Equals 3 founders Scott Litman and Dan Mallin
Scott and Dan’s Wild Adventures — or SDWA — as the the next chapter in this story unfolds. Partners since the mid-90’s, these two perennial entrepreneurs are at it once again with cognitive companion Lucy from Equals 3, an artificial intellicence platform for marketers built in partnership with IBM’s Watson.
When did the idea for Equals 3/Lucy first form?
Litman: The last six months at Magnet360, we were very immersed in the M&A side and taken out of the day to day, but we had a plan to exit with Matt Meents taking over as CEO. While we were focused on finding the right buyer for customers, shareholders and employees, we were already asking in the back of our minds — whats next?
We saw an opportunity with Watson in the marketing and advertising world as IBM has invested over 4 billion into cognitive computing over the past 10 years and was ready to unleash the resource to partners.
As the more it became clear the deal Magent360 + Mindtree deal was going to happen, we were in a great position to complete that and also get started on our next venture in January.
Just as the sun was setting, it was sure to rise again.
Why another startup?
Mallin: The funny thing is…that’s what we do. And in lots of ways, we’re too young not to do it. I remember after we sold Imaginet years ago and finished our contracts, I went home and hung out for about 10 days before my wife kicked me out.
We enjoy the process and I’d like to think were getting wiser, faster, and stronger…because we’re entrepreneurs and love action.
Litman: I’m not sure what else I’d do with my time? The expectation is that we’re always in the game. I can’t imagine that this will be the last one either. The cool thing is that as we go through these things, the assumption is that whatever it is, we’re going to do it together.
How have you refined your effectiveness together over the years?
Litman: We know eachother’s strengths and weaknesses really well by now. Often times, we just know who is going to do what, depending on the circumstances.
Mallin: We’re like a long term married couple.
What pain point are you solving for in the marketing industry with Lucy?
Litman: Over our careers we have implemented a lot of marketing technology and advertising platforms for customers. If you look at the customer landscape, marketers have never had more data.
Imagine P&G – made up of hundreds of business units and brands. At the enterprise level, think of the data they own — every website with data, analytics, loyalty, best practices, market research, in house scientists, agency relationships, etc — all the data they own is incredible. Now put yourself int he shoes of one brand manager concerned with one product. All they know is on their hard drive or the cloud, unstructured from the rest.
Watson is a cognitive solution that can read and understand all of that across every brand at the same time. Now, that brand manager can ask question of that platform through one interface: Lucy.
The questions can be as simple as: how did the website do yesterday, how did shopping cart conversions compare to this period vs. that, what our are competitiors spending on media in what marketplace by type, buyers in this region or that region, demographic studies, the list is long.
Lucy is a voracious reader, for example she can read 1,000 news publications and 250,000 articles daily, looking for near real time insights and sentiment on a given brand.
That data exists within the enterprise. We’re unlocking, democratizing, and making it instantly accessible to those who need it.
It sounds utopian…is it real?
Litman: It is…we have an unnamed customer who was able to reduce their external costs by 75% and increase productivity by 7x.
How did you come up with the name Lucy?
Mallin: In doing research about Watson, we learned that Watson himself had a daughter named Lucinda. The marketing companion should be a woman that can elicit trust and confidence, so thus Lucy was reborn.
So is this augmenting or replacing the need for marketing assistants?
Litman: the efficiency magnitute is great. We’ll have to see how it plays out in the marketplace more. Better than a cognitive solution or a human, is the power of them combined. The future of AI/ML will be supplemental we believe.
Mallin: Instead of doing a bunch of stuff, Lucy gives people the ability to gain the knowledge fast and focuse on more important tasks.
Litman: One company could try to inrease margins by using Lucy to deliver the same lever of service with less overhead, another might maintain the same level of service and increase their outputs.
Our goal and focus is on enabling talented people to do more and the market will interpret that their own way.
Some good reads on the subject include: Rise of the Robots, The Future Jobless Society, and Impact of Automation. So we’re aware of what automation can mean for good or for bad in terms of employment. We know it drives a significant value proposition either way, our hope is that it enables people to great things, and will be watching to see how it’s implemented.
Litman: Squarely at the Fortune 1,000 and large ad or media agenceies that service them. Lucy works best with huge sets of data that are predominantly owned or licensed by the enterprise — private data. We are backed by IBM’s full cloud infrastructure and have the ability to interpret terabytes with ease.
The customer that has so much data that it poses a challenge is where the greater need for Lucy is found.
