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The latest news on Startups from Business Insider

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    David Goldberg

    BERLIN — Founders Pledge, the London charity that aims to get tech entrepreneurs and investors donating to worthwhile causes, has launched in Germany.

    Supported by Facebook billionaire Dustin Moskovitz, Founders Pledge encourages anyone that holds equity in a company to commit to donating a percentage of their proceeds to charity before they exit their businesses.

    When they sign up, they must agree to donate at least 2% of their exit proceeds to a charitable cause.

    At the time they get acquired, be it through an acquisition or an IPO, they transfer the money they agreed to Founders Pledge, which distributes the money to charitable causes chosen by the pledger.

    Rocket Internet IPO, 2014Founders Pledge CEO David Goldberg said at a launch event in Berlin last week that it can be hard for founders to know how to part with their money when they end up with seven figures or more in their bank account. He added that Founders Pledge takes the stress out of philanthropy for them.

    In total, some 600 people have signed up to the philanthropic initiative and $227 million (£181 million) have been pledged to charity, according to Goldberg. That includes high-profile people like Mustafa Suleyman, cofounder of Alphabet-owned artificial intelligence lab DeepMind, and Sam Altman, president of Silicon Valley tech incubator Y Combinator, he added.

    "The German community of pledgers has already committed a total $12 million (£9 million) to charity, and with ambassadors such as Andreas Haug (e.ventures), Sebastian Pollock (Amorelie), and Jeannette zu Fürstenberg (La Famiglia), we are aiming to triple our German pledge value within the year," Goldberg told Business Insider in an email.

    Germany is home to some of Europe's biggest tech companies and there are a number of startups coming out of cities like Berlin that are achieving significant exits. For example, company builder Rocket Internet IPO'd for $2 billion (£1.6 billion) in 2014, while productivity app Wunderlist sold to Microsoft for up to $200 million (£159 million).

    Join the conversation about this story »

    NOW WATCH: 6 things the Samsung Galaxy S8 can do that the iPhone can’t


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    Tokyo, Japan view of Shibuya Crossing, one of the busiest crosswalks in the world.

    When it comes to tech, San Francisco on the west coast of the US has a well established reputation as being the world's number one city.

    But San Francisco's crazy living costs led real estate firm Savills to choose another US city as its number one tech hub in its Tech Cities 2017 report, which ranks 22 cities across the world "at the forefront of the global tech industry."

    In addition to rent, Savills looked at over 100 metrics, ranging from the number of days needed to start a business through to the cost of a flat white coffee. Researchers also looked at access to venture capital and transportation times for the average tech worker.

    Savills said that all of the cities are "at the top of global shopping lists for tech companies looking for space in which to locate."

    22. Cape Town, South Africa

    Summary: "One of Africa's most popular tourist destinations is now also one of its hottest tech environments, aided by initiatives such as French Tech's recently-launched incubator in Century City — with another one scheduled to appear in Johannesburg. Known as the 'digital gateway to Africa', the Western Cape is home to four top universities, and some 59% of South Africa's startups are born here."

    City population: 3.7 million

    City GDP per capita: $8,735

    Established tech firm office rent per week per sq ft: $13

    Prime residential rent per week: $840

    Cost of a Flat White: $1.78

    Startups per 1,000 people: 0.1

    Average commute by employees working in key tech districts: 35 minutes

    Cost of a single journey on local transport: $0.77

    Annual passengers across the city's airports: 9.7 million



    21. Buenos Aires, Argentina

    Summary: "Buenos Aires may be known for its party atmosphere, but a tech start-up environment is also taking hold – spurred on by the city's many highly-rated universities and an increased appetite for venture capital funding. Despite Argentina's troubled economy and political situation, Buenos Aires has emerged as a key player in renewable energy and aerospace technology."

    City population: 2.9 million

    City GDP per capita: $15,285

    Established tech firm office rent per week per sq ft: $28

    Prime residential rent per week: $374

    Cost of a Flat White: $2.50

    Startups per 1,000 people: 0.2

    Average commute by employees working in key tech districts: 38 minutes

    Cost of a single journey on local transport: $0.43

    Annual passengers across the city's airports: 8.6 million



    20. Bangalore, India

    Summary: "Bangalore has enjoyed a status as India's leading tech city since the 1970s, when a 330-acre industrial park was created to house the city's electronics factories. The tradition continues today: around two-fifths of India's IT and software exports come from Bengalaru, and the city's low labour costs and wealth of technical talent make it particularly attractive for outside investment."

    City population: 9.8 million

    City GDP per capita: $4,368

    Established tech firm office rent per week per sq ft: $12

    Prime residential rent per week: $911

    Cost of a flat white: $1.35

    Startups per 1,000 people: 0.4

    Average commute by employees working in key tech districts: 47 minutes

    Cost of a single journey on local transport: $0.31

    Annual passengers across the city's airports: 18.1 million



    See the rest of the story at Business Insider

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    83north partners

    Israeli VC firm 83North has today announced the close of its new tech fund at $250 million, its largest yet.

    The fund, 83North IV, from the firm previously known as Greylock IL, will invest in European and Israeli companies and brings the firm's total capital under management to $800 million.

    83North, led by partners Laurel Bowden, Arnon Dinur, Gil Goren, Erez Ofer, and Yoram Snir, has invested in JustEat and iZettle as well as a number of companies that have exited recently including Barcelona games developer SocialPoint, which was acquired by Take-Two in February.

    "We continue to invest in all stages, with an emphasis on early investments, where we work side-by-side with founding teams to build companies from the ground up," said Yoram Snir. "Our model gives us access to some of the best talent in the world, meaning that we can add real value by exposing entrepreneurs to the best practices in each domain."

    "It's very encouraging for the European market to see such huge ambition to build global, category-leading companies. There have been fifteen exits valued at more than $1 billion that originated from Europe in the past five years compared to only a handful prior," added Laurel Bowden.

    Since the firm started investing in Europe in 2008, it has expanded its focus from UK to more mainland European startups.

    "As we look to the future, the UK’s exit from the EU will accelerate activity in European tech hubs outside the UK. We believe this presents a big opportunity for venture funds, like 83North, that are already well-established in the wider European region," said Bowden.

    Join the conversation about this story »

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    Nordstrom x The Black Tux

    Renting isn't just for your prom clothes anymore.

    Chic startups like Rent the Runway and The Black Tux have changed the rental game, offering high-end tuxedos and dresses to rent for a set period of time.

    Customers have flocked to the startups' offerings. Rent the Runway reached its annual goal of $100 million in sales last November, according to Forbes. As of January, The Black Tux was doing $2 million in sales a month with a two-fold increase year-over-year.

    It seems that shoppers are increasingly seeing renting as a good opportunity to step outside their normal style or to obtain a fancy garment for an event.

    Now department stores, looking for a way to draw in a younger crowd that is more likely to be interested in renting, are partnering with these brands to offer more options to shoppers. In November, Neiman Marcus made a deal with Rent the Runway for a store-within-a-store concept in San Francisco. The Black Tux recently began a trial partnership that calls for the creation of rental locations within six Nordstrom stores across the US.

    It's the first rental partnership for both stores, which are hoping that before and after appointments, shoppers will browse the aisles and walk out with more products than just a rental. The rental companies, on the other hand, are just happy to be associated with well-known, established, and trusted brands that have more locations to service potential customers.

    "We're a purchase people are making for a very important day — we need as much trust as we can possibly get," Andrew Blackmon, a cofounder of The Black Tux, told Business Insider.

    The Black Tux

    Though it may seem that these rental outposts in Nordstrom and Neiman Marcus could steal sales from the department stores' existing offerings, the startups don't think that will be the case.

    "It's a totally different market," Blackmon said. "The price points for [Nordstrom's] tuxedos are fairly high, so there isn't really any cannibalization."

    A typical Nordstrom tuxedo carries a price tag of at least $800, while the store's private label sells one for $430. Compare that with The Black Tux, where an average tuxedo rental will cost you $125.

    Blackmon said he saw his competitors as other suiting companies that sell their suits for $150 to $300 — firmly fast-fashion territory. "A lot of people are using us after having an experience there," Blackmon said.

    Rent the Runway founder Jennifer Hyman told Forbes that she had also seen her customers move away from fast fashion and turn to renting from her company, often supplementing those rentals with buying investment pieces.

    "Rent-buy is the new high-low," Hyman told Forbes, noting that a customer may buy a black dress but rent a hot pink one for a special event.

    Fast fashion, which is clothing made and sold cheaply with a condensed supply chain so it can capture ongoing trends, used to be considered the "low" end of that equation. Since it's in style for only a season or two at best, fast fashion is often seen as quickly disposable and worn just a few times before being discarded.

    It's being pushed out by rental in these formal categories, however, as the prices are similar but the quality and perceived quality are miles apart. And if customers are going to wear the garment only once anyway, it makes a lot of sense to rent something that looks and feels better. Plus, the company will take care of dry cleaning.

    Rent the Runway

    The two founders agree that customers are looking for quality in the garments they wear, and they're not finding it in fast-fashion offerings. The large gap in price between renting and buying luxury and high-quality garments makes rental an attractive proposition.

    "I wouldn't go so far as to say the future of fashion is rental, but I would say rental will be a major component of the future of fashion," Blackmon said.

    SEE ALSO: We took to the streets of New York City to capture the trend that's killing the traditional fashion market

    Join the conversation about this story »

    NOW WATCH: A stylist reveals what many men get wrong about dress shirts


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    Tom Blomfield, CEO, Monzo

    London startup Monzo announced on Wednesday that it has had the restrictions on its banking app lifted.

    The move means that Monzo can now start providing its pre-paid card and beta app users with full, unrestricted current accounts. It also means the company will be able to start managing customer deposits on a much bigger scale.

    "I'm delighted to announce that our banking licence restrictions have been lifted! Monzo is now a fully authorised, unrestricted bank," wrote Tom Blomfield Monzo CEO.

    "This means we can now begin the process of bringing current accounts to existing users. This is a process we will be taking quite slowly to ensure we can provide the best possible experience to our users, so I’d like to ask for your continued patience."

    Join the conversation about this story »

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    Patrick collison, john collison, stripe, sv100 2015

    When Stripe Atlas launched a year ago, it wanted to level the playing field for entrepreneurs in emerging markets so that they could have access to the same tools as people in Silicon Valley.

    Now the $9 billion payments company has realized that Atlas is something entrepreneurs throughout the United States want too.

    Atlas automates the complicated process of starting a company into a filling out a short web form. Atlas then takes care of incorporating a company in Delaware, setting up a US bank account with a tax ID number, and creating a Stripe account so they can accept payments.

    "We wanted to see if we could help entrepreneurs in emerging markets to be on the same playing field as Silicon Valley startups," said Taylor Francis, the lead of the Atlas project, in an interview with Business Insider. "It’s been heartening to see that it’s working."

    The company has already helped incorporate thousands of businesses from 124 countries. And on Thursday, Stripe is officially opening Atlas to US entrepreneurs, a group that had been clamoring to use it too, says Francis.

    "It’s a slightly different problem, but even in the US, the process was time consuming," Francis said.

    A company in a box

    The company had designed Atlas to help entrepreneurs in foreign markets understand how to quickly set up a US based company for only $500. Normally the process would include hiring a registered agent in Delaware to physically receive the paperwork and then walking into a US bank at least once to open an account. Atlas automates all of it thanks to its already established partnerships with companies like Silicon Valley Bank, where it opens all of its bank accounts. 

    And there's the upside for Stripe, the payments company that's been powering all of this. Atlas sets up all the companies with a Stripe account so they can start receiving payments. Francis said that alone has changed how a lot of the companies do business, using an example of a business owner in Nigeria who used to receive wire payments for his software company.

    While it started with a focus on emerging markets, during the course of last year, Francis heard from more and more US entrepreneurs that were looking to save the time and money by using Atlas. It's also struck partnerships with accelerators like Y Combinator and crowdfunding sites like Kickstarter and Indiegogo to help speed up starting a company.

    While it's opening up to US entrepreneurs, Atlas will remain an invite-only tool for now. For one, Stripe has to screen to make sure the companies don't fall on the list of prohibited businesses (like gambling or virtual currencies) and to help screen that the way Atlas sets up a company is the correct fit. 

    Atlas' process establishes companies as Delaware C-Corp, a good business status if an entrepreneur is planning on raising venture capital and building a high-growth company, but maybe not the best if they prefer to stay solo. 

    It also isn't the best option for merchant businesses like opening a restaurant or an Etsy store, although Francis is hesitant to draw the line since so many companies are hybrid across industries these days. To help assuage founder fears, the company is also launching things like forums and Q&As with tax specialists to help entrepreneurs both across the globe and now in the US navigate starting a company.

    "There are entrepreneurs who have started many YC companies who have great lawyers on speed dial that have used Atlas. There are also a lot of entrepreneurs in other parts of the country who don’t have the same network," Francis said. "I think it’s all across the spectrum."

    SEE ALSO: A new self-driving car startup just spun out of Udacity to challenge Uber with its own autonomous taxi service

    Join the conversation about this story »

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    Passivdom

    Building a house completely by hand can be both time-consuming and expensive. A number of home-builders have chosen to automate part of the construction process (i.e. by printing the home's parts) instead.

    A new Ukrainian homebuilding startup called Passivdom uses a 3D-printing robot that can print parts for tiny houses. The machine can print the walls, roof, and floor of Passivdom's 380-square-foot model in about eight hours. The windows, doors, plumbing, and electrical systems are then added by a human worker.

    When complete, the homes are completely autonomous and mobile, meaning they don't need to connect to external electrical and plumbing systems. Solar energy is stored in a battery connected to the houses, and water is collected and filtered from humidity in the air (or you can pour water into the system yourself). The houses also feature an independent sewage system.

    Passivdom's homes, which start at $31,900, are now available for pre-order online in the Ukraine and the US, and the first ones will be delivered later this year. 

    Check out the homes below.

    SEE ALSO: A startup invented this $10,000 house that can be built in one day

    Passivdom's smallest model measures 380-square-feet and costs $31,900, designer Maria Sorokina tells Business Insider.



    Here's what the house looks like when you walk in the front door. It's a large open space with a small kitchen and floor-to-ceiling windows.



