David Scott | 2020-06-12 Founder Picture

Could you give us a quick introduction to Laughly? 
Laughly was an on-demand, comedy streaming app. It carried comedic material from over 4000 well-known comedians, from Kevin Hart, all the way down. We got up to around 1 million active users before we were acquired. 

What was your career journey prior to starting Laughly?
I have a degree in Computer Science and I started off as a programmer for General Electric (GE). I was at GE for a couple of years when I kept reading about all this really cool innovation that was happening in Silicon Valley. Even though I loved my job at GE, I felt like I was not where the action was. So, I decided that I was going to get my MBA and as soon as I finished, I was going to go to the West Coast and start a company. I actually started a company during my second year of business school. It was an e-commerce company focussed on comic books and entertainment-licensed merchandise. By the time I graduated from Wharton, I had a million dollars of investment already in my pocket. 
So we flew out to San Francisco and we built out this company called, which housed the largest inventory of comic books and entertainment-licensed merchandise. We partnered with amazing people like Stan Lee, DC Comics and Marvel, and then we got acquired. That’s when I first got the startup bug. After that, I pursued my passion in marketing for other interesting startups. 

How did you come across the idea for Laughly?
 I was running Marketfish at the time, which was a startup that did marketing automation for brands and agencies. We realised that the majority of our customers were in New York; they were primarily advertising agencies. So, we decided to open up an office in New York and I ended up hiring a comedian as one of my salespeople. He did comedy on the side. He was hilarious. I started going to his shows and realising that this was a really fun thing to do, particularly in New York – see up and coming comedians or famous comedians that pop in. He said, “you’re pretty funny”. I thought “really”? and he said that if I wanted, I could write some jokes for him. 
So, like a typical Ivy league nerd, I decided to take a class on joke writing. I wrote like a thousand jokes and shared a bunch of them with him. He said, “these are pretty funny but they’re funnier for you”. So, I went to an open-mic night and I started recounting my five-minute set – my tight 5 - is what it’s called. After six months, I decided to actually go out and try to become a professional comedian. During that process, one of the things I really wanted to do was study some of the older, really famous comedians. I wanted to understand old Jerry Seinfeld, or old Richard Pryor. I just wanted to have an idea of what their material was like.  I couldn’t find it anywhere. The libraries were not available. That’s when I realised that there was a place for an on-demand library of comedian’s work. That’s how the idea of Laughly was born. 

How did you meet your co-founders?
I really feel like you can’t do it alone. For, I had a co-founder, David Reid, who was a business school mate of mine. For Marketfish and for Laughly, I took a very different approach. I fleshed out the idea as much as I possibly could, but then I actively looked for a co-founding team. I knew that I didn’t want to develop and code, so I looked for co-founders that would-be partners in that regard. For Laughly, I ended up recruiting EJ Emeagwali and Nikhil Karnik. The two of them actually became my co-founders. 

Were there any other ideas that you were considering when you were starting out?
I had a billion ideas; even today I’ve got a billion more. I woke up this morning and wrote down three new ideas for businesses that I wanted to start. A lot of people ask: are entrepreneurs born or made? Is it taught? I just feel like my entire life I’ve always had ideas about how to fix things. That has never stopped. Whenever I started each of these companies, I had a billion other ideas I wanted to start at the exact same time. When I was starting Laughly, I also had the idea of using facial recognition to evaluate customer satisfaction. What I do typically is that I go out with a bunch of investors that are friends of mine and I go: “What do you think about this idea”? 99% of the time they think it’s a horrible idea, or there’s someone already doing that, or this or that. When I pitched Laughly they said “Huh. No one’s doing that”. When I got that kind of reaction, that’s when I knew that I had something I could really follow along with. 

How did your previous experience prepare you for Laughly? In what ways were you unprepared?
I actually thought, since I’d spent a career in marketing, that I really knew marketing well. But I’d never done B2C (business to consumer) marketing, I was a B2B (business to business) marketer for most of my career. And now, all of a sudden, I had to market to individuals. I had to pretty much re-learn marketing from scratch – that was unexpected. But it was an amazing journey to try to understand it. Completely different language, tactics, conversations with customers – that was a surprise. 

After you had the ideas what were the next steps?  
The first thing was, I wanted to make sure that I could really build out my vision for the product. I hired a bunch of freelancers to help conceptualise designs. I actually even hired an agency to build a prototype for me. I took that around and used that to recruit my founding team and my first investment dollars. Then we started coding it. It was very, very important for us to get quickly to prototype, so that people could experience and see what they were investing in. 

Why did you choose to use an agency when you had a background in Computer Science?
One thing is – I’m the worst programmer on the planet. Even though I have a computer science degree, I barely squeak by. During college, I tried to take as many theory classes as possible so I could stay away from the actual programming. My class on assembly language scared me out of coding forever. I’ve never been a very strong programmer, and even when I was at GE I very quickly moved into project and product management. 

