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- 07/17/17--16:58: _Lucid Motors says i...
- 07/18/17--02:36: _Facebook's ex-CTO s...
- 07/18/17--04:29: _TransferWise's cofo...
- 07/18/17--08:02: _What it’s like when...
- 07/19/17--09:21: _A Luxembourg VC has...
- 07/19/17--14:25: _Startups with uniqu...
- 07/21/17--06:15: _5 years ago, 2 room...
- 07/22/17--06:00: _The fabulous life o...
- 07/24/17--05:32: _Tech mentors were l...
- 07/31/17--01:57: _Carwow has raised £...
- 08/02/17--10:14: _The funding 'lifebl...
- 08/05/17--06:15: _This startup is sol...
- 08/06/17--07:30: _This startup, borne...
- 08/13/17--06:30: _This Brooklyn start...
- 08/13/17--08:30: _Today's hottest tec...
- 08/16/17--11:17: _Electric trike-make...
- 08/18/17--07:56: _I'm an investment a...
- 08/20/17--12:02: _The 'Father of Andr...
- 08/21/17--15:01: _It's getting harder...
- 08/21/17--17:04: _A California state ...
- 07/18/17--08:02: What it’s like when someone offers you $600 million, and you say no
- Robinhood cofounder and co-CEO Vlad Tenev.
- ClassPass founder Payal Kadakia.
- Dropbox founder and CEO Drew Houston.
- AOL CEO Tim Armstrong.
- Tinder founder Sean Rad
- Bleacher Report and Bustle founder Bryan Goldberg
- Early Uber and Pinterest investor Scott Belsky
- The co-CEOs of Warby Parker, Neil Blumenthal and Dave Gilboa
- 08/02/17--10:14: The funding 'lifeblood' for new Silicon Valley startups is drying up
- Men born between 1981 and 1984 are highly overrepresented at the top of the tech world.
- There are a number of factors to explain the pattern, beginning with the introduction of the PC in the mid-1980s.
- Sexism in the tech world has made it harder for women to advance and young girls to be inspired.
- Name of optionholder: This is you, the employee. The legal owner of the options.
- Date of grant: The date you were given the shares.
- Number of option shares: The total number of shares you were given.
- Exercise price (per share): This is also called the "grant price" or "strike price." This is the price you will pay for each of the shares you were given, even if the actual stock price is higher the day you cash in.
- Vesting start date: The date your shares begin to vest. When your shares are "fully vested," they are fully yours.
- Type of options: The two most common kinds of stock options are incentive stock options (ISOs) and nonqualified stock options (NSOs).
- Vesting schedule: The amount of time you're on the hook before all of the shares are fully yours. In some cases vesting is associated with meeting specific performance goals.
- 08/21/17--15:01: It's getting harder to cash out of 'unicorns'
- One acquisition: AppDynamics was acquired by Cisco for $3.7 billion the day before its IPO.
- One collapse: Jawbone collapsed in July and is being liquidated.
- And six IPOs
- Software company Cloudera went public in April at $15 a share. Today shares closed at $17.48, up 16.5% from the IPO. But they’re down 24% from their post-IPO peak.
- Meal-kit company Blue Apron went public at $10 a share, rose to $11, but has since plunged 51% to $5.31, and is down 47% from its IPO price.
- Snapchat parent Snap Inc. went public at $17 a share, and now at $14.01, is down 21% from its IPO price and down 53% from its peak three days after the IPO.
- Software company MuleSoft went public at $17 and closed today at $20.91, up 23%. But this is down 27% from its post-IPO peak.
- Security software maker Okta went public at $17 a share and today closed at $24.56, up 44% from its IPO and down 9% from its post IPO peak.
- Delivery Hero went public at €25.50 in Germany and today closed at €27.36, up 7.3% from the IPO price, but down 6.6% from the post-IPO peak.
The Silicon Valley-based electric-car startup, Lucid Motors is said to be entertaining a possible sale to Ford Motor Company, Bloomberg reported on Monday.
The publication, citing people familiar with the matter, said Lucid approached Ford about a possible sale, and that Ford rebuffed the suggestion.
Lucid is currently raising money in a Series D round.
A Lucid Motors spokesperson declined to comment on any takeover talks or the company's current Series D, but said that the fundraising effort was "going well." The company is backed by Venrock, which is the same venture capital firm that led Apple's Series A round in 1978.
Business Insider reported in February that Lucid Motors' Series D was in the works. A company spokesman said at the time that Lucid had raised several hundred million dollars as it develops its 1,000-horsepower Lucid Air electric luxury sedan.
Like Faraday Future, another investor-backed electric-car startup, Lucid Motors is also seeking funds to build its inaugural factory, which Bloomberg said could cost $700 million. But unlike Faraday Future, Lucid Motors has not started work at its own site in Casa Grande, Arizona.
Faraday Future said last week that it was temporarily abandoning its plans to build an assembly plant in North Las Vegas, Nevada, 15 months after it held a ceremonial ground-breaking at the site in April 2016, citing trouble raising money from outside investors.
Lucid Motors Chief Technology Officer Peter Rawlinson told Automotive News at the New York International Auto Show in April: "It would be irresponsible to start moving earth or start anything until we have a financial runway to execute that professionally and with absolute integrity."
During his February interview with Business Insider, Rawlinson said of building a new electric car from the ground up: "This team realizes the enormity of the task. We're car guys. This is the team that has done it before. We know how to do this."
Adam D'Angelo, Facebook's former chief technology officer (CTO) and the founder of Q&A site Quora, is skeptical about Europe's chances of creating a consumer internet company on the same scale as Google, Amazon, or Facebook.
Interviewed at the Tech Open Air conference in Berlin last Wednesday, D'Angelo, who joined Facebook when it had around 20 staff, said he'd be "very surprised" if a consumer internet company "succeeded" in Europe.
Europe is yet to create one of the tech megacorporations that have spawned out of the US and Asia over the last few decades. The continent's most valuable company is a German-based enterprise software business called SAP, which has a market cap of $111.7 billion (£85.5 billion). But it's tiny compared to tech giants on other continents.
However, things are starting to change, as the cofounders of successful European tech companies like Skype, Bebo, and Autonomy start to invest the hundreds of millions they made from exiting their companies to the US giants into new European startups.
"I'd be very surprised if consumer internet companies succeeded in Europe but it could be that there's some other ... maybe like cryptocurrency companies or pure AI research companies," D'Angelo told Business Insider in Berlin, while touting the fact that Quora is now available in five languages, with German being the most recent addition. "If things are different enough, then huge companies could be created here."
Asked why Silicon Valley has the edge over Europe and the world when it comes to consumer internet businesses, D'Angelo said: "It's just everyone is there. It's very hard to break out of that."
He added: "If you're applying machine learning to consumer internet, there's no way that that is going to work in London. No one is there."
One of Europe's best-known consumer internet companies is music streaming service SoundCloud, which laid off 40% of its staff earlier this month as it looks to raise additional funding.
Europe stands to benefit from soaring living costs in Silicon Valley and the fact that immigration is getting harder in the US under President Donald Trump, D'Angelo said.
The cofounders of London fintech startup TransferWise have swapped the CEO role amongst themselves again.
Kristo Kaarmann is taking over from Taavet Hinrikus as the boss of the international money transfer business, according to a blog post on Medium that was written by Hinrikus and published on Tuesday.
"I'm handing the day-to day running of the company and the role of CEO over to my cofounder, Kristo," the blog post reads.
"I will take the role of chairman," said Hinrikus. "As chair and board member — while part-time — I will be closely involved with TransferWise: continuing to shape the direction the company takes, working with external parties and supporting our product teams as they continue to build great things: focusing on the best ways for me to help TransferWise on the next stage of its journey."
