Two Strokes, then Three Strikes for a Mobile Ticketing & Payments startup in 2005
Back when QR codes were owned by only a few technology companies, a startup called bCODE emerged and built world-first technology - but was it ahead if its time?
I co-authored this article with Paul Christy who worked at bCODE twenty years ago.
To win, we need to align with the future, take risks and deliberately put ourselves in luck’s way.
To survive we need to identify when a strike has occurred, as if we had the benefit of hindsight.
Let’s explore the Three Strikes that took bCODE down. Twenty years ago. When your phone looked like this:
Remember back in 2005, when we were still clicking a button on our phone three times to get to the letter “L” so we could send a “short message service” that cost us $0.20? Remember when MMS came out and we could then send “multi-media messages” which were grainy pictures and blurry videos?
2005 was actually a year when a lot of mobile technologies were emerging and converging… there were new flip and candy-bar phone designs from brands like Nokia and Motorola that were becoming multimedia devices:
better cameras (1-2 megapixels)
MP3 playback
video recording
powered by early mobile internet via WAP
new 3G networks improved speeds but mobile data was expensive
Bluetooth became the standard for wireless connectivity
Symbian, Windows Mobile, and BlackBerry OS were the mobile operating systems of the day
Back in the early 2000s, I worked at Fairfax with Paul Christy who has been at the bleeding edge of digital technology and business model innovation ever since…including working at bCODE.
“bCODE was the best place I ever worked. The team was truly kick-ass and we were building the future. We had a clear vision & roadmap, technology that worked well and a leader who wanted to change how the world used mobile phones” - Paul Christy
Pioneering Mobile Ticketing
After initially running Australia's largest free email service and then pivoting in 2004, bCODE was one of the first companies to deliver a scalable, stored value platform for mobile ticketing for events and transport, retail loyalty, gift cards and payments. The mission was to revolutionise ticketing, loyalty and payments by connecting physical locations with an easy way to redeem digital value or services.
The technology to scan QR codes and barcodes was not reliable at the time via first generation mobile phone cameras or scanning barcodes from mobile phone screens. To address this, bCODE developed hardware “kiosks” that could reliably scan - at the point of sale - patented alpha numeric codes sent via ubiquitous SMS (accessible to 99% of phones).
This innovation showed promise and the company was one of the first to see the potential of NFC (Near Field Communications) for the kind of “tap and go redemptions and payments” we do every day now. bCODE built this into every point of sale bCODE kiosk device (even though there were few mobiles with NFC in market at the time).
The two strokes that made bCODE a first-to-market innovator
With an inspired idea and a relentless drive, the founder of bCODE managed to launch and keep the company alive (surviving numerous near death moments with minimal funding) in the early days. This innovation, skill, resourcefulness and sheer determination brought the company to the point of "investability" in the eyes of the Venture Capital community.
Stroke one: Securing $4 Million in Venture Capital
bCODE successfully raised a total of $4 million from venture capital firms, and secured government grants and tax concessions of another >$1m providing the necessary capital to secure resources, develop the platform and file patents to take the company to the next level.
Raising money is never easy, however a combination of being at the right time in history, and being able to demonstrate viability and potential with minimal funding makes for a pitch compelling enough to get VC attention. But completing a capital raise is never guaranteed, so securing funding is absolutely a stroke of good “luck”, for any business.
Stroke two: Building an outstanding team
With the newly acquired capital, bCODE hired an exceptional international team, and key commercial and innovation players from leading mobile brands such as Blackberry and Nokia. Many of the key staff later became leaders in companies such as Telstra, Fitbit and lead engineers on famous film maker James Cameron's Deepsea Challenger submersible to name a few.
Stroke three: …TBC?
A great idea, $5M of capital in total and an outstanding team delivered an MVP mobile ticketing solution for Australia’s largest telco, Telstra.
Telstra's VIP customers and staff at the Commonwealth Games were sent mobile tickets and used their mobile phones to scan these mobile tickets via bCODE’s hardware “kiosks” upon entry. It was a big leap forward in technology and a great and unique mobile experience at the time - and bCODE was set to WIN, right?
Well, bCODE’s solution was also a huge cost compared to the current method of simply printing tickets on dead trees and sending them in the mail.