    This model doesn't include a separate bedroom, which means residents need a sleeper sofa. A small bathroom is located near the kitchen.



    See the rest of the story at Business Insider

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    MaRS exterior streetcar

    It's a startup founder's dream: a community of 2,500 early-stage tech companies, a government investing in high-tech innovation and expediting work permits, and venture-capital investment levels not seen since the heyday of the dot-com bubble.

    This isn't San Francisco, New York, or London — it's Toronto. And its bid to become the Silicon Valley of the North is now getting a boost from the Trump administration.

    Because Trump was elected US president partly on an anti-immigration campaign, interest in moving to Canada has skyrocketed. The University of Toronto saw a 70% jump in applications from American students at the end of 2016, according to the Toronto Star— and that was before the president began efforts to bar immigrants from seven majority-Muslim countries.

    More recently, after a decision to delay the H-1B visas used by American businesses to hire skilled workers, the Canadian government under Prime Minister Justin Trudeau announced in March an expedited work-permit process for the same kind of foreign talent.

    And while London is the world's largest center for financial technology, or fintech, immigration policies are equally uncertain there ever since Britain's 2016 decision to leave the EU.

    As a result, Canada's startups are seeing a jump in job applications — especially from workers in the US.

    "I've never seen numbers like this," said Roy Pereira, CEO of Zoom.ai, an enterprise-tech chatbot startup. "Engineers wanting to immigrate to Canada from places like India are normal, but I've never seen anything close to the numbers of candidates from the US."

    Salim Teja, MaRS

    His company had 101 candidates apply for a "full-stack software engineering" position in a single month. Of those, 31% were from the US, 22% from Canada, 33% from India, and 15% from elsewhere.

    "Certainly the geopolitical environment right now and what Trump has alluded to in terms of his new immigration policy and his perspective on H-1Bs — I think that has made some people nervous," said Salim Teja, executive vice president of venture at MaRS Discovery District, a Toronto venture program helping position the city as the next great startup destination.

    Because of its large footprint in the Canadian startup scene, MaRS — which says it is the world's largest urban innovation hub and home to 1,000 startups within its venture program across the health, finance, energy, and education sectors — is often the federal government's go-to adviser on policy surrounding innovation. And it isn't just home to startups. MaRS, which spans 1.5 million square feet in downtown Toronto, houses 250 larger organizations that lease its space, including outposts for Facebook, Airbnb, and PayPal.

    "We play an important role in connecting partners to the startup ecosystem — those could be international investor partners, those could be international corporate partners," said Teja, who spent six years in Silicon Valley before returning to Canada and helping to build MaRs. "We match incoming talent from both around the world and locally here in the ecosystem to our companies that are growing."

    Silicon Valley investors

    One draw for US investors right now is the cheap exchange rate, which takes investment dollars further and makes investments more attractive. Another is the softer competition for deals in the Canadian market, meaning that startup valuations are more reasonable than in places like Silicon Valley.

    Toronto — the fourth-largest city in North America after Mexico City, New York, and Los Angeles, with a population of 2.7 million — is relatively accessible from startup hubs like New York and Boston.

    MaRS

    The city has attracted the likes of Union Square Ventures, Khosla Ventures, Horizon Venture Partners, Azure Capital, Felicis Ventures, and Sequoia Capital, all of which have invested in Toronto companies. Union Square's Fred Wilson recently said in a blog post that Toronto was his firm's No. 3 location for investment after New York and San Francisco.

    "They're not just coming but they're actually writing checks and investing in companies, and I think that's what drove us to have a record year in VC last year," Teja said.

    Canadian venture-capital investments hit a 15-year high in 2016 with $3.7 billion invested, according to Thomson Reuters data. Four hundred and fifty-nine Canadian companies closed 571 rounds of financing, a 36% increase over the previous year and something not seen since 2000.

    It's paying off for MaRS' startups, which are raising money and making significant exits. Bluerock Therapeutics, a stem-cell-therapy company, last year raised $225 million in a Series A round — the largest in biotech-funding history, while Highland Therapeutics raised $200 million from Morgan Stanley. As of 2015, MaRS' venture companies had collectively generated $1.3 billion in revenue over seven years, with annual growth of $1 billion projected by 2025.

    MaRS

    It's not just the startup and VC communities that are growing in Canada — larger tech companies are expanding their presence too.

    Amazon is scouting for retail space in Toronto, Teja said. That company made a big hiring push for its web services in Vancouver last August, posting 1,000 positions, and opened a data center in Montreal in December. Cisco and Microsoft are growing their footprints, and Google Canada organized a conference last year called "Go North" for Canadian startups.

    Unique flavor

    Now, according to Teja, the question is: "As this window of opportunity opens up, how quickly can Canada capitalize on this opportunity?"

    Key to doing that will be developing Toronto's own "flavor of innovation" to enable it to compete in the world in a unique way, Teja said, rather than simply trying to recreate the Bay Area.

    One way to do that is to create new opportunities as more industries start to overlap with one another. Health companies are becoming tech companies, energy companies are becoming fintech companies. MaRS, with its 1,000 startups across four broad sectors, is well placed to capitalize on that trend.

    "The next breakout companies are going to come from these overlap areas," Teja said.

    SEE ALSO: 40 things Canadians say that Americans don't understand

    Join the conversation about this story »

    NOW WATCH: Robert Shiller on what a rate hike will do to asset prices and who Trump shouldn't put in charge of the fed


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    Jeffrey Ng

    LONDON — Founders Factory, a company that aims to create and scale startups, has hired former Imperial College London researcher Jeffrey Ng as its chief scientist.

    At Founders Factory, Ng — who has cofounded several of his own software companies, including visual search and image recognition recognition company Cortexica Vision Systems — will help to develop new artificial intelligence (AI companies, while also providing support to AI companies on the Founders Factory accelerator programme, such as Iris.AI and illumr.

    In an email to Business Insider announcing the hire, Founders Factory touted Ng's expertise in big data, natural language processing, computer vision and deep learning deployment of AI platforms.

    "Building and accelerating new startups in six diverse sectors opens up exciting new ways to apply AI," said Ng in a statement. "It's the energy and vibrancy of the Factory that's the main draw for me, coupled with the chance to open up the AI toolbox to bring new products to life."

    Founders Factory's AI efforts are largely funded by CSC Group, a private investment firm in China with over $12 billion (£9.7 billion) under management. CSC signed a five-year multimillion pound deal with Founders Factory last October.

    "CSC is the ideal partner to support our new AI startups," said Ng. "There is so much AI innovation happening in China that this could be a two-way connection between the West and the East."

    Join the conversation about this story »

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    Niklas Zennström skype atomico

    Niklas Zennström, the cofounder and former CEO of Skype, has backed water-saving startup Orbital Systems in a £15 million funding round.

    Founded in 2012, the company claims to that its showers, which cost up to £5,295, save considerable amounts of water compared to conventional showers. It released a new £2,299 shower on Wednesday called the OAS, which uses 90% less water than a traditional, it claims.

    Investors have now backed the company with a total of £25 million.

    Orbital System's showers save water by using the same batch of water over and over again. They're used in gyms, army barracks, and luxury hotels around the world. But don't worry, the water is purified by a built in purifier before it gets reused.

    "There’s little point in wasting 150 liters of water during a single shower when, instead, you can use just five," said Mehrdad Mahdjoubi, founder and CEO of Orbital Systems, in a statement.

    "We developed some great technology for the NASA projects, but what the past two years have shown us is that the technology works just as well here as it does in space. For our next growth phase we'll focus on getting Orbital showers into every home that wants to save on both water, energy, and money."Shower of the Future

    Zennström has taken a seat on the board, which also includes former Tesla executive Peter Carlson. Other investors include Karl-Johan Persson, CEO of Swedish fashion giant H&M.

    Zennström told Business Insider in an interview earlier this year that he expects sustainability startups to become the next $10 billion and $100 billion companies of the world.

    Join the conversation about this story »

    NOW WATCH: Your neighbor's WiFi is ruining yours — here's how to fix it


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    Warby Parker, David Gilboa and Neil Blumenthal

    Neil Blumenthal and Dave Gilboa met as MBA students at the University of Pennsylvania and cooked up the idea for Warby Parker, an eyeglasses retailer that would undercut the sale of glasses by hundreds of dollars and sell them online rather than in physical stores.

    Seven years later, they're the co-CEOs of a $1 billion-plus brand and they've sold millions of pairs of glasses in the US.

    Business Insider caught up with Blumenthal and Gilboa for an episode of "Success! How I Did It," a podcast highlighting the career paths of the world's most accomplished people.

    Gilboa and Blumenthal explain:

    • How they launched and immediately sold out of everything, with a 20,000-person wait list
    • How they operate with two CEOs and what each one does
    • Why they try to take 90 minutes a day to do nothing
    • How they scaled a company to millions of pairs sold and 1,000+ employees as first-time founders
    • Their future IPO plans (2018?)

    You can listen to the interview with Warby's co-CEOs below, for the 4th episode of "Success! How I Did It," a Business Insider podcast that follows the career paths of some of today's most accomplished people.

    Check out earlier podcast episodes with: 

    Subscribe to "Success! How I Did It" on iTunes to hear the latest episodes.

    The following is the podcast transcript, which has been edited for clarity and length.

    Losing a pair of $700 glasses in Thailand and refusing to buy another pair turned into a big business idea

    Alyson Shontell Neil Blumenthal Dave Gilboa Warby Parker CEO founder podcastAlyson Shontell: Today with us we have Dave Gilboa and Neil Blumenthal, who are co-founders and co-CEOs of Warby Parker, a glasses company that's been valued at what, more than a billion dollars these days?

    David Gilboa: There are rumors out there.

    Shontell: The unicorn status has been achieved, we can just say that. I want to go back to where you two first met, at Wharton.

    Neil Blumenthal: We were full-time students getting our MBAs in Philadelphia. We had become close friends in a way that business school often does, and Dave had lost a pair of very expensive glasses. How much did you pay for them?

    Gilboa: $700. I'd been working in consulting and finance, then took a few months off to backpack around the world. I was in Northern Thailand and happened to leave my glasses on a plane. They were my only pair of glasses. It didn't make sense to me that I was going to have to pay $700 for a new pair. So I got to campus, was a full-time student, and didn't have glasses my whole first semester. I was complaining to anyone that would listen, wondering why glasses were so expensive.

    Shontell: You didn't have glasses for the whole first semester? How did you see and do any work? That seems like a terrible plan.

    Gilboa: I did a lot of squinting and I wore contacts sometimes ... Then I started chatting with Neil, who'd spent a bunch of time in the eyeglass world and light bulbs went off when we started learning more about some of his experiences.

    Shontell: I didn't realize you had been in the glasses world before, Neil. Dave, didn't you have a bioengineering background? You had history, Neil?

    Blumenthal: I focused on international relations and history. Not exactly what you'd expect to start a tech company or a fashion label. But after school I thought I wanted to work at the State Department. I ended up working for this amazing nonprofit social enterprise that would train low-income women to start their own businesses, giving eye exams, and selling glasses in their communities throughout the developing world. So I spent five years proving out this model, because I don't think most people realize that there are close to a billion people on the planet who don't have access to glasses. If you think about a tool that improves productivity, that enables somebody to learn and then enables somebody to work, it's one of the most effective poverty-alleviation devices out there.

    Shontell: So you guys put your heads together, you have this background experience. You're not able see, and this aha moment happens. There were four of you, right?

    Warby ParkerGilboa: Yes, the other two cofounders in addition to me and Neil are Jeff and Andy. We spent about a year and a half really formulating the idea that eventually turned into Warby Parker… I'd been wearing glasses since I was 12. I'd never heard of a company called Luxottica, but they own brands like Ray-Ban, Oakley, Persol, Arnette, and dozens of others. They have the exclusive eyewear licenses to most major fashion labels like Chanel, Prada, Dolce & Gabbana, Ralph Lauren, and DKNY.

    Most consumers don't realize that when you walk into a Sunglass Hut or a Lens Crafters, you see 50 different brands of glasses, but all those brands are owned and produced by the same company that also owns the store that you're standing in, that also owns the vision-insurance plan that you're using to pay for those glasses. It just didn't make sense to us that that was the only way that you could design, manufacture, and sell glasses to consumers.

    Before e-commerce was available as a distribution channel, it was really hard to create a vertically-integrated brand.

    Shontell: Explain what "vertically integrated" means.

    Gilboa: For us that means that we're designing the products, we're doing all the design in-house, we're producing them under our own brand and selling them directly to consumers without any wholesale or any kind of middlemen along the way … As a result we'd be able to cut out all the unnecessary licensing fees, all the unnecessary markups, and offer a product that normally cost several hundred dollars and offer it for less than $100 to consumers.

    Shontell: So you all got to work and the first money you raised was actually from Wharton. You won a business competition there — it was $2,500 or something?

    Blumenthal: We got a few awards from the school, which was super helpful.

    Shontell: They must be really, really glad they made that investment now. They're going to get a nice return, if they haven't already.

    Blumenthal: Well, they were really kind, and it was actually a gift...

    Gilboa: It was a grant.

    Shontell: Oh no! Poor guys. Missed opportunity.

    Blumenthal: We try paying them back in internships.

    But what we did was, the four of us — Jeff, Andy, Dave and I — got together and said, "How do we want to do this?" We decided that we all wanted to be equal partners. We each committed to putting in our life savings, which at the time was about $25,000 and if the company really demanded it, we would each put in an additional $5,000. Of course it did need that, so we started the business with $120,000. That enabled us, on a shoestring, to design our first collection and produce an initial inventory of frames. We designed a website because we needed some place to sell our glasses. Then we hire a PR firm to help us get some attention. When I say do this on a shoestring, we used to go to TD Bank, steal pens, and steal office supplies from other people.

    We were able to get meetings with Vogue and GQ. We were building this fashion brand and we wanted to be in the best men's book, which was GQ, and the best women's fashion book, which was Vogue. We launched and the company just took off like a rocket ship.

    Shontell: It's pretty hard to get Vogue interested in a startup no one's ever heard of.