TransferWise, which now employs 700 people across nine offices, claimed in May that it was profitable and that it was on target for revenues of £100 million this year. A spokesperson declined to give specific figures during a call on Tuesday but they did say the company is growing 150% year-on-year.
Hinrikus, who is an active angel investor, having backed the likes of simulated worlds startup Improbable, went on to say: "I'm planning to find more time to do more of what I love, focusing on disruption and helping the tech ecosystem flourish."
Hinrikus quietly took over from Kaarmann as CEO in September 2015, meaning he's been in the role for less than two years.
When Business Insider spotted that the founders had swapped the company's CEO in October 2015, TransferWise said: "A couple of months ago the founders changed their roles slightly. We're growing fast and we constantly look across the company to see how we can enable our teams to have the biggest impact. That goes for the founders too. We try different things to figure out what works best and gives us the fastest speed and the best outcome. It's a change in how the founders work together - but nothing has changed in the way that we execute towards the vision."
Aaron Levie dropped out of college to start Box, a cloud-based file storage company for enterprises that is now publicly traded. But six years in, Levie had an opportunity to sell his business.
Citrix offered to buy Box for ~$600 million. Levie and his cofounders ultimately declined the offer.
But the process was emotionally grueling and the decision haunted Levie for a long time.
"It would have been a great financial outcome for early employees and investors, so that was very difficult to think about," Levie said in an interview for Business Insider's podcast, "Success! How I Did It."
"On one hand, you had a guaranteed outcome, and so you could take all of the risk off the table, and it was staring you right in the face. On the other hand, you had really an improbabilistic outcome...all of these things where the odds were against us.'"
Levie got advice from other founders who had faced similar situations. Some told him to sell; others told him not to give up a business he loved.
Finally, he and his co-founders — Dylan Smith, Jeff Queisser and Sam Ghods — holed themselves in a hotel room for 24 hours to deliberate. They left still conflicted, but eventually decided to stay the course. The weeks that followed were tough.
"As soon as we made the decision, we were freaking out for months," Levie recalled. "I was having nightmares for a few weeks after: 'Did we actually make the right call? We can never now go back on this. We're pretty locked into the current path.' It was a scary decision."
Fortunately, Levie made the right choice. A few years later, at age 29, he took Box public. It now has a market cap of more than $2 billion.
Check out the episode with Levie explaining how he built Box, below, or keep scrolling for a transcript of how he decided not to sell it for $600 million.
Here's the relevant part of the podcast, explaining how they made the difficult decision:
Shontell: You went on to make Box a very large company, and to help you do that you raised a ton of money, and you had a big offer from Citrix at one point to buy your company for about $600 million. Your board really wanted you to sell at that time, but you didn't want to, and you resisted.
What's it like as an entrepreneur when something like this happens? You have this opportunity to exit, your board is pushing you to do it — what was the thought process, and how did you work through that?
Levie: It was definitely a struggle, and I think the board was probably a little bit more mixed, so I don't want to necessarily paint it as the board was firmly on one side versus my decision. It was a pretty complicated process because we were still relatively young and early in our growth, and so we didn't have a lot of data points to extrapolate out and imagine what Box was going to be in five or 10 years from that point. And so we had very little data to go off of. We were in a very still-competitive market with companies a hundred times larger than ourselves, and so in many respects, it was a very attractive opportunity.
It would have been a great kind of financial outcome for early employees, for investors, and so that was very difficult to think about. Because, on one hand, you had a guaranteed outcome, and so you could take all of the risk off the table, and it was staring right at you right in the face. And then, on the other hand, you had really an improbabilistic outcome, which is, like, OK, we're going to somehow go from being a $20 million revenue company to hundreds of millions in revenue, and survive all the competitive landscape that we're dealing with, and continue to build a culture that we care about and want to be a part of, and all of these things where the odds were against us. And it was a couple months of really debating that and struggling it.
I called a lot of mentors and founders who had either sold their company or not sold their company, and tried to understand why they went either direction. I was getting advice from lots of different, great founders and leaders, and the advice was sort of all across the spectrum. Some people said, "Totally sell — you're never going to get a better offer than this." And some said, "Hey, when you have an opportunity where you can keep doubling down and growing something that you love to be a part of, don't kill that opportunity."
Ultimately what happened was the four founders did an offsite, where we holed ourselves up in a hotel room for 24 hours and we decided that we were not going to leave until we had the answer of what we wanted to do. We still didn't have the answer at the end of the offsite, so that didn't end up working out fully, but within about a week or two, we concluded that we didn't want to sell. We wanted to keep doubling down, and we wanted to give this a shot.
The conclusion was when we thought about all the things that we had yet to do and what we still wanted to accomplish. Those dramatically outweighed the value of the money that we would get and the risk mitigation we would get by selling.
As soon as we made the decision, we were freaking out for, like, months. And on one hand, we were pumped up: "OK now, we know we definitely want to build an independent company." But on the other hand, we're like, "Holy s---, what did we just do, what did we turn down?" I was having nightmares for a few weeks after: "Did we actually make the right call? We can never now go back on this. We're pretty locked into the current path." It was a scary decision.
Luxembourg-headquartered venture capital firm Mangrove announced on Wednesday that it has raised a $170 million (£130 million) fund to invest in European and Israeli startups.
Mangrove has raised four other funds of the same size and now has over $1 billion (£770 million) under management.
The investor's biggest win to date was website building platform Wix.com, which is based out of Israel. Mangrove put $8 million (£6 million) into the company in its early stages and made $550 million (£422 million) when it went public in November 2015. Mangrove is also famous for being the first investor in Skype, where it turned a $2 million (£1.5 million) investment into $200 million (£150 million).
Mark Tluszcz, cofounder and CEO at Mangrove Capital Partners, who also serves as chairman of Wix.com, said in a statement: "We like to take big bets very early and support our best portfolio companies through multiple rounds of financing to build material stakes. We prefer to invest in unproven or unusual technologies rather than chase the latest fad."
Tluszcz added: "We are absolutely delighted with the returns we’ve generated for our investors and we don’t want to change a recipe that works very well for us. We are also enormously excited by our pipeline — we have at least a dozen gems in the portfolio."
As if having an awesome product isn't hard enough: A study published in the peer-reviewed academic journal Venture Capital has found that a startup's name can seriously affect how a company is perceived by investors.
Names are are easily pronounced, such as Uber and Lyft, are preferred by both early and late stage investors. They tend to be offered more money, whether its through crowd funders, angel investors, VCs or IPO investors.
Uniqueness is also virtue, but only with early-stage investors. The study found that since very little is known about a company in the early stages, unique names give the impression there is something special about the company.
Difficult names "evoke cues of unfamiliarity and create a perception of high novelty, which is valued by these pre-venture stage investors," according to the study.
But don't go registering for that unintelligible URL just yet: The novelty wears off by later stages, when unique names can make investors feel uncomfortable.
Think about now-shuttered companies like Xobni, which was purchased in 2013 by Yahoo for $60 million, before being shut down just one year later. Then there are other departed start ups like Oooooc, and Bawte.
There is just not much of a benefit to having a unique name in later stages, according to the study. Investors looking at a company after it's proven to be successful — around the time of an IPO, for example — care more about accurate valuation, so linguistics have less of an impact on financing outcomes.
These results came from researchers in the business schools at Stony Brook University, Drexel University, and Villanova University, who conducted a two-part study which analyzed how names affect funding. In the first part, the researches looked at 131 crowd-funded projects. In the second study, the researches analyzed 1681 IPOs.
TheSkimm launched five years ago, on July 21 2012. Business Insider wrote the first article on the company ever. We sat down with founders Carly Zakin and Danielle Weisberg a few months ago to catch up on their last few years. They explained (the incredibly hard) way they launched and grew the company.
