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- 01/21/14--10:17: _5 Things I Learned ...
- 12/31/13--12:01: New Ad Campaign Compares Dell To The Hot, New Startup It Used To Be
There's a boat load of angel investors in Northern California who will decide very quickly if they want to invest in you and will open their networks to you if they see value in you.
There is a collegiate atmosphere in the American startup industry that is missing in London. The collegiate atmosphere out there for entrepreneurs, even if they aren't successful yet. In Silicon Valley, people who have seen the model work before are willing to invest in young people they trust, even if they don't have a long track record and their business ideas aren't fully formed yet. In London, people are less willing to take on young, seed entrepreneurs because they are much more into business models, cash flow, and financial forecasts. Shababo thinks its particularly silly for an early stage investor to expect a startup to have a realistic financial forecast.
In the US, failure is viewed asa step on the path of success. In the US, people who start companies that fail are celebrated for actually having the balls to try. In the US, people use their past failures as badge of honor. In the UK, such entrepreneurs are seen as tainted.
- 01/03/14--15:14: Five Startup Lessons For Fast-Growing Companies
- 01/05/14--05:16: Why Companies With Zero In Revenue Get Valued At Billions Of Dollars
- 01/09/14--18:00: 21 Enterprise Startups To Bet Your Career On In 2014
- 01/14/14--13:11: EXCLUSIVE: One-Man Juggernaut Viral Nova Is Up For Sale
- Ranks as the 531 largest website in world (according to Alexa.com)
- Over 100,000,000+ visits in December alone (November also eclipsed the 100 million visitor mark)
- 819,000 Facebook likes and growing daily
- Low operating cost, very highly profitable (well into six figures a month)
- 100% of revenue is from Google Adsense. Direct ad sales would dramatically increase revenues.
- Formerly founded and sold Godvine.com (Alexa top 1500) to Salem Communications. Builds quality websites.
- Run by a small team of three (two of which are freelancers).
- Competing with BuzzFeed.com and Upworthy.com in traffic numbers.
- All internally funded. Has declined VC funding.
- 01/21/14--10:17: 5 Things I Learned From Hiring My First 100 Employees
Stanford is about to create a new generation of startups around "machine learning," the idea that computers can learn from their own mistakes and course-correct as they go along.
Getting machines to "learn" from what they are doing is incredibly complicated, but it's a problem that, if solved, will be a huge step toward creating genuine artificial intelligence in machines.
This paragraph was buried at the bottom of The New York Times' recent story on machine learning:
The largest class on campus this fall at Stanford was a graduate level machine-learning course covering both statistical and biological approaches, taught by the computer scientist Andrew Ng. More than 760 students enrolled. “That reflects the zeitgeist,” said Terry Sejnowski, a computational neuroscientist at the Salk Institute, who pioneered early biologically inspired algorithms. “Everyone knows there is something big happening, and they’re trying find out what it is.”
Stanford, of course, is the beating academic heart of Silicon Valley. Its graduates — and dropouts — create more tech startups than perhaps any other institution. So it's highly likely that these 760 students, and their colleagues over the next few years, will create the next new wave of hot machine learning companies.
The tech world is currently embroiled in a civil war over whether or not the startup industry is in the midst of an economic bubble set to burst in the near future.
Team Bubble is represented by people like UBS bigwig Art Cashin, who see the monumental valuations given to companies that don't produce revenues and extravagant benefits afforded to new startup employees as eerily similar to what preceded the dot-com crash of 2000.
Team No Bubble is fronted by folks like the investment bank Gridley and Co., who see the strong performance of new tech stocks like Twitter and the relatively pedestrian number of deals made in the sector as evidence that the coast is clear for the time being.
Now, it appears that the president of advertising agency MRY has declared himself a proud member of Team Bubble.
In an op-ed published today by Ad Age, MRY president David Berkowitz says that brands won't be working with startups in 2014 nearly as much as they did in 2013. In his mind, the market for such partnerships has reached saturation, and brands will need to try new things in order to get the attention and results they desire.
