#93 David vs. Godzilla

What happens when the biggest tech company in the world, decides to come after you.

Alon: I mean, this is not David against Goliath, right? This is David against Godzilla.

Josh: (laughs)

Alon: At Godzilla's home. (laughter)  And you have these little slingshots. Uh, and uhh yeah, the odds are not in your favor on this one, right?

Josh: Yeah.

This is a thing that investors warn a lot of companies about. Like if you want to build an Uber for dogs and then Uber builds its own dog feature right into their app… That kind of thing, it’s a looming possibility for so many startups. Well today we have the story of what actually happens when Apple decides to make its own version of the thing you've been working on for years. How do you fight Godzilla?

That’s coming up, in just a moment.

Alon Shwartz first made his pitch to the investors on our show two and a half years ago. And it was clear from the start, that he was trying to solve a problem with technology that he’s super passionate about, after all, he experienced the problem first hand. Here’s what his pitch sounded like back then.

Alon: Came back home go to one of my kids, I won’t tell you which one and walking into his room, he's supposed to do homework, of course he's on his phone, uh Snapchatting. So, I told him, okay, put the phone down. Sure, sure. Okay. Sure. Okay, I come back 20 minutes later just to make sure, sure it is actually what it is, and of course he's watching YouTube videos on his computer instead of doing homework on the computer.

Alon: Well, you know, just to be sure, I come back 20 minutes later, and of course he's taking a break. And at that point, that's it, I see red. That's it. I decide to put an end to this. I just unplug all of the computer, the Xbox, took his phone, took his tablet, threw it on my bed. I went to his brother, to his sister, took all of their devices as well. They of course thought dad went crazy. And I had this nice pile of electronics in my bedroom. Our bed. It was beautiful.

Alon couldn't just take away the kids' screens forever, so he created unGlue. an app that helps parents limit how much time their kids spend on apps like Youtube or Snapchat. Now keep in mind, this is two and a half years ago so Alon was way ahead of the parental control app curve. But Alon took things one step further, he also created some hardware that you plug in to your internet router. And it can manage all the devices in your home - your Xbox, computer, iPods, iPhones all of it! 

Alon: It took us about two years to build the technology to cover any device, wherever it is. That’s very, very complicated. Kids will try to hack it, kids will try to uninstall it, we need to let the parents know. There’s a tremendous amount of technology behind the scene. 

Even though Alon was all fired up about this problem, the investors thought unGlue sounded more like it was a feature in a much bigger product. And when he pitched to the investors, they expressed doubts about the size of his vision. 

Daniel: It feels like this is a neat kind of hook product into a bigger ocean of...

Phil: That’s what I’ve been trying to think...

Jillian: What’s the next…

Daniel: As you think about adjacencies, you’ve got the parent, you’ve got the kid, they’re using the product every day. What’s the big ocean?

Alon: So the bigger vision really is... unGlue is the solution, the tool they use, kids, to manage their time. Overall, from now until they’re going to college, and beyond. So if you’re looking at unGlue not as a parental control but more as a time management solution that kids use. And that’s a tool that helps them say, okay, well I do need to spend an hour today on practicing for that test. Or I have an hour of soccer practice, or music, or drama, or whatever, which all the things my kids are doing. And that becomes the tool they use all the time to manage their time. 

Daniel: Isn’t that Google calendar? Isn’t that just a calendar app?

Alon: It’s a lot more than a calendar. Because the bigger problem here is... Putting something on calendar is just there. How do you enforce it? 

In the end, the investors all agreed that the problem was super important to solve. They just didn’t see how it could be a big business. When they all passed, they expressed the same thing. They were concerned about it being a feature, not a product. 

So Alon forged ahead with his plan to grow the company. And in the interview I did with him for the show back in January 2018, two months after his pitch, a big story hit the news... involving Apple. That got people talking about screen addiction again. 

Alon: So what really happened is two of Apple's biggest shareholders wrote an open letter that pretty much said, "hey Apple, you built an incredible product, but from all facts, is showing that this is a very addictive product. And you can and should do better to help parents solve this problem for their kids." That's pretty much the essence of it. umm Of course immediately I opened a bottle of champagne, and drank a glass. umm Because this is Great.