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.
The following transcript of the interview has been edited for clarity and length.
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?
Carly 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'
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
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
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.
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
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.
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?
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.
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.
Shontell: Congrats to you both.
Brian Chesky didn't know much about tech before starting Airbnb.
The 35-year-old CEO majored in industrial design in college and dabbled in hockey and bodybuilding in his 20s. But now, he's grown an idea that stemmed from overbooked hotels into a multibillion-dollar startup — and has become one of Silicon Valley's key players in the process.
Here's how the upstate New York native became one of the richest young tech founders in America.
Chesky grew up in Niskayuna, N.Y., north of Albany. He was into hockey, and he also liked to draw and design new versions Nike sneakers, which turned into an interest in art.
Chesky's high school yearbook quote was "I'm sure I'll amount to nothing." He thought it was funny — his dad didn't.
"Earlier this year, he was happy to find out I'd be speaking at both my high school and college as the commencement speaker," Chesky wrote on Instagram. "See you soon Dad!"
In 1999, Chesky attended Rhode Island School of Design, where he served as captain of the hockey team and studied industrial design.
See the rest of the story at Business Insider
Mentors of Level39, the tech incubator space in Canary Wharf's tallest tower, were left confused after they found themselves locked out of the exclusive space with no explanation.
Several Level39 mentors told each other in an email chain leaked to Business Insider that they had been unable to access the space in One Canada Square in recent weeks. They believe that their free memberships have been terminated.
"I have tried to access Level 39 tonight but got denied entry at the ground floor security," wrote one mentor. "They tried to call upstairs many times to verify me but no one picked up the phone."
Another wrote: "The change was communicated to me by the front desk. Since then silence. Seems we're not good enough."
Level39's group of mentors — thought to be around 50 people strong — have been allowed to access Level39 for free since it was founded. Free access was granted to mentors on the basis that they agreed to deliver a certain amount of mentoring to the startup entrepreneurs based out of Level39 each year.
"This worked well and was respected," an anonymous Level39 mentor told Business Insider. "Now they want mentors to give time still but also pay thousands a year for a desk."
Level39's mentors, which includes the likes of Bindi Karia, a former VP at Silicon Valley Bank, and Marco Mirko, SVP of information security at Citi, are now being asked to pay approximately £3,900 a year if they want continuous access to Level39.
Asif Faruque, the head of content at Level39, wrote an email to some of Level39's mentors last Monday inviting them to become hot-desk members at a price of £325 a month.
"It's pretty poor all round," said a Level39 mentor. "I don't know if Ben is looking for a new job or just doesn't give a crap."
Faruque told Business Insider that mentors who want to use the space on days when they're not mentoring will have to pay for a membership.
"If anyone requires permanent, continuous access to Level39 they pay for membership," he said. "That starts at £325/month. If a mentor is coming in to do mentoring, they do not (and have never) paid for access."
Online car marketplace Carwow has raised £30 million for its website, which tries to help people get the best price on a new car by introducing them to a range of dealers.
Total investment in the company, which allows prospective car buyers to search for vehicles by their make and model, now stands at £48 million.
The Series C funding round was led by Virtuvian Partners, while previous investors Accel Partners and Balderton Capital, who have backed companies like Facebook and Citymapper, also participated.
James Hind, Carwow cofounder and CEO, said in a statement that the funding will be used to improve the service for dealers and manufacturers. The money will also be used for marketing campaigns and to fuel international expansion, Carwow said.
Carwow launched in 2013 and the company claims that £2 billion of new cars have been bought over its platform. The company's website, which gets 2 million visits a month, tells people how much a particular car should cost and provides reviews as well.
The company, which employs 140 people at its head office in Holborn, London, launched in Germany last year and plans to expand into other markets with the help of the new funding. The company did not specify which countries it was looking at next.
Thomas Studd, a partner at Vitruvian Partners said in a statement: "It's clear to see the value that Carwow provides consumers who are looking to buy a new car but what also became evident during the investment process are the significant benefits that Carwow delivers to both its partner dealers and car manufacturers.
"Dealers are particularly enthusiastic as Carwow's highly qualified leads allow dealers to address the market much more efficiently — a third of all calls from Carwow consumers end in the sale of a car. We are delighted and excited to partner with Carwow and to help accelerate its international expansion and deepen its offering within the UK new car market."
The bloom is off seed funding, the business of providing money to brand-new startups, as investors take a more measured approach to financing emerging U.S. technology companies.
Seed-stage financing has been sliding for the last two years, with the number of transactions down about 40 percent since the peak in mid-2015, data show. Dollar investments in fledgling companies have also declined, although less dramatically, dropping more than 24 percent over the same period.
The slowdown comes despite an explosion of interest by wealthy individuals and foreign investors looking to park money in the next big thing.
And it has potentially big implications for Silicon Valley.
Early-stage funding is the lifeblood of a technology ecosystem built on risk-taking. Denied critical resources in infancy, companies can't hope to scale quickly enough to unseat incumbent industries and grow into the next Uber or Airbnb.
"The reason why startups are disrupting companies in the 21st Century is not because they are smarter. It's because they have capital to do so," said Steve Blank, a serial entrepreneur, startup mentor and adjunct professor at Stanford University.
Early-stage investors, known in Silicon Valley vernacular as seed and angel investors, often act as farm teams do in sports. They provide the first significant money and mentoring to help entrepreneurs prove their technology and hit milestones needed to attract even bigger investments from venture capitalists later on.
But the zeal that prevailed just two years ago has faded. Seed and angel investors completed about 900 deals in the second quarter, down from roughly 1,100 deals in the second quarter of 2016 and close to 1,500 deals during that time period in 2015, according to a report released last month by Seattle-based PitchBook, which supplies venture capital data.
The dollar amount provided by seed and angel investors was $1.65 billion in the second quarter. That's just shy of the $1.75 billion for the same time period of 2016 and down significantly from 2015, which saw $2.19 billion invested into fledgling startups.
Veteran seed investors and industry analysts offer a number of reasons for the decline.
They cite concerns over inflated valuations as well as a tepid market for initial public offerings, which provide seed funders a way to recoup their investments. After some much-hyped IPOs such as GoPro, LendingClub, and Fitbit lost their sizzle, Wall Street has curbed its appetite for shares in unproven private companies with billion-dollar-plus valuations.
Others blame the rise of technology leviathans for the decline in seed funding deals.
San Francisco seed fund Initialized Capital, for example, has slowed its investment pace to about 20 companies a year, down from 50 to 60 just a few years ago, even though its fund size more than tripled to $125 million, according to managing partner Garry Tan.
Among his concerns: dominant players such as Facebook have amassed so much wealth they can quickly challenge a hot startup, diminishing its value.
"Incumbents just get so much more power, so there are fewer super early-stage opportunities that are very valuable," Tan said. "I can imagine a 20 to 25 percent reduction in valuable investment opportunities."
Fewer, Larger Investments
Funding cycles in Silicon Valley ebb and flow. Several veterans say the decline in seed deals is bound to reverse at some point.
Still, some early-stage investors say they're observing a rethinking of the traditional "spray and pray" approach to seed funding. Instead of putting small amounts of money into lots of startups in the hopes that a few will work out, seed investors are shifting to fewer, larger deals.
The median seed deal is now $1.6 million, according to Pitchbook, up from about $500,000 five years ago. That's more in line with what big venture firms used to invest.
And while data show that about 70 percent of seed-funded companies never make it to the next level, there is no shortage of interest from investors.
About 450 seed funds have emerged in the past few years, according to fund managers, financed by investors as diverse as wealthy individuals, universities, sovereign wealth funds and Chinese family offices and corporations.
