In this edition of SaaS Talk, Golub Capital Managing Director Peter Fair speaks with Casey Oppenheim, Co-Founder and CEO of Disconnect, to discuss the importance of data privacy, protection and controlling personal information that one shares online.
Disconnect’s guiding principles include creating products that are easy to use and don’t slow down or break the internet. Many solutions put too much burden on users. We believe that the best privacy solutions are those that people will actually use.
The California Consumer Privacy Act was passed in 2018 and goes into effect on January 1, 2020. This is the most notable privacy legislation ever passed in the U.S., providing California residents with robust rights. It requires businesses serving California residents to disclose details about any personal information collected, to provide consumers access to the personal information collected and gives consumers the ability to request deletion of any personal information that has been retained. These and other provisions will require many businesses in and outside of California to make significant changes to their data practices and policies.
There are several federal privacy initiatives that are currently being debated. Although it’s difficult to predict congressional timelines, I expect that Congress will adopt a bill into law in 2020. Voters overwhelmingly want more control over their personal information, and businesses want a national standard rather than a patchwork of statewide laws. Based on these developments, I wouldn’t be surprised to see a federal law, which is now more than a decade in the making, come together relatively quickly.
We have experimented with many different pricing models and freemium has proven to work the best for us. There are two main benefits of freemium for Disconnect: first, from a mission perspective, we can provide high-quality, free protection to millions of people who may never pay for privacy; second, allowing people to use our products for free helps us retain an active communication channel and build a relationship with a large user base, a percentage of whom will convert to paid features over time. The main drawback of a freemium model is that we support many free users, which is costly in terms of support.
From the beginning we designed our solutions to scale. We wanted to make it effortless for other companies to integrate our solutions, and we worked up front to ensure that was the case. We also designed our technology to be dead simple for end users. Our hypothesis early on was that literally everyone wants privacy, so long as there is no trade-off, meaning they don’t have to change their internet behavior and there’s no loss of convenience.
To me, ownership dilution is less important than losing operational freedom and control over major business decisions. Founders may want to consider optimizing for board and voting power versus valuation and dilution. This strategy isn’t about trusting investors or not, it has to do with preserving the chemistry and decision-making structure that brought the business to a place where investors want to fund it in the first place.
My legal background gave me the organizational, strategic, communication and deal-making skills necessary to run a successful business. The primary skill I developed as a lawyer was the ability to efficiently analyze facts, which is essential to running a data-driven business. As a lawyer, I made hundreds of deals not only for my clients, but also when signing representation agreements with clients. These skills were directly applicable to running Disconnect, not just to close revenue and distribution partnerships, but also in recruiting key employees.
Starting and operating a business requires founders to wear many different hats. Most founders have to become proficient not just in the technology their company creates, but in data analytics, operations, finance, forging partnerships and understanding the implications of legal decisions. When I first started Disconnect in 2011 there was an overt bias among investors against nontechnical founders, but I think that’s changed somewhat. The bottom line is that diversity of experience on a team is absolutely critical. Strong technical skills are required, but in the case of Disconnect and many other startups, survival is also dependent on nontechnical skills that a legal background can provide.
Identify your relative strengths and weaknesses, as an individual and as a company. Focus your time on what you’re best at and surround yourself with people who possess complementary skills and experience. Focus the company’s strategy around what your team is best at, or if that doesn’t seem feasible, then focus on attracting people who are capable of executing on the company’s strategy.