Alon said that he thought Apple would want to help unGlue succeed, because it was already doing exactly what Apple's shareholders wanted ... or, he thought, Apple might want to buy unGlue.

So that’s where we left him in our original episode. He had the prospect of interest from Apple, he had tens of thousands of people using the app, many of them paying $6.99 a month, so 2018 was off to a really good start.

Alon: So the beginning of the year was- was amazing. I mean, you know, we managed to close a round,  and we grew and we r-, you know, hired, uh... I still kept a very small team, we rented a very small office in Santa Monica. Uh, 

Josh: You've got eight people at the company at this point.

Alon: And, yeah.  it's one of those moments when you're on a s-, you're really  know that the sky is the limit. Everything is possible. 

Josh: Was it growing every single month? Like how much was it growing?

Alon: It was growing every single day, every single week. I mean, we grew 10% week over week at the, at the slowest times. It was, it was fantastic.  The app was growing. The users were growing. All the metrics were going up and to the right. 

Things were going well with the business, AND with his mission. Alon was like I want to help solve screen addiction for kids, and now it was actually working, the parents and kids were leaving positive reviews on the app store. And Alon told us about one email in particular, that he remembers getting from a parent.

Alon: Single mom, mother of five, every one of her kids have devices because they need it either for, you know, for homework, everyone is doing homework, or, you know, everyone has a smartphone. And it was impossible for her as a single mom  to run this family. And she was fighting with every one of her kids every day.

Josh: Yeah.

Alon: And when she installed unGlue, and explained to the kids and the kids were on board, that changed her life.  And I was reading that email, and I was, I had tears in my eyes. I mean, that was one of those moments where it's not statistics. It's not a metric. It's a person. It's a story. It's a real impact.  

Josh: Yeah.  Why was that so meaningful for you?

Alon: Because for me, making money is not enough. It's not just building a business. I want to make an impact. I want to make, I want to leave something behind. 

Just as Alon was feeling good about the impact unGlue was making, interest from investors was beginning to wane, and a theme was starting to emerge in his conversations. Investors warned him that Apple could copy what unGlue does and just make it a feature in the iPhone. And soon enough, that fear became reality. 

Tim Cook: Good morning! Good morning. [Applause and Cheering ]

At their annual developer conference in June of 2018. Apple announced that later on in the year they would launch a feature called Screentime. Unlike unGlue, Screentime would come preinstalled on iPhones and iPads. Giving themselves a clear advantage that unGlue just couldn’t compete with.

When Apple made the announcement, Alon was watching from his computer at home.

Alon: It was, again, one of those huge screens behind them talking about the fact that, you know, people are talking about screen time being a problem.

Craig Federighi: We wanted to go further, and it's with a feature we call Screentime.  Every week you get a weekly activity summary that details how you used your iPhone or iPad. We know this is something that can help families achieve the right balance for them. And of course it starts with providing your kids with great information, but as a parent  you have the option of creating allowances. [clapping]   

Alon: So the first reaction was, oh, f*ck.  I immediately. Slack my co-founder, Alex and I, we immediately talked about this and went with what will it mean. 

Josh: What did you say?

Alon: What we were worried about actually happened. Right. I mean, Apple just released, announced they're going to release Screentime.

Josh: Yeah. 

Alon: And I mean, they didn't hold back anything. Right. I mean they have great visibility. It looked great. The name Screentime. Right. I mean they didn’t hold back anything.  and best of everything they made it free, they made it free  I mean, I was not happy. I mean, this was one of those one of these immediate analysis is sh*t It's gonna be really, really hard to raise money now.  It's a very uneven playing game because you just can't compete with someone who's. 

Josh: Yeah.  

Alon: Sh*t, I mean, that the company I mean,  This is not David against Goliath, right? This is David against Godzilla.

Josh: (laughs)

Alon: At Godzilla's home.  And you have these little slingshots. Uh, and then the... Yeah, likelihood for success (laughs)-

Josh: Yeah.

Alon: ... of that battle is, you know, the odds are not in your favor on this one, right?

Josh: Yeah.

Alon: So, yeah.

Josh: I mean not great when Apple is not great when Apple comes into your space.

Alon: Yes.  That's the fear that we all have.  Then you never have enough ammunition. Right. 

