Always New Mistakes

November 5, 2007

Powerset’s internal problems

Filed under: Business — Tags: , , — Alex Barrera @ 3:15 pm

is a San Francisco based startup that is trying to build the next generation search engine. Co-founded by Barney Pell, Steve Newcomb and Lorenzo Thione in late 2005, they have already raised $12.5 million in a series A investment round. Powerset is attempting to develop a public and global semantic search engine. Current search engines like Google are based on keywords. You need to type the right keywords so you can find what you are looking for. Even though this approach works great (just take a look at GOOG’s soaring stock), with today’s information rivers, we need smarter ways to find what we are looking for. For many, semantic searches are the next logical step. Instead of searching for keywords, you ask, in plain English, what is you are looking for, just in the same way you would ask a human.

I don’t want to jump into any conclusion, building a search engine is a really tough job, but applying AI and natural language processing algorithms to it, is even harder. I’ve been there and I know it well. So I understand why it’s taking so long for them to release a product to the public. But creating the fuzz Powerset did, and not delivering a product in a year’s time is a tough call. And if that wasn’t enough ammo for good critics, the recent stepping down of their CEO and the departure of one of the cofounders doesn’t adds very well.

Let’s analyze the situation in detail. Why would Barney Pell step down as CEO? As he exposed in his blog: “After extensive thought and reflection, the Board and management team decided that the time was right for us to bring in a new CEO to take the company to the next level and for me to transition into the role of CTO“. Well, why would that be? After all, Powerset doesn’t has a public product yet (not until 2Q of 2008), isn’t making any revenue, isn’t getting ready (AFAIK) for a new round of investment and much less for an IPO. What next level is that then? Most rumors point out at pressures from investors which are getting nervous. I don’t have all the facts, and as such, I won’t jump into conclusions, either way, I do think it’s a very unwise move for a startup that is against the ropes in terms of credibility.

To make matters worse, Steve Newcomb, one of the co-founders is leaving the company. It’s funny how all other related posts have only focus in Pell’s stepping down, instead of the departure of a co-founder. I personally think this is much more relevant of what the inside situation “might” be. It’s quite strange that, as Barney puts it: “Steve lead the company internally and brought strengths in execution on several other fronts“, but nevertheless he’s being “expelled” from the company. At least that’s the image that’s being projected. It isn’t usual that the co-founder and leader defects the company before they have a product. I’m quite sure the work isn’t finished yet and that there are more reasons for his departure. As I’ve said before, I’m only speculating on this as I don’t have all the facts. Still waiting for Steve to post something on his blog.

For me, not only the external image of the company is being damaged by this management change, but worst than this is the fact that people inside the company might be suffering from this restructuring. I would love to hear opinions from Powerset engineers and what are their views in all this.

Just for the record, I’ve been following Powerset for some time now. I think they have a brilliant technology and very good strategic partners. I don’t think they should go to the deadpool (yet), as they are still to show their technology during 2008. As I’ve said, it’s a tough field and I’m confident they’ll produce some nice technology in a near future. Again, inside views of the matter are greatly appreciated.


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  1. You’re right; building a new search engine is extremely difficult, particularly given the benchmark is Google. In terms of the management changes, you’re right: it appears the VCs are getting impatient.

    Comment by Mark Evans — November 5, 2007 @ 4:30 pm

  2. Valleywag (granted, not a completely reliable source) recently posted a bit suggesting that the departure may have had to do with some extramarital issues that made it impossible for the 2 founder to continue working together.

    Hard to say if it’s true or not, of course.

    Comment by DAR — November 5, 2007 @ 6:21 pm

  3. Nice tip DAR. I don’t want to speculate on that either, as you say, Valleywag isn’t a reliable source. Nevertheless I’ve heard it might have been a clashing of personalities (dunno if it was due to the rumor). I sent this post to the guys at Powerset but, as I suspected, I got no answer.

    Comment by alexbarrera — November 6, 2007 @ 6:55 pm

  4. Thats not good, one of the founder is leaving the company and the other step down after years or month of selling to the whole world the idea behind powerset vision.I bet you investor are getting nervous about it, i will be too. A CEO for an start up company that have not yet come up with the product or make any money yet, thats crazy, how and from where they going to come up with the money to pay this person, this new person don’t know anything about their idea, (usually known just by the founders – thats why it call an start up ),how he or she going to sell it to future investors, etc, feel sorry for the investors that put more then $12 million dollar on this ideas without seen any product or results.remind me year 2000 – internet bubble.
    the idea behind powerset is fantastic, but this guys don’t see to me like the tipical start up determing kind of people, don’t you think google that have billions of dollars and personnel, would had done this already if people were ready for this can of new search technology.

    Comment by hiram — November 8, 2007 @ 2:38 am

  5. It’s a cautionary tale about how dangerous it is for a startup to over-promise in a very public way and create a huge buzz, and then utterly fail to deliver.
    The buzz probably makes it easier to raise money and hire good people, but it can also put your company in mortal danger if you don’t live up to it.

    Comment by philobuster — November 14, 2007 @ 8:18 am

  6. Indeed @5, I would say that the problem isn’t that they didn’t deliver (yet), but the inefficient use of buzz momentum they generated. You can sell your product calmly and when it’s close to the end you might want to push some buzz around it, but create hype and not deliver in some reasonable time is a brand killer. As you say, caution please when resorting to over hyped campaigns. They work, just look at the iPhone, but you need to know very well how to play that game.

    Comment by alexbarrera — November 15, 2007 @ 4:33 pm

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