Did the ideas evolve as things progressed? 
I wish I had listened to people more than I actually did. I walked in with a really strong thesis, a really strong vision and I wanted to stay focussed on it. I think at the end of the day, we might’ve done better if we had experimented with a couple of different models that we learned along the way. As we talked to people, we learned different models and how to sell the product. For example, do you offer for free and show ads, or do you do a subscription model? That’s a huge question, and if you ask ten people you get ten different answers. We stuck to our guns and halfway through we made a pivot, and the pivot was very destructive. That’s an example where, if we had stuck to our guns, we would’ve been in a better spot. 
On the other side, it’s amazing how quickly you can get reaction to the product. Very quickly, the public was making comments about different pieces and features. What they liked and didn’t like. One of the most addictive things is to go on the app store every day and read the reviews. It was an obsession. You need good reviews to sell the product, but you also get a better understanding of what’s going on, what you are doing right and what you are doing wrong. 

What were your experiences as a founder from a minority background? What do you think needs to be done to increase diversity in the world of startups?
I think we’re at a point now where we’re starting to acknowledge the systemic racism that happens in the United States. That systemic racism definitely extends into the VC world, and to the startup world. There are almost no people who look like me in Venture Capital. So that’s a problem. I think it was really hard for me to get fundraising, and I think part of it was because of my skin colour. I was successful three different times, for a couple of reasons. One was, I had amazing supporters throughout my career, who always bet on me and always bet on my startups. I’ve had investors that have invested in all three of my startups – which is fantastic. But the reality is, going beyond that small circle and getting into really big fundraises, I found that to be very challenging. 

What advice would you give to a founder from a minority background starting out today?
I think a couple of things. One is, part of the reason why I sought out other founders is, I think it’s easier for a VC firm to bet on a team, as opposed to betting on one single person. That just diversifies their risk in general, which is good. Walking in with a founding team is better, and if you guys don’t look alike or aren’t from the same background, I think that’s even better for a whole host of reasons. That’s one piece of advice I’d give. 
The second piece of advice that I’d give is – pay your dues. So many friends of mine are ex-Google, ex-Facebook, ex – companies that have been there and done that before. They go through this period where they work for these companies and they learn how startups are built. By the time they’re ready to start their own, there’s this fraternity of people who have a shared collective experience, all ex-Facebook employees or all ex-Google employees, that now have money to invest, and they want to invest in people they know. So, for founders of colour, or even all founders that I know, who have that tenure or that background, all have great success in being able to raise money. 

Were there any low points that you can think of, along your journey so far? How did you get through them?
A ridiculous amount of low points, yeah. And with every startup I’ve had, there have been lows, and lows... and lows.  We had one scenario where one of our employees had a mental breakdown, and we spent an entire day trying to recover from that. We were always trying to figure out how to pay our bills, and trying to play credit card roulette, and juggle. That was very stressful. There was a point in time where we were on the cusp of signing a major comedian, to become the spokesperson of the product and then he dropped out. So yeah, there were so many different kinds of experiences that were low points. Part of it is that as an entrepreneur, you have to have an optimistic mind and a sunny disposition in general. So you always look at the bright side and try to desensitize yourself, because the next day something really good could happen. Also, the same thing with highs. We had some amazing experiences. I remember actually hanging out with Patton Oswalt, or having lunch with Damon Wayans. Jim Gaffigan used to call me on my personal phone to tell me what he thought we should do with the app. You have to not get addicted to those as well. Manage your expectations on both the highs and the lows.

Were there any challenges thrown up by the fact that you were in a space where you had to interact with all these big names?
I’ve never been part of the entertainment industry, so I had to learn this on the fly. What I realised was: agents are there for a reason. Agents shield these artists from doing stupid stuff like getting involved in startups like mine. Navigating agents was a really hard process, and was surprisingly difficult, complicated and confusing. 

Any funny or most memorable stories along the way?
Do you know who Jay Pharoah is? He was on Saturday Night Live.  He’s an amazing actor, and he has a thing where he can do anyone’s voice. He raps on stage as well. After a show, we ended up going back to the green room and introducing ourselves. One of my co-founders – he’s this nerdy Indian guy who has an engineering degree from Penn – goes “Hey Jay, nice to meet you man. I rap too”. So, Jay’s like “Show me what you’ve got” and he starts beatboxing, and Nikhil, my co-founder, he must’ve 25/26 years old, BLEW IT OUT. And just rocked the mic, right in front of Jay Pharoah. Jay Pharoah could barely stand, after he saw this guy freestyle on the spot. That was an awesome moment. 

If you could go back and give yourself one piece of advice, what would it be?
It would be to control the burn rate. As a marketer, I love to spend money. When we got our first infusion of cash, I hired a bunch of engineers, because I really wanted to get the product out and I wanted it to be fleshed out. I think instead of that we should have taken our time, hired fewer people, decreased our burn rate and really taken our time to get the product right. I think we would have learned more along the way, and I think it wouldn’t have been as expensive. 

What are your favourite books?
The book I’ve been recommending is a book called The Formula – Ronald F Ferguson, which is about how to raise great children. In light of what we’re going through right now, after the death of George Floyd, I’d like to recommend two books: White Fragility – Robin DiAngelo, which is about understanding how difficult it is for white Americans to have conversations around race. The other one is called The New Jim Crow - Michelle Alexander, which is a book about why systemic racism exists across America, and how it manifests itself in today’s society. 

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