    Blumenthal: We were really fortunate for a couple of reasons. One is I think founders and CEOs often take credit for being the smartest people in the world, but so much is serendipity and timing. We were one of the first of these vertically-integrated brands, so the story was novel.

    We have this Home Try-On program where people select five frames, then we ship it to you free of cost. That was a completely novel idea that writers could write about. I think we have a very specific design aesthetic and our frames were beautiful. They were made from and continue to be made from some of the most premium materials like cellulose acetate, that we work with a 150-year-old family-owned Italian company. So we had all the building blocks there. Of course we had our social mission.

    Shontell: That was in place from the beginning? That's where you give a pair of glasses away for every one that's sold, right?

    Blumenthal: From day one. Dave and I and Jeff and Andy ... It's one of our first conversations: "What kind of business do we want to build?" We wanted to build a business that was going to have a positive impact on the world where we were going to be excited to come to work every day. As we were thinking about what does that actually mean in practice, we thought it's an inherent public good to bring down the price of a pair of glasses from $500 to $95 here in the US, but we knew that even at $95 there were lots of people who still needed glasses who didn't have them. So we decided, "Let's commit to distribute a pair of glasses for every pair that we sell, because that would actually be impact."

    Shontell: So that's expensive, especially for a shoestring budget like you were saying. How important do you think to getting traction is a social component like that? It's a strategy that Tom's has famously used, a couple different brands have famously used it.

    Gilboa: There's no question that we'd be more profitable if we didn't have a social mission built entirely ...

    Shontell: When you say profitable, are you profitable?

    Gilboa: As a private company we don't really talk about that. We've had periods of profitability. We're investing in a lot of growth right now. There's no question that a bottom line would look better in the near term if we didn't have these additional expenses. But we really do it as the best long-term return we can get on those dollars, understanding that we're having an impact. We've distributed millions of pairs of glasses to people in need around the globe and so seven years in, have already had a pretty significant impact.

    How to get featured in Vogue and GQ when you launch — and then sell out of everything with a 20,000 person waitlist 

    warby parker sohoShontell: I just wanted to go back a little bit to how you all started getting traction in the first place. I'm sure the magazines helped, but as we often find, you can get a bump in press and then you have to maintain that. So what did your traction look like? When did you actually have a lot of sales rolling in and know that this was going to stick?

    Blumenthal: When we got those features in Vogue and GQ, it was literally that moment that the business took off. We had actually ... Our website wasn't ready to launch and the fashion director at GQ calls us up and is like, "Guys the magazine's going to hit newsstands any day now, where is the website?" Because we were going to be in the March issues of GQ and it was February. We thought, "Oh, we have a whole month." Just to show you our naivete, it was like, "No, the March issues comes out in February." We literally scrambled, got the website up. We ended up hitting our first-year sales targets in three weeks — sold out of our top 15 styles. Had a wait list of over 20,000 people. It was mayhem and the question is, "How do we maintain that momentum?" That was all about customer experience, so how do we make every single person have an exceptional experience, even when it's a crappy one?

    To this day, you call Warby Parker and a human being answers the phone within six seconds. We have a net promoter score, since inception, in the 80s. I think right now it's 84. For those who don't know, net promoter scores is a measure of satisfaction to give you a sense. Cable companies have negative net promoter scores and most other optical retailers are in the single digits. So when we make people happy, they're more likely to tell other people about us. Word of mouth since inception has been the No. 1 driver of sales for us.

    Shontell: If you all are this successful right out of the gate, I'm sure Luxottica, when they hear about you, is not very pleased. What was your first interaction with them like? I'm assuming they tried to either crush or bite you.

    Gilboa: Their former CEO flew up from Milan to meet with us pretty early on in the business, I think a couple of years in. Neil and I went to meet him at their corporate offices. We kind of told the team half-jokingly, "Here's the address we're going to, if you don't hear from us in two hours, send the cops in." They're certainly aware of what we're doing. It's a massive company and it's an even bigger industry. Even though we're growing quickly and taking share, they have their established business that's still doing well and I think there's plenty of room for more than one player in the space.

    How to run a billion-dollar business with 2 CEOs

    Dave Gilboa Neil Blumenthal Warby Parker CEOsShontell: An interesting thing that you all did when you were setting up your business is, you're both here, you're both still co-CEOs. Sometimes people do that for a little bit, sometimes not at all, usually it's just one. So how does this work? I think I saw you joke on Quora that you flip a coin when you disagree?

    Gilboa: There are four of us who started the business together. We were friends first. We got a lot of advice from people, really smart people who told us never start a business with friends, you guys are going to end you up hating each other, maybe suing each other. Four founders is way too many, especially you guys have overlapping skillsets. There's not like there's a technical person and a designer. We said, "Yeah, but we really trust and value everyone's contributions here. Let's just figure out how we can be thoughtful about it."

    That started, even thinking about future repercussions, so we said, "OK, we're all going to be equal partners here, but let's set up a vesting schedule so that if ... There are so many opportunities at business school, or as we get into this maybe one person decides they want to pursue something else. They should get credit for time served." So we had a structure that got all four of us vesting through graduation and also set up some formal structures around feedback. We had 360 reviews even when there were four of us. We'd go to our favorite bar and ...

    Shontell: How does that work?

    Blumenthal: It was a little awkward at first.

    Gilboa: We'd have one person in the hot seat talking about how they think things are going. Then the other three people would chime in.

    Blumenthal: If you were going last, that's when you really got it.

    Shontell: Yes, because everyone's been building on what you've been saying against them for the last half hour.

    Gilboa: And a number of us had worked at places like Bain & Company where they have really formalized feedback processes. So we tried to bring in what we thought was effective from some organizations that we'd been a part of and build that into the foundation of the team when it was just the four of us.

    So we launched the business in February 2010. We graduated that May and at that point, Jeff and Andy left day-to-day roles. There are still all four of us are on the board. Neil and I, we're going to stay on to run the company and we had been friends first, then had been operating as four equal partners. We discussed a bunch of different structures that could make sense. Does it make sense for one person to be CEO, the other chairman of the board? One person CEO, the other president? Do we even need titles at all?

    We realized that the most effective way to work together is to just continue how things had been going and just think of ourselves as partners. But we wanted to make sure it wasn't confusing to the team as we hired people and wanted to avoid a situation where, "If mom says no, go ask dad." We tried to be really thoughtful and make sure that every department, everyone in the organization only has a line of reporting into one of us. So we each have six or seven departments that role up into each of us. Effectively it works more like a Venn diagram where if there's a major decision about strategy, or brand, or e-commerce, or where we're putting retail stores, we're both involved.

    Shontell: It sounds like no investors were scared away by this either. I mean, you've raised hundreds of millions of dollars at this point. I guess all they really care about is, are you selling stuff? Are the numbers there?

    warby parker dave gilboa neil blumenthalBlumenthal: Frankly, the proof was in the pudding. We didn't raise capital until about a year and a half after launch, when we completed our first round. We had all this success — "success" I have air quotes up because it was only a year and a half. It was clear that the business model was working, we had a brand that resonated, so I think one of the things investors always look at is the team.

    Shontell: What do you think is the most critical thing you all did in that first year to really cement yourselves? Was it that press? Was it going to GQ and Vogue? What was the thing that you think made it that you were going to work as a startup?

    Blumenthal: I think our success does start with the fact that this was a solution to a very real problem. If you asked people, "How much did you pay?" for their glasses, they lower their shoulders, they get a little sad and embarrassed by how much they've spent on eyeglasses. This was a real consumer issue.

    The timing worked when e-commerce was on the upswing. We were one of the first digitally native or vertically integrated brands. This was also a time where, before Facebook had fully monetized ... I don't know if people remember, but there used to be these fan pages and you would try and get people to like your page. With our Home Try-On program in particular, we saw so many customers would get their Home Try-On, get their five pairs of frames at home, try them on, take pictures of them and then post it to Facebook and say, "Hey, which frame do I look best in?" So there was this viral nature to our business that we didn't have to pay for early on. Again, there was some luck there from a timing perspective.

    Shontell: You all at this point have sold over a million pairs. That's dated information I believe. So what's the latest that you can share?

    Gilboa: Again, we don't share much about our financials. What we announced was that we've distributed over 2 million pairs of glasses through our "Buy a Pair, Give a Pair" program.

    Shontell: A million for you and then a million that you give away would be the implied.

    Gilboa: No, multiple millions that we've sold and multiple millions that we've distributed to people in need.

    How to scale a company to 1,000+ employees and build good corporate culture when you've never been a CEO before

    Warby Parker officeShontell: What have you learned scaling a company to a thousand-plus employees? Hundreds of millions raised. That can't be easy to do the first time around. How have you figured it out?

    Blumenthal: One of the things that we decided early on was that, we're building a brand and a brand is not just a logo. It's not just a visual identity. A brand is a point of view and that point of view needs to be lived. It really comes down to the culture of the company right?

    When somebody joins Warby Parker they get a copy of Kerouac's "Dharma Bums" because the name Warby Parker comes from two early Jack Kerouac characters, Warby Pepper and Zagg Parker. They get pretzels from Martin's handmade-pretzel company, which sells pretzels out of the Union Square farmers' market because that was within a block of our very first office and we used to get pretzels from there all the time. I could go on and on, but we've established a bunch of rituals that we think reflect the values and the culture of the company we're trying to build.

    Gilboa: We realized when we were 20 or 25 people, that we'd been hiring a certain type of person that reminded us of ourselves on the founding team a bit, but we hadn't really articulated the criteria or the values that were most important to us as an organization. We went through an exercise with the entire company, asked people to write down what are individual values that are important to you, in people that you want to associate with in your life, completely outside of a work context. We got over 200 different values and lead a bunch of discussions about which values were the same, which ones were different, which ones were critically important, which ones were nice to haves.

    Then Neil and I took those and created our core values at Warby Parker.

    Why Warby Parker's founder tries to spend 90 minutes a day doing nothing

    warby parker ceo david gilboa neil blumenthalShontell: Do you still do this 90 minutes a day just for you — no one can interrupt, no one can have meetings with you? What happens in that time? How's this good for business?

    Gilboa: I take an hour-and-a-half nap every day — no. Neil and I realized a couple years ago that we got to the office and we were just in back-to-back, to back-to-back to back meetings, often 16 meetings in a row with no breaks. It didn't really leave us time to think or prepare for the meetings and sometimes we were forced to email while we're in the meetings, trying to multi-task. It wasn't good for anyone.

    We met Jeff Weiner, the CEO of LinkedIn, and he mentioned that he schedules 90 minutes of unstructured time in his day. So I went back and grabbed our assistant and said, "OK, we need to do this." I'd say it worked for a while. More and more those 90 minutes tend to get scheduled over as things pop up, but we still try to leave some time in the day where we can think and not get bogged down, kind of the hamster wheel where there are always things that we could be doing, always meetings that we can be in. We try to ask ourselves, "Am I the only person in the company that needs to be in this meeting?" If not, maybe somebody will just send me notes afterward, or I'll catch up with someone in a one-on-one and try to spend more and more time thinking about what we want this company to look like in 2020 and beyond and focus on bigger strategic initiatives.

    Shontell: There are a few trends within the startup and tech world happening. One fun thing, as glasses pros, what do you think of Snap Spectacles?

    Blumenthal: We think they did a very good job at positioning spectacles as a toy and limiting expectation. Which was in stark contrast with Google Glass that was marketed as, "This is something you're going to wear 100% of the time, it's going to radically change the world." Those are hard expectations to live up to.

    Why Amazon won't crush Warby Parker

    Jeff BezosShontell: Another question is Amazon. Amazon keeps touting, "We're the No. 1 store for millennials. Everyone's buying everything from us. We're the everything store." Why can't they just crush you?

    Gilboa: I think Amazon's a company that we have a tremendous respect for and it's pretty incredible what they continue to achieve as they extend their products and services. I think where they haven't competed yet effectively is in building branded products and experiences. While they certainly have private label offerings, in terms of a holistic authentic brand that resonates with consumers, I don't think that's part of their DNA, at least not at this time. I think the other aspect that is a bit more complicated about our business is that for prescription glasses, we have to custom manufacture the product after you order and that's historically not something that Amazon has done either. They're really good at delivering products that are prepackaged and getting them to you as quickly as possible, but mass customization supply chain is not something that I think they've successfully done in the past.

    Shontell: Warby Parker is a "unicorn" company. That's a buzzy word people use when a company's reached a valuation of $1 billion. There are a lot of unicorns in tech. What do you think is going to happen to all these companies that have raised so much money?

    Blumenthal: There are cycles in business, whether they're consumer cycles, whether they're investing cycles — there's no question that over a fairly decent amount of time it's been a pretty entrepreneurial-friendly fundraising environment. There were some companies that were using equity capital to just sort of put on the marketing spigot and doing things that were not sustainable. I think that we've always tried to build our business in a sustainable way. An example of that is from a marketing perspective. We're pretty disciplined in that we will only spend the amount of money that will enable us to have positive contribution margin on somebody's first purchase because we don't know necessarily how much it's going to cost for them to buy additional glasses from us or what have you. Whereas there were some other businesses that would be around for six months and were projecting that their customers over the next five years were going to spend X amount, so you can spend Y amount on marketing to acquire them.

    So, when it is an entrepreneurial-friendly investing environment, sometimes there tends to be, reckless is maybe too strong a word, but you know, not disciplined spending. I think we'll see. We've already seen some businesses that were high flyers come down to earth. Then there are some really good companies out there that are delivering great value and great experiences and they'll continue to grow and their valuations will continue to grow.

    How to build a billion-dollar brand in record time 

    Dave Gilboa Neil Blumenthal Warby ParkerShontell: What advice would you give to someone who's trying to build an established brand?

    Blumenthal: From a brand perspective, it takes time to build a brand and you need to be super thoughtful of what it is that you're trying to build, what you're trying to solve, what are the attributes of that brand that are in line with that mission. Really thinking through the brand architecture.

    From an operational standpoint, Dave and I think a lot about these moments where you feel like you have to take these giant leaps of faith and there's this belief that entrepreneurs are these crazy risk takers that are willing to jump out of an airplane without a parachute. It's simply untrue, but when we're looking down the cliff and looking into the abyss, we take a step back and try to break down that decision into a lot smaller ones. Effectively we de-risk it. The better analogy than jumping out of an airplane without a parachute would probably be, we actually build, double-check the parachute before jumping out of the airplane and we jump out of the airplane while the airplane's on the ground.