The experience of early-stage venture firm Floodgate is typical. Investment partner Iris Choi said the firm's average investment size has about tripled in the last four years, from $1 million on the high end to $3 million.
But along with big bucks come big expectations. Funders betting seven figures want to see a much more mature business than in years past.
The upshot is that some entrepreneurs are finding it harder to get a backer in the very early going, says Allan May, chairman and founder of angel investing group Life Science Angels, based in Sunnyvale, California.
"The bar is now higher to get early-stage financing," May said. "You've got to be further along."
In return for writing bigger checks - and assuming bigger risks - seed investors are also demanding larger ownership stakes in new companies.
Initialized Capital, whose investments include San Francisco-based grocery delivery service Instacart, seeks about a 50 percent stake in startups in exchange for its investments, said Tan, the managing partner.
That's enormous considering other seed funders shoot for stakes closer to the 5 percent to 15 percent range.
But more shares gives seed investors more leverage in future funding rounds when additional investors come on board. Seed funders risk seeing their stakes diluted significantly if they don't take a large ownership from the start, or participate in future funding rounds so they don't get squeezed by other venture capitalists.
Venture Capital's "Train Wrecks"
To be sure, entrepreneurs still have ample opportunity to build the next big company. Launching a startup is cheaper than it has ever been, thanks to tools such as cloud computing that allow small fry to forgo the cost of building a data center. Startup incubator programs have helped too.
Still, quick deals could be harder to come by as seed funds with lackluster performances struggle to raise new funds.
"A lot of these funds didn't perform," said Samir Kaji, senior managing director at First Republic Bank. "They are still around but they aren't writing new checks."
In the last year or so, at least nine seed firms have gone out of business, according to PitchBook.
Veteran Chris Douvos, managing director with Venture Investment Associates, has put more than $250 million into seed funds over the last decade. He estimates that the hundreds of small seed funds that exist currently will dwindle to 40 to 80 in the next year or two.
"All of venture capital's train wrecks happen in slow motion," Douvos said. "The mass of these funds is on the bubble, and what will determine who lives and who dies is to some degree luck."
"If the headline of this article read: 'This company wants to help Nintendo with its mobile app,' I would be content with that,"Discord CEO Jason Citron tells me.
Citron is joking, but he's on to something: The new Nintendo Switch console requires players to use a separate app on their phones if they want to voice chat with their teammates. It's a frustrating hurdle that's turning people off to otherwise well-received games like "Splatoon 2."
Meanwhile, Discord is a red-hot app amongst PC gamers, allowing them to chat for free with friends via text or voice no matter what they're playing. From December 2016 to May 2017, Discord went from 25 million users to 45 million, almost doubling in five short months. The company says that growth is still strong.
"When I talk to gamers, I say, 'it's like Skype for gamers," says Citron. "When I talk to [venture capitalists], 'it's like Slack for gamers.'"
And yet, Citron says that he has different ambitions for Discord than those of Slack or Skype. Microsoft increasingly sees Skype as a social network for your closest friends and family. $5 billion startup Slack sees its popular work chat app as something like an operating system unto itself.
Discord, then, has one mission, and that's to help people play video games together. That's it. So far, it's working. Here's what makes Discord special — and why Citron says Discord could never have existed if he hadn't failed twice as a video game developer.
'If I hadn't been running out of money'
Before Discord, Citron was best known in the industry as the co-creator of OpenFeint, an early social network for iPhone games.
OpenFeint itself got its start as part of "Aurora Feint," an iOS game that Citron had co-developed and released in 2008. The game itself was a commercial failure, but Citron found success in licensing the OpenFeint technology to other developers. In 2011, OpenFeint was purchased by Japanese games giant GREE for over $100 million.
History has a way of repeating itself. In early 2015, Citron and his team had released "Fates Forever," an iPad game that was intended to capitalize on the success of "League of Legends" and similar titles. It was well-reviewed, but the revenue just wasn't materializing.
Meanwhile, Stanislav Vishnevskiy, a key developer on "Fates Forever," noticed that gamers were unhappy with the chat tools available. He got permission from Citron to start hacking on the side-project which would eventually become Discord. It quickly became apparent that Discord had much more of a future than "Fates Forever."
Work shifted from the game to the chat program. It was "gradual, and then fast," as engineers moved from the game to the app one-by-one until it was the entire company. He says the most difficult decision he's ever made as CEO was to take "Fates Forever" off the market, laying off the five full-time artists who were working on the game.
"We can't do two things as a startup," Citron says, and "Fates Forever" had to die for Discord to live.
Discord was officially born, with Citron becoming CEO, Vishnevskiy becoming CTO, and investors like Greylock Partners and Benchmark investing more than $70 million to date. The app caught on, first with players of the online game "Final Fantasy XIV" and then the rest of the world. It's looking like a real success, with over 80 employees working from its San Francisco headquarters.
"If I hadn't been running out of money, I would never have pivoted," says Citron.
Above all, Citron says that Discord is born of his personal love of video games — he could have walked away with his money earlier in his career, but he didn't. Now, he says, Discord is here for the long haul, and doesn't rule out the possibility of an IPO if that's what it takes to keep it a strong company.
Optimized for gaming
For the last decade and a half, gamers in need of voice chat have either been using TeamSpeak, a voice chat program first made available in 2001 that's largely remained the same, or Microsoft's Skype.
Discord is designed to take what gamers like about those programs — notably, the ability to quickly and easily form a group and chat with them — and bring them into a more modern interface. Like WhatsApp, Slack, or Facebook Messenger, Discord is available on PC, the web, and the smartphone.
In a technical sense, Citron says that Discord has the sole focus of serving gamers. That means that the company's number-one priority is making sure that the Discord app doesn't eat up too much of your system's resources. After all, if you're using Discord in the background to chat, you're probably playing a graphics-heavy game, too.
You can see that priority made manifest in the app's little details. For instance, an animated .gif image doesn't play automatically in a Discord chat; the processing power could be better used elsewhere. Next up in the product are features like screen-sharing, but it's meant for small groups, not the huge audiences enjoyed by Amazon's Twitch.
As for the business model, Citron says the company is still figuring it out. Earlier this year, Discord introduced Nitro, a $5/month premium service that gives users extra privileges that are mostly cosmetic. Discord is also delving into partnerships with game developers, allowing them to build Discord chat straight into their games.
The app's general snappiness has won Discord acclaim from users outside of video gaming, too, including groups of programmers. That's fine, Citron says, but the company is very happy catering specifically to gamers. In fact, the very concept of a version of the app for businesses is a running gag at the Discord offices.
"We joke sometimes," says Citron. "Maybe we'll do it for April Fools."
• Aiqudo wants to make every app on your smartphone controllable with voice commands, regardless of what device or voice assistant you prefer.
• The company has ties to Quixey, a much-hyped Silicon Valley startup that was backed by the likes of Alibaba and Softbank, but flamed out earlier this year.
• The idea gets at an underlying problem with today's voice assistants: They're effectively "walled gardens" that could fragment what devices and apps you're likely to use.
All the big tech companies want to hear the sound of your voice.
Having a shapeless digital assistant that can tell you the weather, play music, and manage your day is now table stakes. There’s Siri, Alexa, Cortana, Google Assistant, Bixby, and others likely to come. They’re in phones, speakers, cars, fridges, headphones, and, likely soon, augmented-reality devices.
In every case, the fundamental goal is to reduce the need for touch controls and make it so these voice assistants — and thus, the companies that make them — become the filter through which you access all your information.
But John Foster thinks there’s a problem: Everyone with a hand at the table is setting up their own silos.