Josh: Um, how much runway did you have, or how much time did you have to come up with a plan?

Alon: I think at that point, it was... I think like two months, maybe- maybe less. I mean, it was, uh, yeah. It was, it wasn't great. It wasn't great at all. 

When godzilla shows up at your door, what do you do next? 

That's after the break.

Welcome back. So here’s where Alon is: It’s June 2018, Apple had just announced Screentime. It hasn’t launched yet, but already Alon’s investors are getting skittish. After all, 80% of unGlue’s revenue was coming from Apple users. 

Alon is getting ready to take a stand, he’ll exhaust every avenue, knock on every door, before he lets his company get eaten by Apple.

And unfortunately, he’s running out of cash, so the first thing he has to do is lay a bunch of people off.

Josh: How did you tell the team? What do you remember from telling them? 

Alon: Yeah. Yeah. Well, in the meeting, we basically shared the reality of  this is the last two weeks. And I was hoping working day and night for last 12 months to, you know, that we'll be able to raise more money, I'll be able to raise more money, and that just did not happen, and uh And. Unfortunately, that's the end of that road. 

After that, it was just Alon, his co-founder Alex and one engineer left at the company. So things were looking pretty bad. But they were about to get worse. Apple was already scary competition for unGlue. And then, Apple decided to wipe them off the map. And because it's Apple, they could.

Josh: Now, uh, during this time, um, I read that Apple started actually pulling apps like unGlue from the App Store that were competing with Screen Time.  was yours one of the apps that got pulled?

Alon: We actually were the first app that got pulled.

Josh: When did this happen?

Alon: That was Jul-, beginning of July, I believe? 

Josh: Okay. So wait, wait, they pulled your app  before they had launched their own competitor?

Alon: Yeah.

Josh: What?

Alon: Yeah. 

Josh: How many apps did they pull out?

Alon: Tens, tens of apps.  

Josh: What did you think-at that point? Do you remember where you were when you saw that news?

Alon: Yeah, I was at home  in the morning, and I get an email from Apple that, uh, we're in violation and our app is no longer there. 

Josh: And did Apple tell you why?

Alon: Oh yeah.  A week before, they change, uh, their App Store developer policy to-

Josh: Okay.

Alon: ... (laughs) uh, include, uh  some paragraph that talks about one of the capabilities that we were using that's-  that is in violation of their policy, and-

Josh: What capability was that?

Alon: Using VPN, and using, um mobile device management with MDM, so two capabilities that we and everyone else in the market was using, and-

Josh: Yeah, there's so many apps that use that capability. But okay.

Alon: Right, right.  So they pulled us and- and everyone else out of the App Store, one at a time. 

Josh: How did you react?

Alon: I think the exact quote was, "What the f*ck?"

Josh: (laughs)

Alon: (laughs) I mean, at that point, I'm really like, all my fuses in my head just blew, uh, at that point. I was, I was, I was mad. I was really, really mad. Uh, at that point, I mean, you're, you truly fighting an unfair game, an unfair competitor that is just-

Josh: Mm-hmm (affirmative).

Alon: ... pulling no punches and they just made a change to the policy that allowed them to yank everyone else. And there was there was no one to talk to. Right? There's no 1-800 Apple. Right. I mean,

Josh: I mean there is but

Alon: Not for developers. Not for App store developers.

Alon joined forces with the other app founders to try to put pressure on apple. But... it didn't really go anywhere. And for their part, Apple said in a statement that they removed parental control apps because of a privacy issue. But Alon wasn’t buying it. So he tried another way to get his business back on track. He would just ask Apple to put it back in the App Store. Alon got in touch with the company through one of his investors.

Alon: I left a message every day. I sent an email every day, and they can't ignore you forever.  

Josh: How long did it take? How many phone calls and emails before they replied back?

Alon: Oh, many. (laughs) Many, many.

Josh: Like over the course of weeks or months?

Alon: Oh, yeah, yeah. It was, it was many weeks.

Josh: Jeez.

Alon: It was many weeks. Many weeks of- of no sleep. (laughs)

Josh: Ugh. So what happened, did they let you back in the app store? 