    Gilboa: The other piece of advice that we often give and try to practice is staying focused. We see a bunch of companies that tend to get distracted. For us we're asked all the time, "Have you thought about selling products other than eyewear? Why aren't you international yet?"

    Shontell: You sell everything in the US?

    Gilboa: Just US and Canada. We think there's a huge global opportunity and we will tackle that at some point, but we've really just tried to stay maniacally focused on service our existing customer base before moving on into adjacent opportunities … I can't think of many businesses that have failed because they were too focused.

    An IPO in 2018?

    Shontell: There's one more question that you guys get all the time. The IPO market: Is it beckoning? Is it calling to you now, especially since Snapchat went out and it wasn't so bad?

    Gilboa: Certainly a lot of people are asking us about it. We've raised quite a bit of capital, $215 million. We have a good chunk of that still on our balance sheet, so we view an IPO as a financing event. We don't need capital at the moment, so we can be patient and our investors are very happy with the way the business is going, we're not getting pressure there. It's probably a path that we'll go down at some point, but not something that we're rushing into.

    Shontell: But what about liquidity for some of your employees? Or for even for you two? That's also a liquidity event. Is that something you think about? Seven years tends to be about the time when people get antsy.

    Blumenthal: It's been seven years since our launch, but since we've taken equity investment it's been six, if that. So a little bit less.

    Shontell: So you've got one more year, you're saying?

    Gilboa: Part of the deal when you take venture financing is that you're committing to have a liquid exit opportunity. We will have that opportunity for our investors, we also think about how we can provide liquidity for our employees. So it is a path that we'll likely go down, but again want to make sure we're doing it for the right reasons and with timing that makes sense for us.

    SEE ALSO: The 'messy' way a former Goldman Sachs employee grew a $150 million startup, then turned half his employees into millionaires

     A founder who sold his startup for $200 million paid for all 160 employees to party with him in Vegas — 'On a scale of 1 to OMFG, it was probably a 10'

    Join the conversation about this story »

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    warby parker foundersNew employees at billion-dollar glasses brand Warby Parker get the same welcome gifts: a copy of Jack Kerouac's "Dharma Bums," and Martin's handmade pretzels from the Union Square Greenmarket.

    According to the founders, those gifts are key to building the company culture.

    In "Success! How I Did It," a Business Insider podcast that follows the career paths of some of today's most accomplished people, Alyson Shontell, the editor in chief of Business Insider US, spoke with two of Warby Parker's four founders: Neil Blumenthal and Dave Gilboa, who also serve as co-CEOs.

    When Shontell asked how they foster a strong company culture while ballooning to over 1,000 employees in only seven years, Blumenthal explained that the first step was viewing the brand as not just a logo, but as a point of view.

    "When somebody joins Warby Parker they get a copy of Kerouac's 'Dharma Bums' because the name Warby Parker comes from two early Jack Kerouac characters, Warby Pepper and Zagg Parker," he said. "They get pretzels from Martin's handmade-pretzel company, which sells pretzels out of the Union Square farmers' market, because that was within a block of our very first office and we used to get pretzels from there all the time. I could go on and on, but we've established a bunch of rituals that we think reflect the values and the culture of the company we're trying to build."

    Monday morning contemplating 💻🤔#haikuoftheweek

    A post shared by Warby Parker (@warbyparker) on Jan 30, 2017 at 8:05am PST on

     

    Gilboa added that establishing those values and culture was a team effort. He explained:

    "We realized when we were 20 or 25 people, that we'd been hiring a certain type of person that reminded us of ourselves on the founding team a bit, but we hadn't really articulated the criteria or the values that were most important to us as an organization.

    "We went through an exercise with the entire company, asked people to write down what are individual values that are important to you, in people that you want to associate with in your life, completely outside of a work context. We got over 200 different values and lead a bunch of discussions about which values were the same, which ones were different, which ones were critically important, which ones were nice-to-haves."

    They went through those answers to create the company's core values. And as Gilboa told Business Insider previously, they look for employees who believe in those values. They want people who are "passionate about the brand and want to be at the company for the right reasons," he said. 'That don't look at it just as a job, but are really excited to build something much bigger as part of our team."

    Listen to the full episode:

    Subscribe to "Success! How I Did It" on iTunes to hear the latest episodes.

    SEE ALSO: The founders of Warby Parker reveal how they run a billion-dollar glasses brand with two CEOs, and why Amazon won't crush them

    Join the conversation about this story »

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    sally salad robot chowbotics 3474

    In Silicon Valley, you can buy everything from pizza to coffee made by a robot.

    Sally the Salad Robot, which debuted at San Francisco coding academy Galvanize on April 13, is more glorified vending machine than automated chef. She (it?) dispenses 21 ingredients to create more than 1,000 different salads, and each takes about a minute to make.

    Deepak Sekar, CEO of robotics startup Chowbotics, says Sally's goal is to provide workers with quick and healthy meals they can buy on-site. Sekar hopes to install about 125 salad-making bots in Bay Area tech offices through the end of 2017, and is in talks with WeWork and Amazon to bring Sally to their workspaces.

    chowbotics sally salad robot 2

    Three years ago, Sekar — an inventor who holds over 100 patents — hacked together a machine that combined spices and vegetables to make curry. He decided to turn his side hobby into a business when a Silicon Valley investor (and owner of 15 McDonald's restaurants) took interest. Sekar got a team together and worked for another two years on a salad-making version.

    Sally can make salads, but she relies on humans to get part of the job done. The robot has canisters for different ingredients, which a company can source on its own or buy from Chowbotics. Every day, a person loads the canisters and replenishes them throughout the day.

    When a customer orders a salad from Sally, they can make a custom combination or choose from a handful of signature salads created by Chef Charlie Ayers, who's known for being the first executive chef at Google. The menu rotates as seasonal ingredients become available.

    sally salad robot chowbotics 3529

    The California Love Salad features ripe cherry tomatoes, bell peppers, cucumbers, Kalamata olives, and croutons served over a bed of kale. The ingredients are cut into small pieces, which Ayers says is good for computer programmers who want to graze while they work. 

    Sally can't mix salads yet, and avocado is noticeably missing from the ingredients menu. Sekar says the fruit is too soft to be handled by the robot, but the company is working on a solution.

    The organizations that install Sally will determine the various costs of the salads. At Galvanize, the average salad will go for $8.

    Chowbotics plans to sell the robot to companies for $30,000, and offers a monthly payment plan to make it affordable for midsized offices. The price will probably exclude small startups; Sally makes more sense for companies with cafeterias or infrastructure for storing ingredients.

    Sekar says the cost is worthwhile if companies can squeeze more time out of their employees. He suggests that if just five employees (who make $100,000 each on average) decide to work until 8 o'clock five days a week — because they can grab dinner from Sally rather than scavenge for food at home — the value of their time comes in around $10,000 a month.

    "Our revenue model is what I call SaaS — Salad as a Service model," he says.

    SEE ALSO: Apple and Google alums have unleashed self-driving food delivery robots in San Francisco

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    Austin Russell Luminar

    There's a race to the bottom in making self-driving cars more affordable than ever, but Austin Russell has been running an entirely different race.

    The 22-year-old college dropout has been sitting quietly for the last five years and watching as manufacturers rush to create cheaper versions of Lidar, a laser-based radar system that's a key component in self-driving cars since it allows cars t0 "see" the road. 

    Russell, now the CEO of self-driving car technology startup Luminar, decided to skip working on a cheap system, instead spending the last five years with cofounder Jason Eichenholz putting together a Lidar system they hope is better than the rest.

    “There’s a reason we’ve been in stealth so long," Russell said. "If we announced our plans five years ago, everybody would be doing this.”

    Comes down to seconds

    Just four piers down from San Francisco's famous seals at Fisherman's Wharf is an empty cruise terminal filled with a smattering of fake deer, mannequins, and tires strategically stationed at points on the floor.

    Luminar warehouseAt one end of the warehouse, Luminar has installed its Lidar device into a car, pointed at its target: A blackboard as tall as an SUV, sitting next to a "200 meter" sign. 

    This had been Russell's target to hit before publicly debuting his five-year-old startup, Luminar. 200 meters is longer than most Lidar systems for self-driving cars can see, and seeing dark black objects reliably at that distance is even harder.

    During a press demonstration at the pier, Russell and Eichenholz's system zoomed in on the black billboard in the distance. The Lidar was even able to pick up the pigeon walking in the middle of the fake deer on the floor, nearly 100 meters away from the car.

    Russell was a kid of barely legal driving age when he decided to conquer self-driving cars. He'd been a tinkerer most of his life.

    He memorized the periodic table by two, transformed a Nintendo game handset by the sixth grade, and made a holographic keyboard in high school. In 2012, Russell founded Luminar and soon after started doing independent research at the Beckman Laser Institute.

    When he got to Stanford University in 2013, venture capitalist Peter Thiel paid the then-18-year-old Russell $100,000 to drop out of school. His Thiel fellowship bio said he had a "passion for developing innovative optoelectronic technologies". For Russell, being innovative meant having the patience to build a better Lidar that would not only advance an industry, but do it in a field that could save people's lives.

    "We’re able to see seven seconds out instead of one second," Russell said. "That’s a really big breakthrough."

    While some manufacturers say they can produce a Lidar that sees out to 200 meters, most advertised models can't scan that far ahead. Going highway speeds, that means a car equipped with Luminar's Lidar would have seven seconds of reaction time when it identifies an object at 200 meters compared to the typical few seconds most Lidar systems provide, Russell claims.

    Luminar

    Of those that can hit the 200 meter mark, Eichenholz says Luminar is in a class of its own because it can see objects with 10% reflectivity at that distance. That low-reflectivity number is key because objects like black cars and even people wearing black t-shirts can be harder to spot since the color is less reflective. 

    "You don't have to say everyone has to wear a white t-shirt," Eichenholz joked.

    An entirely different system

    Russell and Eichenholz claim Luminar can do all this because they're not using the same off-the-shelf parts as other Lidar companies. Instead, they spent the last five years designing a system from scratch. 

    For starters, the company eschewed traditional Lidar designs and build a new one on a different wavelength than traditional systems. While many Lidars systems operate at a 905 nano-meter wavelength, Luminar is at a 1550 nano-meter wavelength, which means it can emit 68 photons for every single one put out on the traditional wavelength, making it more powerful but still safe for eyes.

    “Eye safety is a really big deal in this industry, It’s actually is a limiting factor of a lot of Lidar sensors today," Russell said. "You can’t fry people’s eyes with sensors."

    Austin installing Luminar LiDAR onto vehicleThe decision to switch wavelengths set off a cascade of events for the startup. Namely, there were no off-the-shelf products it could use. It's had to do everything from creating its own chips and circuit design to manufacturing its own indium gallium arsenide, a chemical compound that it's using as a receiver in its Lidar unit instead of silicon. 

    The company tried 2,000 different ways to construct a Lidar system before deciding on one that was both functional and manufacturable, Russell said.

    The company raised $36 million from venture capitalists including GVA Capital, Canvas Ventures, and the 1517 Fund, a venture firm backed by Thiel. With the money, Russell acquired one of Luminar's suppliers to lock up its supply chain from competitors, He also brought on Eichenholz's previous company, Open Photonics, and named him cofounder and CTO. 

    Jason Eichenholz Luminar

    While Russell oversees the company's Silicon Valley office, a converted tank repair facility in Portola Valley, the majority of the company's 150 employees are based in its Orlando, Florida office, which contains both R&D headquarters and 50,000 square foot manufacturing facility. 

    Even though Luminar has stayed quiet for the last five years, it's already produced 100 units for its strategic partners, which include both unidentified automakers and software companies. Now, Luminar is ready to begin its first major commercial run of 10,000 units, set to be distributed among many customers instead of just putting it in the hands of a few. 

    "Our plan is to power every autonomous vehicle that’s produced and make them so they can truly be safe and autonomous," Russell said of his long-term vision. 

    Our plan is to power every autonomous vehicle that’s produced and make them so they can truly be safe and autonomous

    To do that, the college dropout's startup will have to overcome major incumbents like Velodne as well as another onslaught of software companies — like Google and Waymo  that have developed their own in-house Lidar systems. But Russell is confident that Luminar's system will become the new standard, and he's not worried that everyone will soon be joining his race lane now that his company's plans are public. 

    "The key thing here is that starting this five years ago we have a huge head start and advantage," he said. "No matter how much money you throw at this problem, you don’t need hundreds of millions or billions to develop this. It’s about the time it takes."

    SEE ALSO: Uber isn't sure if it can 'remain a viable business' without building self-driving cars

    Join the conversation about this story »

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    Yelp's Eat24 food delivery service partnered with robotics startup Marble to build a food-delivery robot. Although it only delivers to San Francisco’s Mission and Potrero Hill Districts, for now.

    The robot uses cameras, ultrasonic sensors, and lidar to navigate. Customers are sent a four-digit code to get their food. 

    Marble hopes to make delivery more efficient and affordable for restaurants. The company has received $4 million in seed funding to continue development and expansion. 

     

     

     

     

    Join the conversation about this story »


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    Bryan Goldberg Bustle Bleacher Report founder

    • Bustle has acquired Elite Daily, a millennial site, from Daily Mail.
    • The deal was a mix of cash and stock. The exact amount was undisclosed but seems to be less than the about $40 million Daily Mail paid for Elite Daily in 2015.
    • In late 2016, Daily Mail wrote down its acquisition of Elite Daily, citing poor performance. But Bustle's CEO thinks the property is still valuable, particularly because of its video and social media efforts.
    • Bustle is changing the name of its parent company to Bustle Digital Group. Combined, its three properties could have a readership of about 80 million unique monthly visitors.

    Bustle, a digital media company that caters to millennial women, has acquired Elite Daily from Daily Mail.

    Bustle now owns three web properties — Bustle, Elite Daily, and the young-mom site Romper— and is changing the name of its parent company to Bustle Digital Group. Bryan Goldberg, the founder and CEO of Bustle, says BDG will reach about 80 million unique monthly viewers, per Google Analytics.