"The way voice is shaping up right now — Amazon particularly, but also most of these other guys — what it looks like they’re trying to do is create another walled garden," Foster says. "Amazon wants you to be in their experience. And they want to be there anytime you think of anything you want to buy. Which is great, it’s super convenient. But you have to buy it from Amazon. That’s how they’re starting to encircle the world of the consumer, by making you do everything inside of Alexa."
Foster is the CEO of Aiqudo, a San Jose, California-based startup with a goofy name, a complex backstory, and just over 20 employees. The company came out of "semi-stealth" mode late last month; it’s raised $5.2 million in Series A funding from Atlantic Bridge Capital since its formation in March. It has also acquired Sophia, an Irish startup that’s worked on using machine learning for digital advertising.
On a broad level, Aiqudo is trying to make it so you can do things within any app using just your voice. It has an app called Q Actions, available in beta on both the Google Play Store and the Alexa Skills Store, which demonstrates this tech. (The company says versions for iOS and Google Assistant are in the certification process as well.)
Aiqudo’s tech works similarly to a Siri or Alexa on a core level — you can use your voice to find info — but the company isn’t really trying to make another assistant meant to go direct to consumers.
Instead, Aiqudo mainly wants to sell its voice tech as a service to developers that want to make their apps controllable with voice commands without having to work separately with Alexa, Google Assistant, and every other individual voice assistant platform. It’s also trying to sell to phone manufacturers that want to bake voice controls into their devices (via the home button, for instance). It plans to make a software development kit available later this summer.
Foster says Aiqudo is talking to "four of the top 10 Android OEMs" about potential partnerships, though he declined to give more specifics.
Trying to bridge the gaps
Aiqudo's working thesis is that voice assistants like Alexa are handicapping how useful they could be, particularly on phones, in the service of keeping the market on their terms. It’s inefficient for developers to build out "skills" for various distinct platforms, Foster says, when the apps on your phone can already do most of what you're trying to do, and could just be voice-enabled.
"The developer has to create a skill for Alexa," Foster says. "Uber had to create the Alexa skill. Spotify had to create a skill for Alexa. What we’re saying is: Just use your apps."
Think of it like mobile internet: You can’t just connect your phone to an LTE network; you have to sign up with Verizon, AT&T, or another carrier first, then accept the level of service it gives you. There’s a similar platform war brewing with voice tech. Alexa works with the most apps and devices today, but it's still very limited on a smartphone. Google Assistant isn't as limited on the phone, but it’s not as widely supported by third-party developers. If you own an iPhone, you’re virtually stuck with Siri’s limitations.
Each assistant is improving, but there are lapses in functionality wherever you go. (None of them can help you move around the Facebook app, for instance.) If and when they do improve, they’ll centralize more control in a handful of giants’ hands.
Aiqudo wants to tackle this, at least on smartphones, by making voice control tech available to apps without requiring the major voice assistants. In other words, it wants to sell a bridge that gives apps voice controls and connects them to various voice assistant platforms. If an app jumps aboard Aiqudo’s platform, it becomes voice-enabled wherever Aiqudo’s tech becomes available.
It does this by "onboarding" those apps to its own platform, mapping different sequences of touch inputs within those apps to certain voice commands. Aiqudo performs these so-called app "actions" by analyzing the apps directly on your device, according to CTO Rajat Mukherjee; it doesn’t need any custom support from developers the way Alexa, Google Assistant, or Siri do. Mukherjee says the actions aren’t necessarily tied to one specific app, and that Aiqudo is trying to avoid making you say specific app names to activate certain actions.
If you need to hail a ride home, for instance, the idea is to not have to specify whether you want an Uber or a Lyft. You just say "I need a ride home," and Aiqudo’s tech will, in theory, recognize whatever ride-hailing app you use, enter in your destination info, and call for a ride without you having to touch anything. If you have Slack installed, you could say "show me the general channel," and it’ll open the app and move you there. It’s similar to the automated "applets" of IFTTT in that sense.
Foster pitches this as being particularly useful for apps that want to be usable through voice commands but can’t be bothered to do the work needed to get covered by all the current voice assistants.
"I use Surfline to check the surf — it’s got, like, 200,000 downloads," Foster says. "I don’t think it’s ever going to be an Alexa skill. So as long as I can’t get to it through Alexa, Alexa’s never going to reach that vision that they have of ‘Alexa everywhere,’ because now to check the surf I still have to go over to my app world and the Surfline app to check it."
The end goal is to make voice control a layer that just sits over the top of a phone's interface.
Picking up the pieces
Let's not mince words: Aiqudo has a long way to go before it's even close to relevant. A five-month-old startup trying to make a dent against Amazon and Google is still a stretch of the imagination, to put it kindly.
How Aiqudo came to be, however, is worth noting. The company has largely formed from the ashes of Quixey, a former Silicon Valley darling that was once reportedly valued around $600 million but flamed out earlier this year. Quixey worked on the "deep linking" of apps, making it so information could be searched within apps and tethered between them the way it is with websites.
That promise garnered funding from big-name investors like Softbank and, most significantly, Alibaba. But Quixey struggled to fully realize the tech — which mainly involved emulating apps in the cloud — and developed a contentious relationship with Alibaba, its primary backer. That rift ultimately led to Alibaba shutting down Quixey in March.
Foster inherited Quixey’s issues as its third and final CEO in November. But once the company’s fate was sealed, he and Mukherjee — a former product manager at Google and Yahoo — decided to rethink Quixey’s app-searching concepts through the lens of voice tech. (Foster stressed repeatedly that the company is using new IP to do this.)
They were encouraged to start fresh by Atlantic Bridge, itself a Quixey backer, and eventually used its funding to hire a handful of former Quixey staffers. Those staffers currently comprise about a third of Aiqudo’s team, per LinkedIn.
Obstacles to overcome
Foster and Mukherjee are getting at legitimate concerns, both existential and practical, with today’s much-hyped crop of voice assistants. When I tested Alexa’s recent tie-in with HTC’s U11 phone, for instance, I found it frustrating that I could only play music from Amazon’s own streaming service. Using Aiqudo, in theory, I could simply say "play some music" without having to worry about compatibility; my phone would just know what I want to do with it.
But there are equally legitimate barriers to Aiqudo ever taking off. First and foremost, Aiqudo’s current app feels low-rent. Again, it’s only a beta, and Aiqudo's goal isn’t about going straight to consumers, but using it now is rough nonetheless. It forces you to tap a Messenger-style "chat head" to activate any command, defeating the "hands-free" idea right upfront, and it’s highly spotty about interpreting "natural language" commands the way you want.
For instance, I said "I want to watch a YouTube video" and was brought to Facebook’s video section. (On the flipside, I could use it to go to Facebook video in the first place.) Another time, I said "What’s the top story" and was prompted to download the NBA app. And many of the "natural" commands that do work aren’t entirely obvious. There's still a certain syntax required to get around.
Assuming the kinks are ever worked out, one big question is whether the voice platforms from Amazon, Google, and the like will become useful enough for consumers to overlook any concerns of walled gardens. Alexa is already working with many big apps, and Amazon is now paying new developers to use its tech. Google runs Android and makes several hugely popular apps, which gives Google Assistant a massive leg-up there. And Apple's vise grip on iOS makes it difficult to see any non-Siri voice tech taking off on its platform.
A more immediate question: How often do we even benefit from using phone apps with our voices to begin with? There are cases where it makes sense, sure, but today’s voice assistants cover a fair chunk of those. It’s not like tapping and swiping a touchscreen is a particularly laborious process. It hasn’t become any less awkward to talk to your smartphone aloud in public, either.
Where voice commands could be more necessary is with augmented reality and virtual reality gear. Mukherjee says that Aiqudo’s tech makes it so "any app is fair game," be it on an Oculus Rift or an Apple Watch. Right now, though, the company is focused mainly on mobile devices.