Alon: In- in unGlue case, we had that, uh, kind of a one capability that no one else had, which is we had a hardware component, and they could, their- their- their terms of service did not include that, and that allows me to bring the app back to the App Store. 

Josh: And your hardware component was the WiFi router, or like an add-on to the WiFi router that allows people to control access-on all the devices in the home, not just the iOS devices.

Alon: Exactly, exactly. 

Alon: Part of the learning here is never give up. Never give up. I mean, even if it's Apple, you can find a way, you can make a way

Josh: Even if its david against godzilla

Alon: Right, you can sneak in you can sneak into godzillas den and do something 

Alon had actually convinced Apple to let unGlue back in the App Store. This small victory meant that they could get new customers again. But despite the win, Alon was still struggling to raise money for unGlue. He still had just a skeleton crew. And then, he got some unexpected news... 

Alon: Around that timeframe, um, I got a call from Israel, I'm originally from Israel-

Josh: Mm-hmm (affirmative).

Alon: I got a call from my family that my dad is in the hospital and, um-

Josh: Ah.

Alon: things don't look, uh, very good. So I had to pause the entire fundraising effort and- and fly to Israel. Um... And uh  So the, yeah, as- as I got there, I got in 10, no, it was eight days later and my dad passed away. umm

Josh: Oh, jeez.

Alon: Which was just another punch in the gut on a more personal level  and losing a parent is is very hard and you ask stuff like, what's the you know, why am I doing it for? What's the point?  Is it worth it? The- the most I- ironic, if I can even call it such, uh, the- the night my dad passed away, um, I got a call from Shark Tank, I'm in Israel, um, and they're telling me that I won, that I'm in, that, uh, filming will start in 10 days.

Alon: Um, and, uh, yeah. So had to pack my stuff, fly back to LA, um, and within 10 days, uh, go in front of five sharks in the most, uh, stressful environment ever imagined, and pitch my product in a last hope of success that uh, might save the company.  

This was Alon's make or break moment. He'd spent the last few months doing everything he could to keep his company going before Screentime went live. Apple finally released it in September of 2018, and that's when Alon went to pitch the sharks on Shark Tank.

Alon: So- so I actually did freeze in the middle of my pitch, uh, which was, which was really funny, uh, even though I practiced literally like 300 times in front of the mirror, in front of the wall, you know, I'd record myself. Um,  it is definitely an- an experience that I'm- I'm very happy that, um, I've done. so I actually got a shark to invest, one to invest, so-

Josh: Which one?

Alon: Uh, Robert Herjavec, yeah.

Josh: Ah.  So you get the money from Shark Tank, or you get a commitment from Shark Tank. 

Alon: You get, you get a commitment, yes.

Josh: And they say, "When this airs, you'll get the money," which was when?

Alon: They were shooting for April of-

Josh: 2019?

Alon: 2019.

Josh: So that was like six months away.  Did you think you could make it 'til then? Or were you like, "I'm going to h- have to go out and get a second job and kind of wait to see if I can resurrect the company come April"? What were you thinking?

Alon: What- what I was thinking is either we're going to sell the business, which was the, what was happening on a parallel route, or, um, we'll- we'll see if I can close that investment from, uh, from Shark Tank and, uh, try to resurrect the company, yeah.

Josh: M’kay.

Alon: But the plan A was let's sell the business. 

Josh: So somebody was interested in buying you. 

Alon: Yeah. Yeah, someone was definitely interested and it was one of the biggest router companies in the world. 

Josh: Oh! And they were thinking they'd integrate your software into their router.

Alon: Exactly. Exactly. 

THIS is the last-last, very last option for unGlue. Parents weren’t interested in paying for unGlue if they could just use Apple’s Screentime for free, investors saw the company as a bad bet, Shark Tank ended up being a dead-end because he found out the episode wasn’t going to air, and he couldn’t develop the product more because he’d laid off so much of his staff. But the part of unGlue that integrated with the router, that IP was valuable and Alon thought he could sell it. 

And he got so close to a deal, they even got to negotiating a term sheet. But then it fell through at the very last minute.

