Quixey

What did it do?

Quixey developed a “functional” search engine that let users find mobile apps without knowing their names, by describing the job the app could do. Rather than offering the technology as its own product, the company embedded it in the services of partners such as Ask.com and Sprint.

Why did it shut down?

By embedding its technology in partners' sites and devices, Quixey reached a large volume of queries, but it struggled to turn that volume into revenue. Its first attempt at making money, sponsored results, came in mid-2013. In 2015 it raised $60 million at a valuation of about $600 million, but in February 2016, when the company missed its revenue targets, senior executives left. The company closed in February 2017.

The story

In December 2011 the puzzle Quixey set for prospective engineers was simple: find the bug in the code in under a minute and win $100 and a T-shirt. The contest, called the “Quixey Challenge”, produced 38 winners, five of whom became serious candidates for three open positions. The start-up was taking an unconventional path in its product, just as it was in its hunt for talent.

Founded in Mountain View in 2009 by Tomer Kagan and Liron Shapira, Quixey aimed to be the search engine of the app age. Users did not need to know an app's name; they typed what they wanted to do, and Quixey found the apps that did it. The team developed the product over a year and a half. A $400,000 seed investment led by Eric Schmidt's Innovation Endeavors fund came with the private launch, followed by a Series A led by U.S. Venture Partners and WI Harper Group in August 2011 and a $20 million Series B in June 2012. Over that period headcount grew from six to thirty.

Quixey sold its technology not directly to consumers but to partners. On 4 December 2012 it took over app search for Ask.com, which was reported to account for 3 per cent of US search traffic in 2012; a month later it announced that it was powering about 100 million queries a month. App search in two of Sprint's services also came from Quixey. Its first attempt at making money, however, came only in June 2013, with sponsored results.

In 2015 the company closed a $60 million funding round at a valuation of about $600 million. But the gap between valuation and revenue never closed. According to a Re/code report in February 2016, the company missed its revenue targets and its operations and technology chiefs left. A year later, in February 2017, Quixey closed.

Quixey's story shows that big usage figures do not mean revenue. A start-up that embeds its technology in other people's products can present query volume as its own success; but how much money it makes from that volume depends on its contracts with partners. If the monetisation model is not designed alongside the product, a high valuation becomes a burden at the next round.

Lessons for founders

• If you embed your technology in other people's products, make the amount the partner pays you, not query or usage volume, your core metric.
• Do not leave the monetisation model until two or three years after the product launches; settle revenue sharing in the very first partner contract.
• A big round at a high valuation inflates revenue targets too; keeping targets realistic matters more than the size of the round.

Sources

1. Quixey (Wikipedia)
2. Quixey COO, CTO Depart as Mobile Startup Misses Revenue Targets (Re/code, 2016-02-29)
3. Fast-Growing App Search Engine Quixey Raises $20 Million Series B (TechCrunch, 2012-06-07)

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