The future is fragmented
Whether Aiqudo can drum up enough interest to make using its tech worthwhile is totally up in the air. But if nothing else, its existence is an interesting thought experiment.
Voice assistants are integrating into more and more places; the smart speaker market in particular is expected to grow 60% from 2016 to 2017, according to Parks Associates research analyst Dina Abdelrazik. So let’s say one day, voice tech starts to feel normal and become superior to touch — what happens if some apps and devices only support one assistant, while others only work with another? If Amazon's Alexa were to stay dominant, would that let Amazon dictate what devices you buy — and where you shop? Is recreating the type of platform war that led to Android and iOS dominating mobile devices the best thing for voice tech?
"I think as the Internet of Things gets bigger and bigger and bigger, [the current voice assistant model] is not realistic," Victoria Petrock, an analyst at eMarketer, says. "Because someday you’re going to buy a washing machine that's compatible with Alexa and everything else you have uses Google."
Even if Aiqudo’s app-enhancing approach isn’t the solution to tie everything together and make using voice controls more natural — it’s not the only one trying— allowing the various assistants to talk to each other in some fashion would seem to cut down on annoyances for consumers down the road.
"Eventually, the tech industry will likely need to embrace some sort of standards if voice is going to become ubiquitous, just as we had to settle on standards for the Web," Tom Mainelli, an analyst at IDC, says. "Without them, progress will take much longer."
If you want to work at the Farmer’s Dog, the fresh made and personalized meal delivery service for dogs, you have to be prepared to do one thing first – eat the dog chow. This might seem like a ghastly test, but the Brooklyn startup thinks it’s important to emphasize that the food they make is safe for humans, and so by default, safe for a human's four-legged friend too.
“It’s fun think about the food being safe enough to eat, so you may as well try it,” says Jonathan Regev, a cofounder of Farmer’s Dog. But, he adds, “people are usually disappointed by how bland it is, it’s just meat and vegetables.”
Regev and his co-founder Brett Podolsky got their start after Podolsky’s dog, Jada, needed home cooked food to stay healthy. Making meals that were nutritionally balanced enough to keep the vet happy was tough and time consuming. Podolsky was willing to do it for a short time, but realized others might not be despite their desire to feed Fido a fresh dinner.
Their service is a little like a subscription meal service — think BlueApron, but for dogs. Customers order as many meals per week for delivery as they need, with each meal based on a questionnaire that takes into account the hound's health and size.
As it turns out, dogs are the perfect subscription customers – they eat like clockwork and aren’t too picky about what their meal looks or tastes like. The important thing is that the food is fresh and healthy.
The duo launched in beta mode in 2014, and in May of 2017 raised $8.1 million in Series A funding in a round led by Shasta Ventures with participation from Forerunner Ventures, Collaborative Fund, and SV Angel.
“We forget dogs are animals, and for some reason we’ve been conditioned to feed them small processed balls from a factory,” says Regev.
The meals, which are prepared at a facility in upstate New York, are made from meat and vegetables and can last up to a week. The team works with vets to make sure the meals contain the proper levels of vitamins.
Their timing is spot on – Americans are spending more than ever on their furry friends and what they eat. The American Pet Products Association estimates people will spend $29.69 billion on pet food in 2017, up from $21.57 billion in 2013. A lot of that spending is the result of an increased interest in high-end premium food.
“Right now you have really cheap processed food and then really expensive processed food,” Regev says. He and Podolsky think the market will shift away from really expensive processed food, and be replaced with fresh meals like the Farmer’s Dog.
The duo plans to be there when it does. Regev said they don't have a specific growth goal in mind, they are just passionate about making the fresh food as widely accessible as possible. They’ve seen the difference it makes in their own dogs, and are excited about getting people to shift away from factory made kibble to food that’s cooked with ingredients good enough for humans.
Creating a billion-dollar company isn't the only thing the founders of Reddit, Quora, Dropbox, Venmo, Airbnb, Instagram, Palantir, Pinterest, Lyft, Wish, Sofi, and Facebook have in common.
The 17 people who make up that list also happen to be men who were born within three years of each other, between 1981 and 1984.
The question of why, exactly, seven of the top 10 billion-dollar-plus unicorns, along with a handful of publicly traded titans, were all launched by guys who could have been in the same high school class doesn't come with just one answer. But there are clear events throughout history that offer clues.
Going back to the 1970s
The arc of the early-30s techie actually began in the 1970s, with the prior generation of computer programmers, according to technology consultant Tim Bajarin. "The Bill Gateses of the world were actually the precursor to this," Bajarin told Business Insider.
People like Gates and Steve Jobs began working in the 1970s, alongside lesser-known luminaries like Mitch Kapor of Lotus and Fred Gibbons of Software Publishing. They mostly worked on mainframes and mini-computers, and they spent thousands of hours doing so. When the first personal computer debuted in 1975, these small-time programmers were poised to strike it rich.
As Malcolm Gladwell noted of this tech generation in his book 2008 "Outliers," they came of age in a special time. If they were slightly older, they would have left college to work for a large corporation, like IBM, and their career would have been set in stone. On the other hand, if they were born after the window, the wave would have already passed them by.
What's important about the latest generation is that they were born right when the PC was becoming available to the masses, in the early 1980s, which meant that many grew up with one in their home.
"That was huge," Bajarin said. "They already knew how a PC works, and in a lot of their cases they had PCs in their homes because their parents had PCs in their homes; whereas the generation before them, the production of digital technology was more of a product in the toy category."
The gender gap persists
However, the PC wasn't marketed to everyone across the board. In 2014, NPR used data from the National Science Foundation, American Bar Association, and American Association of Medical Colleges to show that computing companies stopped marketing their machines to girls around 1984.
It's had dramatic effects on female representation in computer science fields to this day. Women earn 57% of all undergraduate degrees but only 18% of all computer and information science degrees.
Underrepresentation is only the start, though. Sexism and sexual harassment scandals have plagued the industry for decades. Women also have a much harder time earning venture capital money. One study found that even if there was just one woman on a company's executive team, the company tended to receive less funding.
A recent manifesto written by a now ex-Google staffer that criticized the company's emphasis on diversity is only the latest example of how women can be dissuaded from staying in the tech world.
The factors come together
It wasn't all boys who used the first PCs — rather, those from predominantly affluent areas. In 1981, the average PC cost $1,565, or about $4,100 in 2016 dollars. And if you wanted to buy the first Macintosh when it came out in 1984, you had to fork over $2,495, or nearly $5,700 today.
Sam Altman, the 32-year-old president of Y Combinator, Silicon Valley's largest startup accelerator, said growing up in St. Louis he had a Mac LC II at home, but most of his hacking took place on his elementary school's Mac IIGS. He would spend hours writing simple programs — a luxury kids living in poorer areas, with poorer schools, wouldn't necessarily have.
The mobile explosion was starting to take off. And the opportunity was very large.
"You could write a program to print all the prime numbers, and come back to school the next morning and the computer's run all night, and it's gotten to like to prime number a million-something," he told Business Insider. "And you think it's so cool."
When the dot-com bubble formed in the late 1990s, the kids writing these simple programs were now in their late teens. And since the internet's transformation was on display for all to see, through news media and the internet itself, these teens had a front-row seat, says Paul Saffo, a Stanford consulting professor and technology forecaster. This visibility, Saffo claims, is ultimately what separated the new tech generation from the old.
"During the dot-com bubble, when so many people are starting companies, you say to yourself, 'Well, that's not an aberration,'" which is how many viewed Gates' and Jobs' rise to prominence, he told Business Insider. Instead people said, "That's a career track."
That mixture — years of preparation as a kid combined with a budding tech landscape on the verge of tectonic change — ended up sending a slew of young tech geeks into a field that would write history books.
