seat, too, so we controlled our destiny. That, you can still do, by the way. So I’m going to take a little bit of a different tact.If I were you, this is what I would do: I would take VC cash.And I would go very hard at it to really, really build tremendous value and build a moat, even though that’s still going to be hard to compete against, but I would go fast. I think that what’s going to happen, is here how’s this story is going to play out. You’re going to get up to a million users, you’re going to stick your head out of the ground, and then someone, the Facebook’s and Snapchat’s is going to get all interested in how you’ve fertilized this ground. And then they’re going to jump on it. You probably won’t have the cash or the backing if you didn’t raise any money.I’m kind of telling you I don’t think you have forever in this business. I don’t buy the dream that everybody’s going to pay $30 forever on this. I don’t see that.I’m going to tell you to go out and raise some money. And if Greylock is coming in, I’ll invest alongside them, but you won’t take my money then because you won’t need it. But I’m happy to invest alongside Greylock any day. So that’s my advice. I’m sticking to it.

Cesar: Thank you. I really appreciate that. That’s great.

Michael’s out - for now. It’s Daniel’s turn. 

Daniel: Um, so I think I said this before, I just fundamentally believe that the biggest companies in consumer tech are horizontal user generated content platforms, 

as the old saying goes.

Daniel: and I think this is one. So I think having invested in, what are we in, we’re in House, NextDoor, these billion dollar horizontal UGC companies. I believe that huge businesses can be built kind of in the way that you’re building this business. Um and so I think it could be a really big idea. Where I, I guess my answer is, I just kind of need to know more. Like it’s kind of hard to make a commitment without actually seeing the product. So I think as a starting point, would love to actually love to actually see the product and I think if the product is sufficiently differentiated and impressive, this is something that we’d absolutely love to lead.there is a lot of potential here. I’m sure you’ve got a really long product roadmap that you want to work on.

Cesar: Very long.

Daniel: And so I really see this as a really nice binary bet. Which is kind of the exact thing that I look for. So I’d love to explore more. I’d love to sit down with you tomorrow or soon to dig into those two pieces. But I think what you’re building is really interesting and I think potentially a really, really big company.

Cesar: Sounds great.

Daniel: I think you need to convince yourself that you want to take VC. I wasn’t convinced that you were convinced. So I think that’s kind of the first step in your journey. But all in all, I think it’s a really interesting story, and I think you’re really intriguing as a founder, and we’d love to hear more.

Cesar: Sounds great. Like, I’m not going anywhere! Let’s chat. 

Jillian: Thank you so much.

Cesar: Thank you guys, appreciate it. It was a pleasure.

Jillian: It was really a pleasure. 

You might have noticed - Jillian never actually said whether she was in or out. But based on the fact that she just said goodbye, I’m pretty sure she’s passing.

Cesar has left the building. And as it turns out, each of the investors have pretty strong feelings on whether or not Cesar should be raising money.

Phil: So you were into it?

Daniel: I was really into it. I mean, I was conceptually into it. I haven’t seen the product, so it’s kind of hard to...

Michael: I think he does need money. I think he does need VC. I think he’s in a market that’ll go away.

Jillian: Well, I think he needs VC because that’s part of the defensibility of this. I think...

Michael: I would love one of the VCs I invested in to go in and I’d do a sidecar. For this kind of thing, I think he needs 5 to 10 million bucks and he needs to go hard or go home.I’m telling you, this thing is so going to be copied . If I’m going to copy anything, it’s that. I mean, Facebook listens to this, or Snapchat, they would be crazy not to copy this. It makes so much sense what he’s doing, and they are trying desperately to try to keep people to engage. Something happened, one of the Kardashians just slammed Snapchat, and it lost a whole... They are looking for these kind of things.

Jillian: Absolutely.

Phil: But if he goes and raises this money, it’s not going to prevent Facebook and Snapchat...

Michael: I know. But it’s at least going to cover him for a little longer. It’s going to protect him, he’s going to build a little more of a moat.

Phil: It’s still, he’ll build a little bit more of a moat, get some more traction, and then they’ll introduce it and they’ll crush him.

Jillian: Or they might buy it.

Michael: Or he gets to sell it. And I think...

Phil: Why would they buy it? It’s so easy for them to turn it on. It would be nothing for them.

Daniel: They’re buying because of the user base and/or the team. 

Phil: I think he should take six months or so and try to prove out the...

Michael: I wanted to almost go, Luke, take the money.

When we come back, I meet up with Cesar at SXSW to find out, if he’s figured out his answer to the age old question. To vc or not to vc. 

[break]

Welcome back! Two weeks after his pitch, I sat down with Cesar at South By Southwest.

Josh: So the last time we left you on the show we were talking backstage and you and the investors basically just finished having a conversation where it was like ‘hey you need to figure out whether you really want to raise money or not. And if you are let's talk more’ but you needed to like really know which road you were going to go. And Daniel in particular was like I'm not sure, he's like I don't think you convinced me that you necessarily are going to be raising like that you want the money right now. What's happened since then? 