    Goldberg says Bustle has about 50 million readers, while Romper is nearing 10 million. Elite Daily, a general interest site similar to Bustle, could add another 20 million or so.

    Bustle's readership appears to be stagnant; the site boasted 45 million monthly uniques in October 2015, the same month it launched Romper. And Elite Daily's 20 million is down significantly from its high a few years ago.

    Bustle says most of its growth over the past few years has been on other platforms like Instagram, where its audience grew 600% in 2016 and is making "significant revenue" from Stories. Bustle expects to bolster those cross-platform efforts by adding Elite Daily.

    Another man's treasure

    Bustle quantcast

    Goldberg, who founded the sports site Bleacher Report and launched Bustle in 2013, believes he has acquired a "true trophy" in Elite Daily and says he has wanted to own it for a long time.

    "I've been working in this market for four years now," Goldberg said. "Elite Daily, Refinery29, and Bustle are what I hear when I ask [our users] what they read."

    Elite Daily's audience skews slightly younger than Bustle's, with core readers between 18 and 24. But Elite Daily has had a turbulent few years — both its audience and value have tanked.

    Daily Mail purchased Elite Daily for about $40 million in 2015. At the time of the sale, Elite Daily had about 40 million monthly unique visitors. But the media landscape — including algorithms on social media platforms — has changed significantly since then. A lot of the viral traffic Elite Daily enjoyed from Facebook has disappeared, and now its on-site readership is half of what it was.

    Daily Mail recently wrote down its purchase of Elite Daily, Recode's Peter Kafka reported, citing "poor performance." Both of Elite Daily's founders have moved on from the company.

    When Business Insider told Goldberg he blew millions on a dead company, he said he didn't care.

    "This property is valuable. I know it's valuable," Goldberg said on a call. "If there's one person who doesn't care what the press thinks, it's me.

    "I can't speak to Elite Daily's past, but this is a site that has always been extremely valuable in my estimation," he added. "It is a great property, and we're going to show everyone how great it is."

    A video and social boost

    elite daily acquisition team

    Goldberg's plans for Elite Daily may have more to do with boosting Bustle's video and social media efforts than anything else. Elite Daily produces original videos that generate about 60 million monthly views, Goldberg says, while Bustle's early video efforts generate about 10 million.

    Additionally, he says Elite Daily's brand has "off the charts" social engagement, with about 6 million Facebook and Instagram followers.

    "This deal is very much about us doubling down on platform revenue," Goldberg said. He estimates BDG will double its video inventory through the acquisition.

    It's unclear who will run Elite Daily under BDG, or how exactly the teams will be integrated.

    "We are endeavoring to keep as many team members as we can," Goldberg said.

    Goldberg struck up conversations with Daily Mail a few weeks ago. Jon Steinberg, who was the US CEO of Daily Mail, oversaw the purchase of Elite Daily in 2015 and now sits on Bustle's board. Steinberg recused himself from Bustle's and Daily Mail's acquisition talks.

    While the acquisition price is undisclosed, it was implied that BDG paid less than Daily Mail did for the property. The deal was a mix of cash and equity.

    Bustle has raised $50.5 million from investors and said its recent $12 million round would be used for acquisitions. It generated about $30 million in revenue in 2016, according to The Wall Street Journal.

    SEE ALSO: INSIDE MEDIUM'S MELTDOWN -- How an idealistic Silicon Valley founder raised $134 million to change journalism, then crashed into reality

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    The Insider Picks team writes about stuff we think you'll like. Business Insider has affiliate partnerships, so we get a share of the revenue from your purchase.

    STORY_linjer classic watch_89afa5fd d3f0 4b12 87e6 df86bb24e6eb_2048x2048

    At Insider Picks, we're dedicated to finding emerging brands with products that will add value to your life, whether it's a set of nice sheets for your bed, a pair of stylish computer glasses, or a hoodie that will last you a decade.

    Linjer is one of them. With millions in sales after only a few years of operation, the leather-goods company has filled the demand for affordable luxury and is poised to become the industry's next breakout watch brand.

    Launched in 2014 by Jennifer Chong and Roman Khan, Linjer was founded on the belief that shoppers shouldn't have to compromise quality for a good deal.

    "We were fed up with having to choose between fast-fashion products that don't last and luxury-branded goods that are really expensive," Chong told Business Insider. "Many of us are left with little choice but to buy fast-fashion that is bad for the environment, bad for our wallets, and in many cases bad for the workers who make it."

    Linjer launched its first Kickstarter campaign for bags two years ago. Not only did the campaign raise over $350,000, but Linjer made $1 million in sales in its first 14 months. 2016 was projected to be another banner year.

    Chong and Khan recently expanded Linjer with a line of minimalist watches for men and women.

    "We didn't want the experience of checking the time to be stressful, so we decided to make old-school analog watches to bring some 'analog peace' into our lives," Chong said.

    Linjer spent 18 months perfecting two watch designs, and it paid off. The Minimalist and the Classic watches each come with vegetable-tanned leather straps, Swiss movements, and scratchproof sapphire crystals. Best of all, both retail for just $249.

    The watches raised nearly $1 million on Kickstarter. Now the company is just trying to keep up with demand.

    The Insider Picks team recently got the chance to try out Linjer's watches. Read our thoughts and see if you want to buy one for yourself.

    watch silver black_18f3b133 87f6 4e9d a32e 76710829dba5_1024x1024

    Breton Fischetti, senior director, commerce:

    The watch tried: Linjer The Minimalist Men's Watch, $249

    It would be hard to think of a more simple but well-designed watch. The face is easy to read but still minimal, and having the date is a must for me, so I'm glad they included that feature. The leather band feels sturdy and well-made, and while not immediately soft, I get the feeling it's going to break in with consistent wear.

    This is also the lightest watch I've worn in years. I can barely feel it while I'm wearing it. It feels like a great design and value for the price; you get everything you need and nothing you don't — plus it will look good in both formal and casual settings.

    Ellen Hoffman, commerce editor:

    The watch tried: Linjer The Classic Women's Watch, $249

    I’m not a regular watch-wearer, mostly because I never found a watch I wanted to wear every day. But Linjer might turn me into one yet.

    I value form more than function when it comes to watches (I always have my iPhone within arm's reach that I can check for the time); I see them as pieces of jewelry. To that end, I love the look of Linjer's watches. I got the "Classic" watch with a 34 mm face, rose gold case, and navy leather strap. Rose gold seems to be a real love-it-or-really-really-don't shade of gold, but I'm a big fan, and I'm excited it's an option Linjer offers. I'm also a big fan of this watch's thin band and smaller face; they give it a feminine touch. To echo Breton, this is also the lightest watch I've ever worn. I keep forgetting I’m wearing it.

    Overall, it feels and looks a lot nicer than its $250 price suggests.

    watch silver navy_1024x1024

    Tyler Lauletta, commerce reporter:

    The watch tried:Linjer The Minimalist Men's Watch, $249

    I've found that in most cases, at least for my taste, less is more when it comes to watches. That's why I'm really enjoying my watch from Linjer. It's extremely clean, the perfect weight, and looks great on my wrist. The leather strap is comfortable enough that it's easy to forget it's on my wrist at times. If you're looking to bring some simple sophistication to your watch collection, Linjer is a great option that doesn't break the bank.

    Kelsey Mulvey, commerce reporter:

    The watch tried: Linjer The Minimalist Women's Watch, $249

    Writing for Insider Picks has turned me into a regular watch-wearer. While I still check my phone for the time, having a watch strapped on my wrist makes me feel more put together. All of Linjer's watches are free of logos, so you can easily dress them or down. The brand also lets you choose from three different sizes, so I went with a bigger watch face — not all watch brands give their customers as much autonomy.

    linjer watch packaging_2048x2048

    Linjer's men's and women's watches all retail for $249, and they're available in a bunch of great colors and sizes.

    DON'T MISS: This site offers high-end watch brands at some of the most competitive prices you’ll find

    SEE ALSO: I've written about a bunch of great watches, but this is the one I wear to work every day — here's why

    DON'T MISS: We tested what might be the best dress shoes out there

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    The Skimm founders CEO Carly Zakin Danielle Weisberg

    Carly Zakin and Danielle Weisberg cofounded theSkimm, an email newsletter sent to 5 million subscribers every day at 6 a.m.

    TheSkimm picks the most important new stories of the day and tells readers what they need to know in a conversational tone that's full of millennial lingo. Loyal subscribers include Oprah and Hillary Clinton's former campaign manager, John Podesta.

    The business was far from easy to build. Zakin and Weisberg quit jobs at NBC only to get turned down by "hundreds" of venture capitalists, who saw no value in creating an email company. Together, the pair went into credit-card debt, which they say they finally paid off just last year.

    We sat down with Zakin and Weisberg to talk about their battle stories, how they eventually got investors on board, and how theSkimm took off, all on this episode of "Success! How I Did It," a Business Insider podcast hosted by US editor in chief Alyson Shontell that explores the career paths of today's most accomplished and inspiring people.

    Subscribe to "Success! How I Did It" on Acast or iTunes. Check out previous episodes with:

    The following transcript of the interview has been edited for clarity and length.

    A post shared by theSkimm (@theskimm) on

    Alyson Shontell: Carly Zakin and Danielle Weisberg launched theSkimm, a morning email newsletter, in July 2012. Business Insider wrote the first article about it back then, and today the newsletter has over 5 million subscribers, including Oprah and Hillary Clinton's campaign manager, John Podesta, as we learned last year after WikiLeaks' publication of Clinton's hacked emails.

    To start, I wanted to go back to 2012 and even a little before that. You met as students studying abroad in Rome. You both worked at NBC and then quit to start a newsletter. Tell me about that process.

    Danielle Weisberg: Thanks for having us — it's exciting to be back here. You wrote the first article about us, so it's a lot of déjà vu. Carly and I met studying abroad in Italy. We had a great time and didn't think about what we were going to do later on. We had really similar backgrounds. We're both storytellers, we love journalism, we love news. It was our passion.

    We started interning for NBC news as soon as we could and we grew up in that world. NBC was our universe — we always wanted to work there. We worked our way up the ladder from intern to full time, and then we were producers, and between the two of us, we worked in pretty much every news division they had.

    We were roommates in an apartment in New York, and we would come home to each other every day and talk about two things.

    One, as clichéd as it sounds, we were very much having a quarter-life crisis. Being 25 and 26 and loving what we were doing but wanting to move up and not wanting to hear that you have to get in line and wait 10 years for a position that might open. That was really frustrating as two people who loved what they were doing and wanted to do more of it.

    The second thing was our friends who were smart and had great jobs and knew everything about their industries would come home and ask us what was going on in the world. That was our job. That's what we did for a living. We read all day long, and we reported on the news and our friends didn't do that. They had other things to fill their time with. It wasn't a matter of intelligence, and it wasn't a matter of interest; that's not what they were being paid to do.

    So we wanted to create a news source that actually brought this audience that was exemplified by our friends, female millennials, who are smart and leading in so many ways, but didn't have a news source that they loved, and we knew that we could create that.

    So the newsletter was never the be-all and end-all. It was the beginning to a very big empire that we knew we could create in harnessing the power of female millennials, and being their go-to source for information that really matters and can drive the big decisions that they're making in their lives.

    Shontell: When you did this in 2012, it felt like newsletters had been there, done that. Daily Candy had been acquired for a ton of money; Thrillist, a popular guy newsletter, had been around for a few years. What made you think that newsletters were where it's at?

    oprah TheSkimmCarly Zakin: It wasn't newsletters that we thought about; it was email. There was a beauty in how naïve we were. We didn't have a tech background. We didn't have a business background. It helped us not overthink things. We just thought — what's the best way to get in front of our friends? We went back and forth. Should we text them?

    We were like, "No, the very first thing you do in the morning is you turn off your alarm, it's on your phone, you grab your phone, and you literally open your email to be like, Did someone die? Am I getting fired? or Is my boss yelling at me? and What did my friends send me? And we knew we had to be in that moment. One of our friends worked in finance, and she left for the office at 5:50 in the morning every morning. So we were like, we gotta get it out to her on that commute. So we chose 6 a.m.

    A lot of the hallmarks of what theSkimm is about, that one-eye-open routine, we call it. Being in that moment and being there at 6 a.m. happened because we were just thinking about our friends' daily experiences. We weren't overthinking it. We weren't like, let's A/B test this. We didn't even know what A/B testing was.

    When we started theSkimm, we started meeting with investors, industry experts, and everyone was like, email is dead — this is a really bad idea. But they would email that to us.

    And we would just laugh at it because we're like, you're saying email is dead, but you're emailing that to us. And we both still read email every single morning. Obviously, since then, we've seen a resurgence of email newsletters, and a lot of that, we've been told, is credited to what we've done.

    But for us, I think we've talked so much about all the things we didn't know. We haven't spent a lot of time talking about what we did know. And what we did know is that we knew how to talk to this audience, who they were, and we also knew that we were not starting an email newsletter company. We knew email was a marketing tool.

    'We made a list of all of the investors, angels, and seed funds, and we would turn anyone who said 'no' red — then the whole list was completely red'

    Danielle Weisberg and Carly Zakin, The Skimm

    Shontell: Talk about quitting your jobs at NBC. Because you did that and bootstrapped for a bit, right? You said just now there wasn't a ton of investor interest, you were first-time founders with no technical background. That's everything that makes a venture capitalist run away.

    Zakin: Yeah, everything that would make you not think "This is a good idea."

    Weisberg: It's funny when people ask that, because they're like, "Oh, you decided to bootstrap it." And we're like, "We didn't 'decide.'"

    Zakin:“Bootstrap” is such a generous term because it makes it seem like we had money to bootstrap. We worked in media in mid-level jobs. We had just over $4,000 between the two of us. We lived in a rent-stabilized apartment downtown and agreed to go into credit card-debt together.

    'Bootstrap' is a generous term. It seems like we had money to bootstrap. We worked in media in mid-level jobs. We had just over $4,000 between the two of us. We lived in a rent-stabilized apartment and together agreed to go into credit-card debt.