"The mobile explosion was starting to take off," Tim Bajarin said. "And the opportunity was very large."
Finding the next big thing
Not all of today's most prominent tech founders are in their 30s. Tesla and SpaceX CEO Elon Musk is 46. Amazon CEO Jeff Bezos is 53. Likewise, a number of younger founders born after that early 1980s wave are rising to the top. Evan Spiegel and Bobby Murphy, the cofounders of Snap, are 27 and 29, respectively.
Nor did every founder between 33 and 36 launch their company at the same time. Mark Zuckerberg launched Facebook in his college dorm in 2004, for example, while John Zimmer didn't cofound Lyft until 2012.
More important are the experiences they had growing up, and the relationships they formed to technology at the time. Altman says he grew to have such a fascination with computer programming specifically because he could write simple code that would print out strings of prime numbers. It didn't matter he wasn't creating super-smart apps — the seeds of inspiration were getting planted at the right time, with tech that was sufficiently hackable.
"If you give a kid an iPad today, they'll have a great time," Altman said. "But if you want to go make an app for an iPad it's a lot of work. A 7-year-old is not going to figure that out for him- or herself."
According to Saffo, the same wave Gates and Jobs rode and which resurfaced for Zuckerberg and many others is poised to happen a third time in the field of genomics. He said technologies like CRISPR, a gene editing tool, are ripe for innovation in the coming decade.
Altman, however, said to look at whatever the smartest kids in the best universities are talking about, and ignore the hype. "Because everybody says that," he said, "I expect that it's wrong."
It's easy to tell the difference between a motorcycle and car, right? One has two wheels, one has four.
Except that there are now plenty of vehicles available that have three wheels.
There's the Can-Am Spyder, the Campagna Motors T-REX, and the Polaris Slingshot, to name a few. There's also the Elio, which recently paid a visit to out New York office.
Soon to join the party is the all-electric Arcimoto SRK (those aforementioned rides all run on gas), effectively a $12,000 tandem three-wheeler motorcycle that can be outfitted with a fully enclosed "cabin" or converted to delivery van duty.
Arcimoto is serious enough about its ambitions that it just launched an unusual type of IPO, selling stock for $6.50 per share and throwing the investment opportunity open to retail customers (versus a more conventional offering, in which only the pros would get in initially). The goal is to list the company on the Nasdaq exchange, and according to a statement, the company has undertaken that process.
“Our thesis since the beginning has been to develop an incredibly fun and highly useful vehicle at a disruptive price point the mass market can afford,” Mark Frohnmayer, President and founder of Arcimoto, said in a statement. “We believe the Arcimoto SRK will deliver on that vision: our target base model price of $11,900 is about a third of what a typical new electric car costs."
The offering is a bit off the grid, being handled by WR Hambrecht + Co, a San Francisco-based investment bank that has taken companies public using an "Open IPO" model. Even the reserved ticker symbol is offbeat: FUV, for "Fun Utility Vehicle," Arcimoto's term for its electric trike. The IPO is what's known as a "Regulation A" offering.
It could raise as much as $28 million, according to reports.
I've sampled the T-REX and the Slingshot, which run on gas, as does the Spyder. Obviously, the SRK is something different.
It might be the ultimate city vehicle. And I checked it out:
(This post has been updated from its original version.)
Arcimoto swung by our Manhattan office for a curbside briefing and test drive last year. It was a lovely day. The Oregon-based startup has thus far taken about $8 million in funding and has worked through 8 prototypes of its vehicle.
They brought a pair of SRKs — one red and one blue.
That's Mark Frohnmayer, the founder. He's an entrepreneur who sold his previous company, GarageGames, before starting Arcimoto.
See the rest of the story at Business Insider
Congratulations! You've been awarded incentive stock options in your company.
This may be the most amount of money you've seen in your lifetime. As such, you would be best served developing a solid written game plan for managing your "winning hand." Don't fail to plan with a financial decision of this magnitude.
I've seen dozens of stock incentive plans for companies — both private and public. The most common form of stock based compensation offered by privately held companies to its employees are incentive stock options or ISOs.
Typically, new full-time employees are granted a number of shares of stock on their date of hire based on the current market value per share. The first page of the agreement often specifies the following:
Once you've been with the company long enough — usually 4 to 5 years — your stock options will be 100% vested, meaning you can cash in when you're ready. By then, the shares hopefully will have appreciated in value so you have what are called "unrealized gains" in your company's shares.
You may be wondering what you should you do next. Many people start with the tax implications, but letting the tax tail wag the dog without considering other critical factors can be a catastrophic financial mistake.
Below is the game plan I put together for my clients when stock compensation makes up a meaningful percentage of their net worth. This five-step plan should help you avoid some of the common pitfalls affecting investors:
1. Quantify your goals.
For example: You're planning to purchase an apartment in San Francisco for $1 million. You'll need around $200k stashed away for a conventional 20% down, 30 yr. fixed mortgage.
Colleagues at your company may discourage you from selling shares. They'll tell you, "Don't sell now, you're foregoing tremendous upside." Don't listen to them. For every Facebook and Google there are hot tech IPO duds like: On Deck Capital, Coupons.com, GoPro, Fitbit, to name a few. Stick to your plan and do what makes you comfortable. We all have different goals and risk tolerances.
2. Set aside 3-6 months of living expenses for a rainy day fund.
If you don't already have one established, use a portion of the proceeds from exercising and selling your stock options for a rainy day fund.
Life gets in the way. Having a rainy day fund affords you flexibility. Whether you decide to take time off, or perhaps are considering a career change, having this fund will give you the financial freedom not to have to take the first available job.
3. Don't ask everyone in your network for advice.
Your accountant, colleagues on your team, wealth advisers, friends, family: Everyone you know will each have different suggestions based on their training, background, relationship with money and inherent biases. YOU know YOU best!
4. Find an accountant well versed in the taxation of stock options.
According to Walt Medling, a certified public accountant at Bay Area Tax Group, there are three kinds of taxes you should consider when exercising your incentive stock options: ordinary income tax, long-term capital gains tax, and the alternative minimum tax (AMT).
Long-term capital gains are preferable, but only attainable if stock is held for at least two years from grant date and one year from exercise date. And it's important to be aware that income is often recognized for AMT purposes at the time you exercise options, long before you may be selling stock and putting cash in your pocket.
Proactive planning with an expert can significantly help with cash flow management, projecting future tax obligations, and maximizing your tax saving opportunities.
5. And finally, diversify.
When you exercise and eventually sell your incentive stock options, you'll be presented with a new issue: what to do with the cash in your brokerage account. Not to worry. There are a number of options available to you, depending on your financial advisery needs. You can work with a robo-adviser, the most well-known to the millennial generation being Betterment and Wealthfront.
Robo-advisers provide a low-cost automated model investment portfolio of passive exchanged traded funds (ETFs) based on results obtained from their questionnaires. And if you happen to be investing more than $5,000, you may consider Schwab's robo-advisery offering, Schwab Intelligent Portfolios, which charges no advisery fee, account services fee or commissions.
If, however, you decide that when it comes to your financial well-being, you'd prefer a relationship with a human financial adviser who can cover anything from stock options to budgeting to collaborating with your accountant, attorney, and more, be sure that the adviser you decide to work with is a fiduciary, and therefore legally required to put your best interests first.
Aaron Hattenbach, AIF® is the founder and managing member of Rapport Financial, a registered investment advisery firm headquartered in San Francisco, CA. Rapport Financial specializes in advising technology professionals at public and private companies with stock based compensation.
DON'T MISS: Everything You Need To Know About Stock Options
Andy Rubin has a different take on how a startup incubator should operate.