Cesar: So Daniel and I met a week later, after the show. And and it was amazing. He was really he blew me away with his insights. And he really got a lot of what we were trying to do and I got this, you know, wonderful sense from him that he was really trying to figure out what was best for One Second EveryDay and you know he was able to really break down a lot of the ways that we can continue moving forward with or without VC funding. And it certainly does come down to an extent to what it is that we are ultimately willing to put all our chips into because yeah like remember he he said on the show something along the lines of you know once we jump into the express lane like there's really it's really difficult to get out of the express lane. And yeah we...one of the you know one of the best things he said that really like, made so much perfect sense when Daniel put it this way he was like, you know, essentially you're, you know, you raise money to build to create or you raise money to scale a company.And so I think really really grasping that...really being able to bring all those data points from the past couple of weeks until like these two roads of money to create money to scale, it was kind of help me gather my thoughts a bit to say, like, do we need the money to create. And the answer is...in theory no. And so right this second it seems like we can just continue to move forward with what we want to do and I’m meeting with Daniel hopefully in a week after he leaves South By and he’s back in New York. And we're going to continue the conversation. 

Josh: So you're kind of a so that...there's a little bit more clarity, it sounds like, on whether you're raising money to create or raising money to scale. Sounds like you're saying “I don't need the money to create but I will to scale. But first let's create see if it works like test this thing out and then raise the money to scale later on.” Is that basically what you've decided, or is it still kind of up in the air and you might raise to create faster for example? 

Cesar: Right. So some variables in place, our subscription tier will probably launch in a month or two and we have no idea what that's going to do the revenue we have no idea what that's that's gonna take off or it's going to do terribly. Andyeah it's all the stuff that we're continuing you know at any moment in time I'm always like like doing math in my head. You know that gif of like you know Zach Galifianakis like you know with all the math equations like floating around like that's basically me right now I'm just like constantly I'm in constant mode of math equations like gif you know in my own bubble. 

Josh: This is like the age old entrepreneurship question that you're mulling over and you have way more data than I think most entrepreneurs have when they're trying to make this decision. I think a lot of them try to figure it out really early on without the revenue, without the traction, without the numbers. And here you are you know five years into your company and you're answering the same question of like: do I raise money from investors or do I bootstrap this thing? It's just funny. 

Cesar: No, you know, it's, I think about that all the time which is the whole like when you graduate high school you go to college. Right. Like there's that's just that's what you do. Right. Like you're building a startup you go raise a seed or you go to an accelerator you go you know it's just like set things that put all these companies on a path for the same, you know, vc- they get into the express lane essentially like right at the beginning. And I do certainly agree that there's a lot of companies that need that. But it's become clear to me that like most companies don't. You know, one of the. It's funny, one of the best pieces of advice I ever got, it was actually like from like Tim Ferriss but I like went to his book launch in New York for 4 Hour Body. And I just waited around until people dispersed away from him to like just ask him like was me again this is me like this is like two months into entrepreneurship. I don't know what I'm doing. I walk up to him I'm just like ‘how do I raise money? Because I literally have no idea. And I just think that's what I'm supposed to do.’ And I kind of tell him the quick pitch and I'm like ‘what do I do.’ And he said, he's like don't raise money. He's like, figure out how to build like an MVP without raising money. And he kind of got that in my head and that's why we did a kickstarter.But we were able to get moving without without jumping into the express lane. And so that's really that was really you know that little side conversation thing that day really helped shape a lot of the decisions moving forward.

Josh: So, still undecided, eh? 

Cesar: Undecided is not the right term. It's more like, I would say we will be decided within a couple of weeks. Right. But we're not decided yet because we're just luckily in a position where we don't have to make a decision immediately. 

It might strike you as kind of odd that Cesar pitched to our investors, if he wasn’t certain he wanted to raise VC. But I think what happened was once the investors leaned on him and said, you know, are you sure you want our money?, The truth is, he wasn’t. Because, as everyone pointed out, a lot of strings come with that money. Once you take it, the business isn’t just yours anymore—and you don’t get to call all the shots. So for now Cesar’s mulling it over a little longer. We’ll keep tabs on him and see what he decides.

Our show is produced by me, Josh Muccio, Molly Donahue, and Kareem Maddox. We are edited by Devon Taylor.

We are mixed by Enoch Kim. Original music composed by The Muse Maker. Our Theme Music is by Breakmaster Cylinder.

Thanks to Lisa Muccio for planning the recording of this pitch. 

We found out about One Second Everyday because Cesar applied to be on the show. Founders who are raising money can apply to pitch by going to thepitch.show/apply

And as a reminder, no offer to invest is being made to or solicited from the listening audience on today’s show.

All right -- you’ve been listening to The Pitch from Gimlet Media. We’ll be back with a brand new episode, next Wednesday.