    We just both paid off our credit-card debt in the last year or so, and it was a huge sacrifice, that even looking back now I'm like, "I can't believe I made those choices." Because it sounds so unlike myself, it sounds so unlike Danielle.

    Weisberg: The other part, too, is people hear our story now and they think about it as two women decide to quit their jobs and start their own company. Quitting our jobs, it was the scariest day of our life. That was not easy. And those first months ... every point of this company has been hard. That's the case anytime you're building something. But those first months, we only got through it because we didn't have a backup plan. We didn't have a safety net financially or emotionally. This was everything.

    That was our saving grace, because there was no plan B. There was only, "We're on our couch, we can't afford cable, we've maxed out our credit cards, our parents are giving us hugs." But that was the support. Carly's parents made us a lot of dinner. That was it. There was nowhere else to go.

    So when everyone was saying no, and we made a list of all of the people — all of the investors, angels, seed funds — and we would turn anyone who said "no" red. And then the whole list, which was a lot of names, was completely red. I remember a day in our kitchen, we had just gotten off a pitch that again ended with "Thanks so much, not interested," and we just had to make a decision. Are we going to go for this or are we going to go try to get jobs freelancing for the 2012 election?

    It wasn't really even a decision — it was just a half-second to reevaluate where we were, change our pitch a bit, and that was it. That was the closest we've ever come to a crisis of confidence in this company. If you let those things get to you early on, then you don't know what else is coming. There are going to be a lot more challenges.

    Shontell: Had you launched the first newsletter at that point? Why quit your job if you're launching a newsletter to begin with? You can do that while keeping your 9-to-5.

    Zakin: Well, two things. One is we had both weird schedules. I worked daytime and Danielle worked nights. So we couldn't do that. One of us would have had to change our schedule.

    Second, we took a Skillshare class while we were employed, and it was ironic because the class we signed up for was "How to Find Your Business Partner" and that was the only thing we knew how to do. But the person who taught it, Alex Taub [an entrepreneur and investor], became a mentor to us, and he was one of the first people to tell us, "If you're going to start something, you need to be all in. How can you ask anyone to even think about giving you money if you have not made sacrifices to prioritize the effort yourself?'"

    When people come to us and ask for advice on starting a business and are like, "I can't afford to quit," I still have mixed feelings about what to tell them. Who am I to tell someone what financial decisions they should make? But for us, we were asking people to believe in us, and we had to show that we believed in us so much that we were willing to take a huge risk ourselves, quit our jobs, have no financial security, and give it a shot.

    So we took that approach. That's not for everybody. I don't know if it could have worked out differently. But there was actually a third reason.

    A lot of people ask us, "Why didn't you just bring this to NBC? Why didn't you get this in front of Steve Burke?" There is no way that NBC would have allowed two associate producers to not only run the editorial but to run the business side of what we were doing. There was just no way. We knew that in our gut.

    Weisberg: That would have ruined the company in a lot of ways in starting off, because the authenticity of having this idea came so much from our friends, and it was developed around routines of this target audience. It couldn't then have had a successful launch if it had then been led by people who had been doing this for 30 years and thought about the same strategy that had worked for all of these other companies and startups. That's not what we're building.

    4 days after launch, theSkimm got a shout-out from Hoda Kotb on the 'Today' show, and it changed everything

    Jeff Zucker Hoda Kotb Kathie Lee Natalie Morales

    Shontell: Tell me about launching your first Skimm. Who did you get to subscribe?

    Zakin: We didn't add anyone to the list. We sent an email to everyone in our address book. When we say everyone in our address book, at that point you could download your Facebook friends' email addresses, so we literally took every email address that we had in our possession.

    Meaning like, my grandma is on chain letters, chain mail that she forwards. We took those people. So we had, between the two of us, 5,500 names. We sent an email and were like, "Hey, we quit our jobs and we're starting this. Can you please sign up?"

    That first day, almost 800 people signed up. But we didn't add anyone to the list. I think the first email had our closest friends and family on it, and it was not a lot of people on it.

    Shontell: So 800 pity subscribers?

    Zakin: Eight hundred people who were like, "I'll take a look."

    Weisberg: The first went out to our family and friends. And then there were two press articles that came out on the first day, and Business Insider was the first to cover us. Thank you! And we got the traction from that.

    It all happened very quickly, because we had also emailed every news anchor out there, truly. We didn't know most of them, but we were like, "We're former NBC-ers, thought you would love this, thought you would appreciate the need that we're solving." Most of them didn't respond. Hoda Kotb responded, and she said, "I'll check it out!" We did not know her. We followed up with her two more times, but got no response. Day four of us in business, she said we were one of her favorite things — on air — and it totally changed our life.

    So we went from, at that point, let's say under 1,000 users to thousands. All of a sudden, we had geographic diversity. And all of a sudden, we had huge pockets of the country paying attention to what we were doing.

    Shontell: Wow. What does a Hoda bump do to your newsletter subscribers?

    Zakin: It crashed our site. It crashed our email inbox. We got a few thousand people from it. It was so funny, we were actually back visiting our old bosses at 30 Rock. We were in Starbucks and I tried to load my email and it wouldn't load. Then someone wrote on our Facebook wall: "Just saw you on the 'Today' show." And we thought we were caught walking on the plaza in the background, and we were like, "Oh, how embarrassing — what were we doing?" Then someone had posted what she had done. So it was life-changing.

    Shontell: How did you create the voice for theSkimm? It's really something that resonates, and sometimes people will say, "Are they dumbing it down too much?" Or "Do women need their own news source?" But the voice did set you apart, so how did you create theSkimm's tone?

    Weisberg: It was the easiest part of building this company. The voice comes from how people speak and how we talk to our friends. We spent a lot of time thinking about, "How do we launch this? What are we doing? What's the ultimate vision?"

    We literally sat down in separate parts of our apartment and went to write what would become the Daily Skimm. We came back together, and we hadn't really talked about what the voice would sound like, aside from knowing that it would be how we actually speak to our friends. And we came up with the exact same voice. Since then, we have put a lot of time into explaining the voice to our team and putting a brand guidebook together, and talking about how well we know theSkimm girl, our character inside and out.

    Anyone on our team can tell you what her favorite drink is, what she's going to order at Sunday brunch, and it's a living, breathing document — what she likes and where she is in life changes. That is something that everyone in our company knows because they're all telling the story of theSkimm and this character is who the brand is.

    So when we put the voice together, it's not for everyone. I think that when we hear criticism like that, that the voice is condescending, we hear it all the time, it's nothing new. I don't think that there should be a one-size-fits-all approach to news. Just because someone doesn't like it, that doesn't mean it's for them.

    Shontell: You have coined terms like Mitt Romney was "Mittens" and Hillary Clinton is "Hillz." Business Insider has found the same, that there's something to a conversational nature. That doesn't mean you're dumbing it down; it means you're explaining it so that everyone, the really smart people — because you've got incredibly smart people like John Podesta on your email list — and the people who aren't heavy in politics can understand it.

    Weisberg: I think it also goes back to what we were creating, which is it's not something for experts. It's not something for just people who love politics or who love business. That was a huge thing that five years ago when we started the company, we saw such a trend toward personalization. That was the hot thing, and you should be able to just get information about what you're interested in.

    That's great, but it left a huge void for people just to be well-rounded. So we want to arm our audience to be able to participate in all types of conversation with all types of different people, and not feel like, "Oh, I work in finance, and my hobby is baseball. So those are the things that I'm going to filter my news on."

    That was a huge difference when we started, and that was something that people really latched on to, as well as we were describing business stories and not having words that you had to look up. When we started writing theSkimm, I remember we did this experiment where we were reading a story, and we would kind of highlight if there was a word that we couldn't explain. If that was a term or a sentence we had to go look up and read four times through, that's kind of broken.

    Weisberg: We're smart, we worked in news, we were following these stories day in and day out, and if we couldn't understand it, then how can you expect that from people whose job isn't to be up on what's going on day in and day out?

    Raising the first million, and hitting No. 1 in the App Store for news

    The Skimm employees team jobs Carly Zakin Danielle Weisberg

    Shontell: I'm interested in how you got out of your debt. A newsletter that racks up subscribers is great, but at the same time, it's also not immediately clear how you'll start making money. Certainly not enough to pay your salaries and employ people.

    Zakin: One is that people still ask us, "How do you guys make money?" And I remember we were on a panel and Danielle just got pissed off and was like, "We make a lot of money!"

    Weisberg: I was done.

    Zakin: So we're proud to say that we do very well. And it goes back to what we knew, which is that email is a marketing tool. Our goal from day one was to place a long bet on loyalty.

    What can you do with loyalty? How do you develop a community, get people engaged? And from there, you can activate them, and in many ways directly monetize that. From truly day one — maybe let's not be hyperbolic; let's just say day four — we had brands reaching out to us, like our wish-list brands. Saying, "Just got this, would love to advertise." We knew nothing about how to work with an advertiser. So instead, we said, "We're actually not working with brands right now."

    By doing that, I think we created a little bit of mystery. Our list kept growing. There kept being more press about how big our list was and who the audience was. And we weren't letting brands in.

    What happened over time was that we continued to gain a lot of traction. We were meeting with venture capitalists who said to us, "Email is dead. Why are you going after a niche market like women?" Which is ridiculous. And who were like, "My wife reads it."

    As Danielle said, we literally had thousands of "nos" in a spreadsheet tracking all of it. So it had been a year and a half almost of the two of us on our couch, in coffee shops, just growing organically. We got to about 150,000 users, and we were able to take in a little bit of seed money.

    Shontell: How long did it take to get to 150,000 subscribers?

    Zakin: Less than 18 months. It took us one year to get to 100,000. Once we got that first big check — we raised just over $1 million — it was life-changing. We took a picture of it in our bank account. We were like, "We've never seen this many zeroes." It was so exciting. We treated ourselves to nice haircuts, and then we went to go hire a team.

    In hiring a team, we really chose to double down on growth. We had one goal, which was to get to 1 million users in a year. We ended up doing it in six months. Then over the course of that year, we started to let brands in, but really selectively. What we've been doing over the last four and a half years is building out two businesses.

    We have a media business. We work with sponsors in a really needed capacity, and we're really great storytellers with that. If you asked us, "Do you think it's a really innovative that we created an email newsletter and work with brands to email a newsletter?" No. That is not why we raised venture-capital funding, and that is not why we're building a huge business. What we're doing is we have turned that loyalty into a community. And a community that we can activate.

    The other business that we have is a subscription business. We launched our first subscription product just under a year ago, which has been a huge success, called Skimm Ahead. And for us, these two businesses and subsequent capital raises we've taken in have helped really create what Danielle said. We're building an empire. That is how we feel.

    A post shared by theSkimm (@theskimm) on

    Shontell: Talk about Skimm Ahead. That's your new product. What is it?

    Zakin: TheSkimm, as a company, makes it easier to be smarter. We looked at the Daily Skimm. We were like, "Here's an email that makes it easier to be smarter about everything that happened yesterday, and everything you need to know about today." And then we thought, "What's the routine that we all share? And outside of email, what happens next?"

    For us and our friends, we look at our phone, and I immediately look at my calendar, and I'm sure you are like us, and you live on your calendar as well. So we thought that was a really interesting way to deliver information. When we thought about what information could we solve next, it was that moment that we all have of, Wait, when is that happening? When's that show back on Netflix? What time is March Madness on? When is the State of the Union? What night? It was about the idea of making it easier to be smarter about the things coming up.

    So we created a subscription product that costs $2.99 a month. It can integrate directly into your calendar. For us, it really pushed the door open toward subscription. We had a hunch — we obviously made more than an educated guess — that our audience would be willing to pay for something. I don't think we had any idea what we were stepping into. We're so excited about how well subscription has gone over with our audience.

    Shontell: Are there any metrics you can share to show it is an early success?

    Weisberg: We can tell you we were No. 1 for news in the App Store in our first month. We continually beat The New York Times and The Wall Street Journal in highest-grossing news apps every month. Apple actually asked if we had figured out how to hack their rating system because they had never seen so many five-star reviews.

    Building a marketing empire on loyalty, not scale

    Carly Zakin Danielle Weisberg TheSkimm The Skimm

    Shontell: The venture capitalists did finally come around, and you've now raised $15 million. But it is hard in the media environment right now. There's a lot changing. Fifteen million dollars is a lot, but it's not the $200 million Vox and BuzzFeed and others have raised. How do you look at the media climate, and how do you plan to survive?

    Weisberg: A blessing for this company is that we've never fit in. People have been constantly surprised by our audience, even when we've gone out for raises and the traction has been there. We've never been what venture capitalists have been looking for. So I think us trying to guess or trying to figure out what the trends are in media has never been helpful to us, because we've always been carving our own path.

    It took a long time for people to understand what we were building. The criticism that we got was always like, "Oh, it's just that newsletter." And I think that it really came through strongly with the election.

    We launched our "No Excuses" campaign, which started with, How can we rally our entire company and our audience around getting people to vote? And at a time when a lot of other media companies were facing this crisis of confidence from their audience, and they were endorsing candidates and hearing a lot of backlash for it.

    the skimm

    We've always been nonpartisan. Our stance in the last election, just like the other elections that we've covered, has been to get people out to vote. So we interviewed the candidates, we launched a big destination site, and what we are most proud of is that we got over 120,000 people to register to vote, making us pretty much Rock the Vote's biggest partner ever. That's over 90,000 women. That's unprecedented.

    The biggest part of our company is our Skimmbassadors. We have the media business, we have the subscription business, and then we have the community element. They are why Apple called us to say, "How did you get so many five-star reviews in such a short period?" Our Skimmbassadors. We have over 20,000 of them. They've started off as just people writing in saying "I love your product." We would ask them to get 10 friends to sign up. And they became pen pals.

    Zakin: We call it "intimacy at scale." We genuinely know subscribers' names. We really know who they are. Of course you can't do that for 5 million people, but we have a community. We know how to activate them.

    Shontell: Facebook has 2 billion monthly active users. That is tremendous scale, but there seems to be this movement in media and tech happening where maybe you don't need that many people, as long as they're loyal.