This past week, while showing off the new Essential Phone, which a Playground company designed, Rubin talked about the philosophy behind the organization.
"Playground has a unique structure," he said. "We're a venture capital firm mashed up with a design studio."
Incubators offer a large office space for many startups to share. They frequently provide entrepreneurs with funding and mentoring from experienced executives and founders. Often, they will also handle administrative functions like human resources tasks.
But Playground offers something different, Rubin said. In addition to offering startups cash and a place to work, it also provides them with a pool of engineers and access to a whole bunch of high-end prototyping and test equipment to help them develop their products.
Playground has some 60 engineers of its own, Rubin said, and they have expertise in a variety of areas, including hardware, software, and electrical engineering. When the incubator invests in a startup, the engineers work side-by-side with the startup's employees.
"It's an accelerant," Rubin said. "It helps companies build their products faster."
When startups launch out of Playground, the incubator's engineers and designers who have been working with them may leave with them, he said. Eventually, those engineers may make their way back to the incubator.
"There's a potential — we haven't done this yet — but there's a potential they can recycle back," Rubin said. "And it just keeps happening and happening and happening."
Essential, Playground's consumer electronics startup, which just launched its smartphone, serves as a model for how the process can work. About 18 people developed the company's core technology, Rubin said. Of those, a majority came from Playground.
In addition to engineers and designers, Playground also offers startups the chance to work with a collection of high-end equipment. Its lab is a kind of inventor's paradise with 3D printers, computer-controlled laser cutters and milling machines, and a band saw.
It also has environmental chambers that can be used to subject devices to a variety of climatic conditions, high-speed and thermal imaging cameras, oscilloscopes and spectrum analyzers, and enterprise-grade camera testing equipment.
Because Playground has all that equipment in-house, its startups don't have to buy or lease it on their own.
"That means a much more efficient use of capital when we invest in these companies," Rubin said.
As for the types of companies Playground is looking to back, Rubin said it evaluates startups largely based on the expertise of its own engineers and executives. Like other tech investors, Playground scrutinizes startups' founding teams, their technology and the market segments they're pursuing, a process he called "pattern matching." But the incubator also is looking for companies that are looking to fill the holes in the market that Playground's own leaders perceive based on their own experience.
That's a "different type of pattern matching that we're uniquely qualified to look at," he said.
With Friends like these…
Goldman Sachs’ hedge fund, Goldman Sachs Investment Partners, has offloaded over $75 million of Spotify shares, or “less than half” of its stake, in recent weeks, Sky News“has learnt” from “insiders.” This is peculiar because the Swedish music streaming service is preparing to list its shares on the New York Stock Exchange at a valuation of $13 billion, and confusingly, Goldman Sachs is one of the three investment banks that are advising Spotify on this “direct listing.”
A source told Sky News that Goldman Sachs had “practical reasons to sell a small stake.”
So what does Goldman Sachs know that others don’t?
A “direct listing” is not an IPO. It bypasses underwriters and their hefty fees and avoids the whole issue of IPO pricing. It also means that Spotify would not raise any new capital via this listing, which is planned for later this year or early next year. If it succeeds, it’ll be the first major direct listing on the NYSE. If other companies follow the example, investment banks, losing out on underwriting fees, would not be happy campers.
Spotify is one of the 167 “unicorns” in the US, Europe, and Asia listed in the Billion Dollar Startup Club: venture-capital funded startups that have reached “valuations” during their last round of fund-raising of $1 billion or more.
They include 100 US startups. Seven of them have “valuations” of $10 billion or more, including Uber’s $68 billion, if it remains intact, which seems unlikely, given all its problems. Two more unicorns have valuations of just over $9 billion; one of them is Theranos, which has imploded and whose $9-billion “valuation” has become a painfully leftover joke in the list.
But these are boom times. The Nasdaq has surged 16% this year and hovers near its all-time high. Startup booms require this kind of relentlessly rising stock market.
Yet, it has been tough for tech unicorns to provide an exit for their investors. The moment when investors cash out and take their hoped-for huge profits requires deep pockets to come in behind them. This happens when startups sell shares to the public via an IPO (or now perhaps via a “direct listing”), or when they’re acquired by large companies.
But for unicorns, this just isn’t happening anymore. So they keep growing in number, and their valuations get higher and higher, and the exits are blocked. Three years ago, in August 2014, there were 67 unicorns. At the beginning of 2017, there were 157. Now they’re 167.
This year so far, there have been only eight exits among unicorns:
Of these six unicorn IPOs, not all of them fared well:
Those were the lucky ones that made it out of the gate.
Beneath the unicorns: Investors in small fry are still able to get out. According to the Wall Street Journal, citing Dealogic, 1,546 startup tech companies were acquired this year, about the same number as last year at this time. But the average deal size was only about $39 million – down 15% from last year’s average. Big companies doing big acquisitions appear to have become gun-shy, Cisco’s AppDynamics deal in January having been the exception.
And 17 tech startups of all sizes went public this year through August 15, including unicorns. In 2016 at this time, 26 companies had gone public. 2016 was already a down-year. Over the same period in 2014, 62 tech companies had gone public — almost four times as many as this year.
Startups with these stunningly high valuations, in relationships to the thin revenues and the thick losses they produce, appear to have trapped their investors: It’s easy to inflate valuations during funding negotiations among a handful of investors behind closed doors where everyone wins when valuations keep getting inflated.
But it’s now getting hard to persuade the outside world to pay these ludicrous valuations just so the original investors – and this includes employees with stock-based compensation – can cash out. Until shares can be sold, these “valuations” remain fake wealth. Many startup investors, particularly those that got in at later stages, may see their bets go up in smoke.
And Goldman Sachs might have been contemplating this when it sold “less than half” of its stake in Spotify even though it is advising the startup on its direct listing at a humongous valuation of $13 billion and could have waited to sell if it figured the listing would succeed and shares would rise afterwards.
A California state senator is hoping to create a new law that would punish sexual harassment by venture capitalists.
Sen. Hannah-Beth Jackson, a Democrat from Santa Barbara, is introducing a bill this week that would explicitly prohibit sexual harassment by venture capitalists as an amendment to a current civil-rights law.
The bill, SB 224, comes in response to accounts from female tech entrepreneurs who have described being sexually harassed while seeking funding from venture capitalists.
The bill would amend the Unruh Act, a civil-rights law in California that protects against sexual harassment in business relationships. The law lists doctors, landlords, teachers, and others as liable for sexual harassment. The bill would amend the law to clarify that consequences exist for investors too and provide protections for entrepreneurs who are harassed.
"If we want to see the venture capital industry change and an end to sexual harassment of women in technology, we need strong legal protections," Jackson said in a statement. "No matter how well intentioned, decency pledges and promises are not enough."
Jackson was referring to a public plea made by Reid Hoffman, the LinkedIn founder who is a partner at the venture-capital firm Greylock Partners, that asked firms to sign a Decency Pledge, a promise to treat the relationship between a VC and an entrepreneur like that between a manager and an employee.
Hoffman proposed the idea after dozens of women came forward in recent weeks with accounts of being sexually harassed while seeking funding for their ideas and startups. Prominent investors like Dave McClure of 500 Startups and Justin Caldbeck of Binary Capital have resigned following such allegations.
But self-regulation like a decency pledge isn't the same as introducing legal protection.
"We need to be clear there are consequences for this type of behavior," Jackson said. "The idea is to take a very strong position, and make it very clear that this is the kind of intersection between power and opportunity where we are not going to tolerate sexual harassment."
Jackson says the response to the bill has been overwhelmingly positive. Because the current legislative session ends soon, in September, she plans to move the bill forward when the legislation reconvenes in January and expects to have a vote on it by the end of that month.