Noting that Ad Age wrote more stories about startups in 2012 than it did from 2005 through 2009, Berkowitz says that there are now so many startups looking to work with brands that there are independent shops springing up whose sole purpose is helping brands pick which hot, new, tech company to work with next.
Berkowitz says that as a result, the media will no longer be interested in writing a story every time a company becomes the first brand to do something on the next Vine or Snapchat, or integrates the technology of a startup like Google's geolocation company, Waze.
Without this publicity, he says, brands working with startups will be measuring their partnerships based on the technologies that are produced, rather than the positive externalties of being perceived as cool and innovative by the public.
Berkowitz concludes that these results by themselves don't always make working with a startup worth it:
"It sounds rather poetic, but the harsh reality of the natural order is that most species go extinct. Most of the efforts don't make enough of a difference. Even good bets often don't pay off. A marketer working with a startup successful enough that it soon gets acquired can soon find a lot of their effort wasted when the acquirer buys the startup, strips it for parts and destroys its original purpose. It's relatively rare that a partnership between a marketer and a startup delivers results that the chief marketing officer cares about."
In sum, he says, marketers will have no choice but to decrease their investments in startups as they find other strategies to be more promising. On the bright side, he says, the publicity of all the brand/startup partnerships that have gone down the past several years has at least let marketers know these partnerships are available.
Dell is heading into 2014 a new company, and it's airing a brand new commercial on New Year's Eve to let everybody know.
In October, founder Michael Dell and the investment firm Silver Lake Partners completed a $24.9 billion buyout of the company to take it private and turn the PC giant into an enterprise solutions and cloud computing company.
He announced the buyout in February, but spent a chunk of the year fending off powerful investor Carl Icahn, who tried stopping the deal.
Now, the former PC giant has released an ad to show how its reinvention will be guided by the spirit of entrepreneurship that led Michael Dell to start calling his company "the world's largest startup."
The "Beginnings" ad shows recreations of the humble birthplaces of companies using Dell services. It ends with the dorm room Dell started selling computers from back in 1984. There's the pizza shop Trip Advisor was born in, the small bedroom Skype came from, and the bus on which Dropbox began:
By tying itself to successful companies like Whole Foods and promoting startups, Dell is taking the vigor that made it a PC manufacturing giant (and its founder the youngest ever CEO of a Fortune 500 company in 1992) and applying it to its role as a services provider, much like IBM and HP have done.
This campaign falls in line with Dell's announcement of a $300 million startup fund in December, which significantly grew the company's commitment to fostering innovation.
American startup entrepreneurs have got it incredibly good, says London-based entrepreneur Liad Shababo.
Shababo says he learned this back in the Spring of 2012, when, in just one week in California he was able to raise seed-funding for his startup, called Shoply.
Shoply helps small businesses and brands sell their goods online. Shababo says it's like Etsy, but for more than just handmade goods.
Back in 2012, Shababo posted about an earlier version of Shoply on a Website called AngelList. AngelList is a site where entrepreneurs meet startup investors.
One of the investors on the site, early Groupon employee Shawn Bercuson, messaged Shababo to say Shoply looked interesting. So Shababo booked a ticket to meet with the Bercuson in Northern California.
When they met, the Bercuson told Shababo that Shoply still looked good to him, and that Shababo should meet all of his friends.
So Shababo spent the week shuttling back and forth from San Francisco to the Valley, meeting with that Becuson's friends. Every night, Shababo would come back to his hotel room to get online and manage his business from 3,000 miles away. He'd also tweak his pitch deck based on what he heard that day.
Eventually Shababo met with a former Facebook executive named Chamath Palihapitiya. Palihapitiya invited Shababo over to his house for dinner with him and his wife. At the table, Palihapitiya decided he liked Shababo and that he wanted to invest in a small seed round.
It was a pretty wild week.
Looking back on it two years later, Shababo says American entrepreneurs don't understand how good they've got it — especially compared to entrepreneurs based in places like London.
He gave three reasons why it's so good in America:
When Snapchat reportedly turned down a $3 billion offer from Facebook, the knee jerk reaction from a lot of people was, "Are they crazy?!?"