    Weisberg: We talked about it with our investors very early on. We've heard various founders of some of those companies speak, and we're such fans of them. But we look at them and we're like, "It's so funny to us that VCs ever put us in the same sentence as them because we couldn't be more different. We would much rather say we have 5 million people we activate and get to pay for a subscription product. Or we can get them to turn out in the hundreds of thousands to vote, than say "We've got 20 million of them, but only 2 million of them open us every day." That's not interesting to us.

    Zakin: That's why we've always been our own category. As these media trends — and what's hot and what's not come up — we always knew who we were. We always knew what we were building as a company, and we've been lucky to be surrounded by a board and investors and advisors who respected that and respected our vision and helped us along.

    At times we got, "Well, you're not BuzzFeed, you're not at BuzzFeed's scale." And we're like, "That's because we're not trying to be BuzzFeed." BuzzFeed's great, we think they have great stuff, but that's not what we're trying to build as a company.

    It has always been about staying true to our vision and staying true to our audience in that whatever we create has to be additive. It has to be a voice that they trust, and it has to be part of what they actually need to get through their day. That's what they find whenever they interact with our products.

    There's a new New York Times best-seller list for millennials

    Shontell: One thing that's interesting that you've built loyalty-wise, and we've seen it being on the receiving end when you put a Business Insider link in a Skimm newsletter, we see a flood of traffic. Are we allowed to talk about this? How when theSkimm recommends a wine, and when it recommends a book, it's often better performing sometimes than even The New York Times?

    A post shared by theSkimm (@theskimm) on

    Zakin: We've been told by publishers that we are the No. 1 way to sell books for this audience.

    Shontell: Above being in the New York Times best-seller list?

    Zakin: Above the "Today" show and above the New York Times best-seller list. Multiple publishers have told us that.

    Weisberg: You can see that by walking into our office. Publishers are sending us cartloads of books. And we're like, "We just need one or two."

    Shontell: You put one in a newsletter every day, right?

    Zakin: One every Friday, and a bottle of wine that we like every Friday. We happily taste-test the wine and happily read the books.

    Shontell: Do you get affiliate fees?

    Zakin: Yes, and we are open about that in the newsletter. But we choose what we think is the best for this audience. It's not about, "Oh we're going into the book business." That's not what we're saying. It's about being in the engagement business.

    We can drive as much traffic to a Business Insider article as we can to driving book sales and as we can to driving sales toward our new products with Skimm Ahead. It just goes into the powerful relationship that we have with our audience. We feature products and brands we like all the time, and I can't even tell you how many brands have said we've changed their business trajectory because they were featured in theSkimm. That's a wonderful feeling, and we've been told we have the Oprah effect. We would never say that about ourselves, but we're happy to repeat the quote.

    Shontell: Definitely. And Oprah is a fan right?

    Zakin: Oprah is a fan, which is a very surreal sentence to say.

    Shontell: You've grown tremendously, but I'm sure it's still early in the company's history. What do you think is next? Are you going to do video? Are you going to do an audio version of theSkimm?

    Weisberg: I think it's all coming. It's just about how you prioritize it and when you release it. We started the company with two guiding principles. The first is that we have a voice — the voice is very clear — and it's in all products we create.

    The second is that we really have a strong belief in looking at the routines of this target audience and fitting that in with what we release and when. That's the same thing, you wake up, you get an email telling you what you need to know for your day, and then you step out your door and you get your calendar. So those two things are very much in our product roadmap.

    We did video. You can check out our Instagram and Facebook site for some of the video that we've been producing. We just did one on equal pay and we did one on Syria and immigration and it's gone over really well. That's just the beginning of what we're doing and what we're testing. As former video producers, it's exciting that we're going into that, and we clearly see a lot of interesting ways to work with brands.

    So that's up next. It's also thinking about other products and services that fit into the routines of this audience that we've always wanted to create and haven't had the time or the ability to focus on other things. That's the benefit of being where we are now with the amazing team that we have, that we can really start thinking about what was in our head five years ago and three years ago, and now it's actually the perfect time for us to create those things.

    A post shared by theSkimm (@theskimm) on

    Shontell: How does theSkimm newsletter come to be every day? How do you pick the stories? Who writes it?

    Zakin: I think we developed our secret sauce. Of our team of 41, only five are on the editorial team. We still touch every word and see every word.

    Shontell: What is everyone else doing?

    Zakin: It's tech, analytics, sales product, really. For us, it's about every day, it's the best part of our day to pick the stories. It's the same principle that we started with, which is: What will our friends need to talk about? What's becoming a story? What already is a story? And what will feel old by tomorrow?

    We want you to be able to go to any work or social event and talk to anyone about anything. We love doing that, we love picking the stories every day — it's the easiest and best part of our day. The last edit is made every morning at 5:58.

    Shontell: Ready for that 6 a.m. deadline.

    Zakin: Yep.

    Shontell: Congrats to you both.

    Join the conversation about this story »

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    managed by QWhen Dan Teran set out to launch an on-demand office services startup in 2014, the model to follow appeared obvious.

    Companies like TaskRabbit, Handy, and Uber had fired up the gig economy by hiring thousands of workers as independent contractors.

    In doing so, the startups benefited from a cheaper workforce, and workers got to enjoy greater flexibility in when and how they worked.

    But Teran had just read management expert Zeynep Ton’s newly published book, "The Good Jobs Strategy," in which she held up companies like Zappos and Trader Joe’s as proof that investing in a workforce can make a company more profitable in the long run. Teran couldn’t shake the feeling that Ton was right. On top of that, the 1099 contractor model was just starting to show signs of weakness, as Uber had recently been slapped with a class action lawsuit alleging it was exploiting drivers.

    So in launching Managed by Q, Teran decided to make what seemed like a gamble: He would make members of Q’s workforce full W2 employees, eligible for company-paid health insurance, a 401K with match, and paid family leave.

    That was nearly three years ago. Today, Managed by Q is at the forefront of a growing trend of on-demand companies that support full-time workforces. Some of these startups began by embracing more traditional labor models, like Q, while others decided to switch mid-stream, overhauling their business practices to bring workers on board as employees.

    By Uber standards, this second generation of on-demand platforms is minuscule, and its approach has yet to stand the test of time. Some companies that switched employee models have failed entirely.

    But the trend is clear: It’s become dangerous to build a business purely on the backs of contractors, and a growing number of enterprising companies are betting their futures on marrying the appeal of the on-demand world with the security of traditional employment.

    Over the past several years, legal challenges to the contractor model have piled up, and just in the last month, Lyft and Instacart both settled misclassification lawsuits  —  Lyft for $27 million, and Instacart for $4.6 million.

    Meanwhile Uber, whose latest round of bad press has centered on its corporate culture, continues to face questions about its drivers’ status: Courts in New York and the UK have found that drivers cannot be classified as self-employed, while drivers in Seattle are fighting for their right to unionize and Californians are considering doing the same.

    Against this backdrop, a number of on-demand startups that began with 1099 contractors have taken the risky step of converting their workforces to employees  —  taking on as much as 30 percent more in payroll costs in exchange for legal peace of mind and a trainable workforce. Instacart, for example, began offering a full-employee option to workers in 2015, after being served with its first misclassification lawsuit; W2 “shoppers” now comprise about 20 percent of Instacart’s workforce. (As Instacart’s recent lawsuit settlement makes clear, however, the partial switch has not saved the company from all of its legal woes.)

    In a flurry of announcements over the summer of 2015, several other companies started revamping their workforces entirely. Shyp made the switch that July, citing the desire to be able to train its couriers and provide them with more supervision; it was followed by companies including Luxe (valet parking), Eden (tech support), and Sprig (food delivery), all of which appeared to come to the collective, sudden realization that they needed more control over their workforces.

    Most of these startups avoided directly calling out misclassification lawsuits as their motivation for making the switch — but giventhe timing, the rush to change seemed far from a coincidence.

    “I think that you have companies stepping back and saying, ‘Well, wait a minute, let’s find out what what we really want and how we really want to build our business,’ and I think there are plenty of companies that find Uber’s arrogance, with respect to taking responsibility for complying with even baseline regulations, distasteful,” says Rebecca Smith, deputy director at the National Employment Law Project. “As we see more courts and agencies diving in and saying, ‘Just because you use a shiny app or platform doesn’t make you not an employer,’ the more we will see these sorts of changes happening.”

    But those changes aren’t easy to make. When Honor, a platform connecting older adults with home care professionals, transitioned its workforce at the beginning of last year, it kicked off a particularly trying six months—and lost about 15 percent of its workforce in the process.

    “The amount of code our engineers had to write just to be able to continue to pay people on time, to take out the right taxes, it was mind-blowing,” says Honor CEO Seth Sternberg. But the rough patch was worth it, he says: Honor is now able to train its care professionals and offer what it believes is better, more consistent service, in total compliance with labor laws.

    Things didn’t go quite as smoothly for HomeHero, another venture-backed home health care startup that made the switch: When the company folded this February, it called the W2 model an “inferior” employment model that increased onboarding costs tenfold.

    “This is the kind of fundamental decision you make early on—the earlier the better,” says Mitch Kapor of Kapor Capital, an investor in both Honor and Managed by Q. “The nature of your relationship with your labor force is a fundamental piece of the architecture of the business. It’s not the technical architecture; it’s the social architecture. And these architectural choices are difficult to change.”

    Nearly three years in, Managed by Q now has close to 900 employees, working across 5 cities with some 1,200 office clients. That’s hardly the hyper-growth that companies favoring the Uber model have enjoyed, but the slow-but-steady approach is a natural consequence of investing in employees, and it encapsulates Q’s bet on longevity.

    Investors haven’t shied away. A year ago, Q raised $25 million in it Series B round; it’s since raised another $30 million, and counts Google Ventures, Jessica Alba, and former NBA commissioner David Stern among its backers. That influx of cash has allowed the company to expand its office services menu: Alongside Q’s initial offerings of cleaning, maintenance, and office administration, it now includes flashier options such as yoga classes and catered lunches. As it’s grown, Q has also started offering its employees (known as “operators”) more perks—last March, Teran announced that the company would begin giving operators equity.

    In practice, one big difference between Q and other on-demand companies is that platforms relying on 1099 contractors are legally barred from training workers. “The W2 route involves more rigorous training and supervision,” points out Q communications lead Ariella Steinhorn. Q’s hypothesis is that investing in its operators’ happiness and career development will pay off in the form of a better end product: says Steinhorn, “happy employees will ultimately lead to happy clients.”

    The home management platform Hello Alfred is also testing that theory using full-time employees. “Alfreds,” as they’re called, are entrusted with customers’ keys and perform tasks ranging from laundry to grocery shopping and home cleaning. Because of the intimate nature of the work, hiring Alfreds as full employees made more sense, says CEO Marcela Sapone; she says she also felt strongly about offering her workers traditional benefits.

    Sapone, like Teran, believed that if she built up employees’ trust and loyalty, they’d ultimately offer customers a better experience. Like Q, her company is growing slowly—it currently employs only about 200 Alfreds—but the strategy has been deliberate, she says, and the company has been profitable since its launch.

    Providing benefits such as health insurance and paid leave, though, means that these companies tend to have higher expectations of their workers than looser on-demand platforms.

    Unlike Uber drivers or Postmates, Q operators and Alfreds can’t just pop onto the app whenever they please and knock out a few hours of work. They’re given schedules, and then have some flexibility within those, in that they can adjust their shifts and the number of hours they work in consultation with their supervisors. Both Q and Alfred say that they work with employees to accommodate unexpected schedule changes, and Q keeps a number of operators on call to fill in when those do come up—but a schedule still exists.

    Customers, meanwhile, are more likely to have their requests filled by someone who’s familiar with their office space or apartment—and they’re guaranteed to have it filled by someone who’s been thoroughly trained by their employer. Companies embracing the W2 model are hoping that those perks will in the long run make their services more valuable to customers.

    It’s a worthy theory, though it’s still unproven. None of these newer companies has come close to achieving the scale or notability of its on-demand predecessors, and ultimately only a combination of customer demand, legal clarity, and some more time on the market will determine whether this version of the on-demand economy can thrive.

    This cohort of companies—the ones that have felt an acute pressure to play things safer than their contractor-driven brethren—is sacrificing explosive growth for building what it hopes are sustainable, ethical, and legally airtight businesses. If their bet turns out to be correct, the future of work may end up looking not all that different from the past. 

    More from Backchannel:

    SEE ALSO: This idealistic food startup could change the way we eat — if it survives

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    doddle london finsbury park

    • London delivery startup Doddle is closing most of its high street stores after burning through tens of millions of pounds in investment funding.
    • The company is laying off more than 100 people as it pivots its business model.
    • In 2015 it lost £24 million ($31 million) on just £687,000 ($878,000) in revenue, across dozens of stores.
    • Investors have sunk about £48 million ($61 million) into the company.

    In August 2015, Doddle enlisted James Heptonstall, who creates viral videos of runners racing against public transport, to help the logistics startup launch a new feature — "Doddle Runner." With a tap of the Doddle Runner button in the Doddle app, customers could have their mail sent from any location via a human who would run through crowded city streets. No need to leave your house or workplace to visit the post office. A Doddle Runner would show up anywhere, like an on-demand competitor to the Royal Mail.

    In the launch stunt, Heptonstall, on foot, raced three other people to deliver a package the short distance from Monument to Cannon Street during rush hour in London. One rode a bike, one went on a bus, and another took the London Underground. The whole thing was filmed for a YouTube video.

    doddle runner launchHeptonstall won easily — with a time of 1 minute and 23 seconds — in an apparent demonstration of the efficiency of runners in getting round London. The Tube user came second at 2:48, the cyclist came in third, with 3:32, and the bus was last, with a miserable 8:09 time.

    But when Doddle Runner launched in real life, there was a catch: The runners weren't actually allowed to run.

    "For health and safety reasons they're not allowed to run," Doddle CEO Tim Robinson told Business Insider. "They can walk briskly, is how we described it."

    "To be fair, I think the most valuable thing they had is an Oyster card," he added, referring to London's ubiquitous public transport pass. "They spent most of their time on the bus."

    Later that year, Doddle said it planned to expand Doddle Runner to new cities but the service was discontinued in 2016. Robinson described it to Business Insider as a "pilot," and said that was "always the plan."

    Meanwhile, the company is grappling with bigger issues.