Who is the buyer?
Litman: VP Marketing, EVP Marketing, CMO, CSO or someone who is responsible for digital transformation. At the agency side, it goes right to the president or CEO because they are thinking what it means for their performance and bottom line based on the data they already use.
How does a corporation of that size wrangle all that data and integrate with Lucy?
Litman: There’s a lot of big data/BI systems out there and getting that data into any system is a big challenge. For us, onboarding gargantuan amounts of data is about a 2 week process of mapping, use case, and API hooks. Or, we just tap into their existing repositories and start digesting at an incredible rate.
For example, we have a partnership with the American Marketing Association who had a concern about their data being too much, some 300,000 pages of documents, and Lucy consumed it within an afternoon and was ready to start answering questions.
The user will train in Lucy over the coming weeks, a lot like hiring a new employee, and she learns on the fly. After about 2 months, the confidence levels are consistently high.
Even when the confidence gets to say 90% she’s still going to continuously learn and improve.
How do you sell/charge for it?
Litman: The introductory price for Lucy is $25k now through October 1st for a one year license, onboarding and hosting. It’s typically sold by brand with up to 20 users per license with fees above and beyond that.
How many paying customers do you have right now?
Litman: We’re approaching a dozen active customers already.
What is the median revenue per customer you’re seeing right now?
Litman: Most are starting with one brand to get the experience of Lucy and see what it’s like and how it can be used. From there, adding more brands is like cloning.
What is the sales cycle like?
Litman: It’s hard to know because we’ve only been previewing Lucy so far, so in some cases it dates back to January, and in one case it was a weeks time.
Mallin: Yesterday we sat down with a Fortune 100 CMO and he signed a letter of intent on the spot, now it’s a matter of how fast we can onboard with each brand.
What current customers can you name?
Litman: Havas, the ninth largest media agency in the world. DDCD, which does talent management for A list talent, IBM is also a customer as well as a partner, and a couple of agencies within WPP — the world’s largest agency holding company.
Who is on the team right now?
Litman: Jeff Margolis is our senior account executive, we have a local head of marketing, a partner named Marc Dispensa in New York and some other people there, with an offshore team doing a significant portion of the development.
What has the development process been like to create Lucy?
Litman: Fast. There’s two sides to it. In one, we’ve been given a box of parts from IBM that has a few Legos a few Contsrux, and other type of building blocks. They don’t all automatically fit together, so, we’ve been picking and choosing certain blocks like the rank and retrieve engine.
We’ve architected this things together and created some of our own IP and some outside services tied in that ultimately makes this quite complex.
Watson is very good at searching volumes of unstructured content, like on Jeapardy and in Medical applications. But marketers also need to leverage that combined with structured granular content and parse both simultaneously.
Mallin: We have also filed for what could become six separate areas of patentability.
Do you see a future wherby Lucy is made available downstream to SMBs?
Litman: Yes. Part of our vision is a Lucy for everyone, all marketers that is. If you are a five person agency, you can’t really best use Lucy today, but we are putting in place partnerships with content and license agreements with various organizations that hold that information. Once the available data is there we can then extend her reach.
How have you financed the venture so far?
Litman: We closed out a seed round in Q1 for a million, friends and family. One of the benefits of being a multiple time entrepreneur is that it happense real quick. Our series A is about $5m with over half committed and we’ve just started those conversations and our confidence that we’ll get more interest and offers than we have capacity for.
Do you guys need to raise money for Equals 3?
Litman: No, we don’t necessarily need to…but it can be strategic to have other parties involved with a vested interest, so it’s less about the money and more about the people and advisory they bring.
In terms of investing, are you two still active with SDWA, your own angel investing?
Litman: When we invest as angels we do use SDWA, although our focus is shifting towards angel groups like Gopher Angels because of the multiplier effect. As we become more immersed on Equals 3, we’ll be doing less of those though as this is all consuming.
What is your big picture vision for the company?
Litman: It’s around transformation. We know that cognitive computing is going to have a huge impact on the marketing and advertising industry. Our plan is to be the champions for that and to fundamentally change the way that marketing is done in the future. We’re at the forefront of it and have a great first mover advantage. Whether the company ends up having a five year timeline, or strategic opportunities happen further, of course is TBD.
We intend to provide great value for those shareholders who are betting on us. We have a pretty good track record with that so far. By the way, four times we’ve taken outside capital and four times we’ve returned it with an average of 5x.