The Three Strikes that took bCODE down
First Strike: Unable to move from POC into commercialisation
The first strike came as the company struggled to move proof of concept customers such as Telstra onto commercial contracts.
The kiosks were custom manufactured and totally reliant on third party dial-up and early broadband connections. The costs of building and servicing these kiosks, critical for reliably scanning the mobile tickets, was cost prohibitive for brands over the current methods (printing on dead trees).
Customers (from hospitality, Ikea, Sprint Telecom and even Visa) enjoyed the user experience but saw the solution as a futuristic concept rather than an implementable technology for the present.
Second Strike: Enough capital to stay alive, but not enough to thrive
The burn rate of an exceptional team solving complex engineering challenges and lagging revenues saw the company begin to run low on capital. They then had to cut costs and downsize the team.
bCODE was now on “life support” funding from existing investors, the tension was rising and the company needed a big-break. With a lack of funding, the greatly reduced team were not able to evolve the technology or address the core issues of reducing the cost of manufacturing and servicing the kiosks.
They ran out of runway to find product/market fit.
Whilst the company explored all sorts of commercial opportunities, the reality is options were running out. The existing investors had passed the point of no return (they were “pot-committed” but also increasingly nervous) and provided just enough funding to survive, but not enough to thrive.
bCODE was hamstrung and could not capitalise on their early mover advantage.
Third Strike: The Launch of the iPhone & Adoption of NFC Payments
The third and most decisive strike was the launch of the iPhone in 2007. This event changed the world and made bCODE's strategy and investment in hardware technology redundant.
This was the time the company needed to reflect and rapidly pivot. bCODE should have focused on one use-case (e.g. mobile payments) and focus on software and apps instead of hardware. Every iPhone and Android that followed negated the need for bCODE's redemption kiosk device.
The founder was deeply emotionally and financially committed to his original vision, and failed to pivot quickly to leverage the iPhone opportunity many others could see. Instead, and with few options available, the team focused on iterating smaller versions of bCODE’s hardware kiosks which over time became completely redundant.
The window of opportunity closed. Existing mobile technology leaders, and other new market entrants, would lead the world of "tap and go" payments, loyalty, and ticketing.
bCODE had become investor controlled and was sold in a “fire sale”. It was last known to be targeting opportunities in developing markets, a far cry from the original vision.
Tragically, the night before the sale, the founder was found dead in his bathtub in San Francisco. While this was not a deliberate suicide, it was clearly the result of overindulgence caused by the immense pressure, sustained stress and emotional loss of this failure. I suppose knowing when to let go is, for a founder, just as critical a realisation as when to double down.
A moment of silence for the founder of bCODE, a true visionary innovator who suffered three strikes in business, but paid the ultimate price in life.
Did bCODE invent “a solution looking for a problem” or was it merely ahead of its time?
Was bCODE always going to be disrupted by the iPhone, or could the iPhone have been the hardware solution bCODE was unable to solve themselves?
In talking with Paul Christy about his experience of working at bCODE, it strikes me that bCODE was:
ahead of its time in terms of vision around the application of emerging mobile payments and ticketing technologies but;
quite a long way behind in terms of their thinking around hardware and strategy, and;
way behind competitors in terms of funding.
For example, in 2007 when Apple launched the iPhone it had already been listed for 27 years and had a market cap of $72B. My gut tells me that if bCODE had focused on the software aspects of solving the user experience of mobile ticketing, or just focused on making mobile payments easy (based on the mobile handsets and operating systems provided by others) then they would have been in a much better position to capitalise on their first mover advantage, own their market, and win.
Hindsight is only useful if we learn from it:
If you’re an expensive solution, make sure you’re cheaper than the problem. Often businesses can design a solution that seems smart, but if there’s no commercial demand, there’s no problem that needs solving.
Predicte the future
If bCODE had been able to foresee the predictable rise of the smartphone, it could have been ready to pivot into software-led solutionsBe ready to pivot
One of the most time-consuming endeavours, and often work that never sees the light of day. But if you’re ready to pivot, then you’re ready to put yourself in luck’s way.
Do you have a story to share? Let me know..
This brought back a lot of memories, and also a lot of learning and reflection. Thank you for sharing this.