    The parcel delivery startup is closing 17 of its retail stores across the country — most of its remaining stores. It is laying off more than 100 employees, and pivoting its business. It is nowhere near being profitable.

    In 2015, its first full year of operation, it lost more than £24 million ($31 million) — while pulling in less than £700,000 (£894,000) in revenue across dozens of stores.

    "Lots of members see us as the new Post Office — although I'm not allowed to say that,"Robinson told City AM in early 2016.

    For a fee, customers can receive or send packages at the stores. Won't be at home to receive a delivery and can't get it sent to work? Just get it delivered to Doddle instead, where "parcelistas" will take care of it until you can collect it. As e-commerce has boomed over the last decade, so too has click-and-collect, and Doddle — with its brick-and-mortar high street stores — is one of the most visible proponents of the model.

    But conversations with former employees, Robinson himself, and accounts filed with Companies House paint a picture of a company in transformation. The three-year-old business is spending huge sums, sinking deeply into debt, and generating comparatively little revenue. Doddle is now changing direction, shelving its ambitious retail strategy as it moves away from standalone high street stores and shifts its business into kiosks in existing stores in an attempt to cut costs.

    "I think we haven't got everything right, but I think we've got enough right to build a sustainable business," Robinson said in an interview at the company's East London headquarters. "It's just a sustainable business whose ambition is slightly different to what it was two and a half years ago."

    tim robinson doddle ceo

    A brief history of Doddle

    Doddle's stores are hard to miss. They're big, bold, and purple.

    Dotted around train stations and British high streets, they're emblazoned with bright purple signage on the outside, and have a minimalist white-lilac-purple design within.

    lloyd dorfman travelex doddleDoddle was the idea of Tim Robinson, now the CEO. His original vision was to launch Doddle's stores in under-utilised spaces in or nearby rail stations across the UK. Stations, with heavy footfall, are an ideal place to pick up a package on your way to or from work, the logic went. 

    The company was launched as a joint venture between Network Rail and Lloyd Dorfman, the billionaire founder of Travelex, a currency exchange company best known for servicing tourists at airports. They initially invested £24 million between them, split equally, Robinson said.  Their aim was to change how people send and receive parcels with a chain of high-profile high street stores.

    There were plans to open stores at 300 stations, Sky News reported in 2014. But three years later only a sixth of that total are actually open — 57 shops, including concession desks inside larger stores. Just six are standalone stores. 17 sites are facing imminent closure.

    So what happened?

    From relatively early, Doddle faced difficulties enticing people into stores. "What we're finding is consumers are not prepared to walk far off the beaten track to collect their parcels,"CEO Tim Robinson told the BBC in July 2015. "I think some of the assumptions we had in our original business model that we could be 100 yards to the right outside a railway station have not really played out."

    Network Rail withdrew from the business in the Autumn of 2015, The Times of London reported at the time. The move was part of a broader sell-off of assets by the rail organisation after it was effectively renationalised by the UK government. (It is also selling off at least 18 stations.)

    Dorfman, who serves as Doddle's chairman, bought out Network Rail's 44% stake for an undisclosed amount — giving him 90% of the company overall.

    While the focus was on train stations, some stores were located nearby, rather than inside the station itself. "We learnt that it wasn't just railway stations that our services really worked in,"the chief exec said to City AM in January 2016. "We've got six stores in universities now. Shopping centres work well … we'll have over 300 stores by 2017, but not all in railway stations."

    "As you get further out into the provinces it's harder to find 1,500 sq ft on a railway station, so we look for retail units that are right in the eye-line,"he also told Essential Retail. "We're either in the station or adjacent to it — within and around stations."

    Doddle brixton

    Doddle is hemorrhaging cash

    Doddle's public accounts from this time show the company generated very little revenue compared to its losses.

    Doddle officially started trading in September 2014, and in the year ending December 21, 2014, it lost just under £11 million. During the same period, it booked just £16,779 in revenue.

    In other words, in its first three months the business made less than the annual salary of a single employee working a 40-hour week on minimum wage (£6.50/hour in 2014, or £17,280/year). Doddle had 43 locations in operation during the period, according to its accounts.

    Doddle's revenues grew in 2015, the most recent year accounts are available for publicly, as did its losses. The company lost £24.4 million throughout the year, with revenues of just £687,505. That means the 56 locations it operated were generating, on average, just over £12,000 each annually — less than the salary of a single full-time employee.

    Meanwhile, the company was spending £8 million a year on staffing costs for its 336 staff.

    doddle accounts 2015

    Doddle's accounts for 2016 aren't public, but Robinson said revenue grew by slightly more than 200% year-on-year, while losses "shrunk a bit." (A spokesperson later declined to provide exact figures.) If we estimate revenues at £2.5 million and losses at around £18 million, that would mean the 70-odd locations (both shops and concession stands) Doddle was operating at the end of the year were still only pulling in around £35,000 each, not nearly enough to cover losses.

    Robinson said that the company always expected to lose money when it started out, describing Doddle as a "growth business."

    Dorfman's cash is keeping the company afloat, and since the initial £24 million Network Rail/Dorfman investment, he has invested "kind of similar to the same again," Robinson said, which would put the total invested at about £48 million. The company owes him at least £16 million, according to Companies House documents.

    A former retail manager said staff spent hours waiting with no customers in the early days of the business, though it grew rapidly throughout their time there. And a negative review of the company posted on job review site Glassdoor in November 2016 said they had "plenty of time to look for other jobs as we have hardly any customers ... our store barely takes enough to turn the lights on." (The company is rated 2.4 out of 5 on the site, with ratings dropping recently.)

    The manager Business Insider spoke to questioned whether the standalone high street model could ever be viable: "It doesn't take a genius honestly. When you see a store in a premium location, and the rent can be £100,000, and there are five staff inside on average 22 to 25 [thousand] per annum, minus the manager, it's easy to understand that this particular store costs pretty much near a quarter of a million ... you need to make stellar, unrealistic sales in terms of collections, returns, etc etc."

    Later, the source added: "I think they always knew they're not gonna make any money for the first one, two, three years of the operation. The most important part was to make ourselves known."

    doddle store closing city thameslink

    Doddle is happy to experiment — but not always successfully

    The company was willing to take an experimental approach to new ideas and products, and was "happy to try new things," former staff said.

    Some stores have changing rooms, where customers can try on clothes they ordered online, and send them back if they don't like them. However, they were only used "handfuls of times," Robinson said. One store had fridges storing alcoholic drinks for a trial by AB Inbev that sold drinks via Deliveroo.

    Doddle Runner was an example of this experimentation. Couriers on foot were assigned to stores, delivering and collecting parcels in the surrounding area. It launched in the City of London in 2015, with a press release from the time saying it would later "roll out across London and major cities." However, it was discontinued in 2016. A Doddle employee said that "uptake was minimal" during their time at the company.

    Robinson said that Doddle is in talks with online retailers about "lighting that up again"— but integrating it into the online checkout process, so customers would have the option to order parcels to their desk when they buy them.

    Doddle Neighbour was another experiment. The project tried to turn ordinary people into collection points, allowing you to get parcels delivered to your neighbours rather than a physical store. But Doddle struggled to find people willing to become a "Neighbour," and the feature is no longer available.

    doddle liverpool street

    Click-and-collect is hot right now — but competitive

    Doddle is looking for other sources of revenue beyond walk-in customers and one-off orders. It has deals with companies like ASOS and Amazon for deliveries and collections. And Doddle has been selling itself to big companies as a kind of outsourced post room for their employees. Goldman Sachs is among the clients.

    Individual customers can also sign up as "Doddle Unlimited" members, giving them unlimited collections and 10% off sends for a monthly fee. (Including the free tier, Doddle has 350,000 members, but just 6,000 are "Unlimited" members, according to the CEO.)

    Click-and-collect is a fast-growing niche in e-commerce, with shoppers expected to pick up £6.5 billion from places that offer the service by 2018, according to Verdict Research. Numerous high street chains, from Tesco to John Lewis, now offer the service — and there are third-party click-and-collect services also giving Doddle stiff competition.

    One of the largest is Collect Plus, a parcel-sending-and-collecting-network in more than 6,000 locations across the county. Unlike Doddle, it doesn't operate its own stores. Instead, it piggybacks on other retail locations, enlisting newsagents, garages, shops and more to handle the parcels in exchange for a fee — drastically cutting costs.

    From a financial perspective, Doddle is a minnow next to Collect Plus, which did £49.6 million in revenue in the year ending March 2016— while losing £447,783.

    Online retail behemoth Amazon is also placing "lockers" into shops that customers can order their parcels to. (Some Doddle stores contain Amazon lockers.) And catalogue retailer Argos is also partnering with companies like online auction site Ebay to let customers collect orders from their stores in a similar fashion.

    Doddle has historically been at a disadvantage against these companies. For organisations like Argos, or the corner shops working with Collect Plus, click-and-collect is just one additional revenue stream among many others. It can be used as a loss-leader to keep customers coming back for other services. And Collect Plus and Amazon don't have to worry about expensive high street rental or retail staff costs like Doddle does. But Doddle has all those challenges, and deliveries are its only revenue source. 

    amazon locker

    Core customer loyalty is no longer enough

    Joe Rackham, a TV production manager who lives in Putney, South London, said Doddle was invaluable as he planned his wedding in 2016."It's been a godsend for us to be honest, we would have really struggled to accumulate everything we needed to buy for our wedding without a service like Doddle."

    He added: "Before Doddle we had been so used to arriving home to a missed delivery card from couriers who would then expect us to travel out to the middle of nowhere to pick up packages from a depot with opening hours that were never convenient. The staff at Doddle have always been really friendly and helpful, so it's sad for them also that many of them will be losing their jobs as a result of these closures."

    Rackham is typical of Doddle's core base of loyal customers. Robinson has said in interviews that a subset of Doddle customers will come time and time again, becoming extremely regular users of the service, and an ex-manager said their team made a point of remembering the names of these regulars.

    But when you're renting some of the most prime real estate in the country, a small and devoted following isn't enough. Tens of millions in the red, Doddle is finally realising that.

    Doddle is closing most of its stores and pivoting

    Doddle sign

    At launch, Doddle wanted to build 300 stores within three years. In February 2015, Essential Retail reported it was aiming for 100 stores by the end of 2015. And at the start of 2016, Robinson said the company would have "well over 300 stores by 2017."

    But at its peak, Doddle had just 39 standalone retail stores, in addition to concession desks inside larger retailers. A former Doddle employee said they were told Doddle had met its parcel targets for 2015 and 2016 — but the company is now closing most of its stores and laying off staff as it pivots to a concession desk-model.

    It has quietly been closing stores, a few at a time, since 2016. One employee laid off when their store closed earlier in 2017 told Business Insider the closure came as a shock, as employees had previously been assured that it was not at risk and had met its targets.

    But the imminent closures are its largest single batch to date — 17 stores, from Milton Keynes to Kingston, are being shuttered on April 28. "The reality is that shop [in Milton Keynes] has been open for two and a half years, it has had a decent amount of money spent on it," Robinson said. "We'd capped out at about 250 transactions a day, we were struggling to get any more than that and for that store to work it'd need about four-to-five-hundred."

    Just six high-street stores will remain, including Liverpool Street Station and Finsbury Park, along with two standalone kiosks in Westfields, London. ("A couple" of the remaining stores are profitable, the CEO said.)

    102 people are losing their jobs in this batch of closures — retail employees, as well as "head office functions that are no longer needed because we're not supporting the store network," Robinson said, and cuts across other departments "to make the business more fit and lean for the future."

    doddle kings cross st pancreas london

    Instead, the company is focusing on concession desks and kiosks inside larger stores, largely inside Morrisons supermarkets, Ryman stationers, and Cancer Research UK charity stores, dotted from Glasgow to Brighton. Instead of an entire dedicated store, a Doddle location becomes a single desk, like Collect Plus.

    Robinson said that the company's partners like Amazon and ASOS want to see it in more locations, hence the shift. "It's clearly about efficiency and productivity, so in order to satisfy the demands of our retail partners to get more sites, to become more present, we've had to rethink how we spend our working capital."

    Doddle has an ambitious roll-out planned, aiming to be in kiosk 500 locations by the end of 2017, and 1,000 by the end of 2018. (A previous story in CloudPro reporting Doddle wanted to be in 1,000 stores by the end of 2017 is incorrect, Robinson said.)

    Ultimately, Robinson said, he wants the demand Doddle to become synonymous with click-and-collect — and even to be used as a verb ("to Doddle a parcel"), like "to Google" is. 

    packages post fedex parcels deliveriesThe company is also now experimenting with selling white-label tech to other companies. "We're working with a number of high street retails, both domestically and internationally, and carriers, helping them set up their own click-and-collect networks using the tech we've built," Robinson said.

    Doddle is also apparently in talks with a major retailer about the company adopting Doddle Neighbour's tech for their own deliveries — paying people to take in orders when the customer isn't available to collect it. "This is a retailer that has years of brand knowledge, and experience with people living in pretty much every house in the country ... this retailer has a loyalty base of several million."

    This isn't an approach Doddle anticipated when it first launched, but in a few years, 30% of its revenue should come from white-label tech services, the chief executive predicted.

    The CEO doesn't think the retail stores were a failure

    The vast majority of kiosks and Doddle locations will be manned by the employees of the store its inside, which — along with the lack of expensive retail units — should significantly reduce costs. Tim Robinson estimates the company will do £5.5 million in revenue in 2017, and will become profitable in 2018.

    Despite Doddle's losses, the exec argued that he doesn't consider the retail shops a failure, and that it couldn't have struck the deals it has with partners without the stores helping them "cut through."

    "We wouldn't have been able to do this pivot if we hadn't done what we'd done previously. I mean, do I wish I'd had 10 fewer [stores], 15 fewer? Probably, particularly with what we're going through now, ultimately getting to that position where you're having to say goodbye to colleagues and locations you've put a lot of time and effort into."

    The exec also suggested the company might return to standalone stores one day. "I've said to people a few times, 'what I might've done is build the click-and-collect network for 2022 but I built it in 2014' ... the idea might've been six, seven, 10 years ahead of its time."

    Contact the author at rprice@businessinsider.com

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