Alon: Lawyers were involved and the deal was structured and investors knew about it and we were like almost high fiving.  And as we were just negotiating the final, not even negotiating, just going over terms of the deal, everything was negotiated, everything was agreed upon…  for different reasons that I'm not going to go into that deal fell apart at the last minute.  And that was very obviously very, very disappointing. umm  It would have been a nice, uh outcome, not- not huge, can't buy an island, (laughs) uh, it- it would have been nice. Investors would have been content.

Josh: Uh, c- could you give me an idea, like would the investors have like doubled their money? Tripled their money?

Alon: They would have more than doubled, yeah.

Josh: Yeah. And I assume that if they're doubling money, you're- you're coming out okay, too?

Alon: Yeah, it would have been a nice, uh, nice, uh, Christmas present.

Josh: Yeah. Is that when you finally accepted that it was over?

Alon: Yeah.  At that point I remember vividly me closing the laptop, taking my car keys, and just going for a long hike in the mountains to figure out, okay, now what, right? It was truly like a knife to the heart, right? Was this realization that- that- that it is, it is the end, and uh, there are no more tricks, there are no more cards. And- and more importantly, there's just no more energy.  I mean...

Josh: Yeah.

Alon: I gave it my best, right? and this is, this is one of the most important lessons for anyone who- who ever goes through a period of massive difficulty or failure is the need to decouple yourself from that effort that you were working on.

Josh: Right.

Alon: And I had to, for- for- for four years, I was unGlue.

Josh: Yep. 

Alon: My- my face was on the product, literally.  Like if you look at unGlue, I mean, there are...  it's my family, right, my kids are  on the website.  I mean, there were periods of time that I- I- I could not, I have these mugs, these unGlue mugs-

Josh: Mm-hmm (affirmative).

Alon: And I could not, I could not, uh, get myself to drink from the unGlue mug because it kept reminding me of the failure  and when you identify yourself and every entrepreneur that is identified himself with their business and you’re one of the same. unGlue is me. I'm unGlue. And if that fails, that means I failed. And you have to really separate the two and see what did you gain? 

Josh: Yeah. 

Alon: And really, how much of that story, or how much of that unGlue journey truly made me better. I'm a better executive. I'm a better leader. I'm a better person. I'm a better parent. I'm better in so many ways.  

Josh: Um, in the months that followed, did you think that you would ever start another company?

Alon: I was sure that I will never, ever start another company. I will never join another startup.  If anything I want to start, or join more a more mature company, or in consult-

Josh: Yeah.

Alon: ... to more mature companies, which I've done,  but It's in my blood. (laughs)

So here we are, present day, 2020. Alon said that actually his app, until just a few months ago was still live in the app store, and he had to send an email to his remaining subscribers telling them that he was shutting it down. So that was tough, he was finally letting go. But as he was shutting down unGlue, he was starting up something new. He recently became a co-founder at a startup that he was consulting with, called Trellis, it’s a legal research tool that pitches itself as a Google for state legal documents. And in a way, it’s helping him move on from unGlue.

Josh: Are you able to drink from those unGlue branded mugs again? 

Alon: Absolutely. I have all of them here in my new company. I have two of them at home. And I drink from the mug almost every day. And I drink from that mug with pride, with happiness,  I mean, we made something incredible. I mean, we forced Apple's hand. We introduced this concept  to the world. We positively impact the lives of- of hundreds of thousands of families. It's- it's something that is amazing, right?

Josh: Yeah.

Alon: And- and do I, would I have taken this route again? Of course I would. Of course I would.

From the outside, it’s pretty easy to see that this was never going to end well for Alon. I mean really, you can’t win a war against Godzilla. When Apple announced Screentime, That’s it. Game over! Time to walk away. But when you’re a founder, when you’re the one in it. With employees and investors counting on you. Would you really know when to give up? Or would you keep trying, and trying until … there’s just nothing left to try. That’s what Alon did. 

But at least at the end of the day, he can be proud of the work he did. And know, that he did everything he possibly could before he threw in the towel.

The Pitch is hosted by me, Josh Muccio. Produced by Muna Danish, Heather Rogers, Chris Neary and Max Gibson. We are edited by Sara Sarasohn.

Original compositions from Peter Leonard, Emma Munger, Breakmaster Cylinder, The Muse Maker and Edwin. We are mixed by Enoch Kim. 

Thank you so much for listening. We’ll be back with a brand new episode in three weeks. See you then.