It's a lot of money to pass on. But, according to venture capitalist Marc Andreessen, Snapchat has an opportunity to build something much bigger, much more valuable.
In an interview with the Wall Street Journal, Andreessen was asked about Snapchat's future as a business. Here's his answer:
"The bull case on Snapchat is that there's a company in China called Tencent that's worth $100 billion. And Tencent is worth $100 billion because it takes its messaging services on a smartphone and then wraps them in a wide range of services—things like gaming and social networking and emojis, and video chat—and then charges for all these add-on services. And it has been one of the most successful technology companies of all time and is worth literally $100 billion on the Hong Kong Stock Exchange. Maybe that's [CEO Evan Spiegel's] plan. Maybe Evan's plan is to transplant the Tencent business model into the U.S., which nobody has actually been able to do yet."
Obviously the "if" in here is huge.
But, next time you hear about Snapchat getting some massive valuation, think about this before you dismiss it as crazy. Big businesses based on messaging exist elsewhere in the world.
Investors are starting think it can happen here, too.
SEE ALSO: Why Snapchat should apologize
Within our first month of publicly launching Ministry of Supply in June 2012, we sold more than 6,000 shirts and gained 4,000 customers. Our company grew fast because it had to. We were an adolescent trapped in a baby’s body — we had to learn how to sprint before we could learn how to walk, and we had some serious growing pains as we tried to scale production from 300 to 6,000 shirts a month. However, we quickly realized that by empowering our customers and empowering our company, we could truly grow the way we wanted. Everything we do comes down to empowering people to be their best.
As a co-founder, I focus a lot on how we can scale our team, our operations and our distribution. We’re a startup, and face many of the same challenges that startups face. Here’s what we’ve learned along the way about managing fast growth.
Championship vs. Ownership
There are six members of our team, and we all champion different areas of the business. For example, co-founder Gihan Amarasiriwardena focuses on product development and technology. Devin Cook, head of Customer Advocacy, spends all day thinking about how we can make customers as happy as possible. Over the months, we realized that we worked better as a team when we moved away from ownership and moved towards championship.
This philosophy ensures nobody feels possessive about his or her area of focus, while encouraging teamwork and collaboration. So while Devin may be focused on customer happiness, we all chip in with ideas and often have company-wide brainstorms about improving the customer experience. As champions, we’re all really proud of the areas we focus on and are encouraged to get others behind our initiatives.
Holistic Views of the Business
I love knowing what’s going on in all areas of the business, and we’ve found that everyone the team does too. We have an open office space and are constantly talking and bouncing ideas off of each other throughout the day. A few months ago, we realized that our communication wasn’t great despite the fact that we spent all day talking – some people didn’t know what was going on in various aspects of the business because decisions get made so quickly and a lot of decisions get made outside of the office.
We’ve been trying to get better at making sure that everyone in the company knows what’s going on and has a holistic view of the business. Being transparent and giving everyone the opportunity to know as much as they can enables everyone on a team to be their best.
We act fast whenever we see problems. When we realized that some of the shirts we were shipping were running too slim, we halted production, created a new pattern, trained our manufacturers, and got better-fitting shirts on the market in three weeks.
Being able to adapt quickly and iterate in real-time is a huge benefit of a startup and we will forever try to retain that ability. In this example, by acting quickly to solve a problem, we were able to minimize exchanges — and more importantly, make our customers happy.
Technology Is in Our DNA
As a fashion brand born out of MIT, we use technology to create the best products possible — from our use of thermal mapping to optimize venting in our Aero pants design to the NASA phase-change performance materials we use in our Apollo shirts.
We truly believe that technology can improve everyone’s lives and we democratize technology through apparel. As such, we don’t stop at the use of technology in product development; we leverage technology in every touch point of our brand.
Brand Is Culture
At Ministry of Supply, we all live and breathe the mission. We are intentional about hiring people who fit both our brand and our culture. When we take company retreats, we challenge ourselves to be our best. Our last one included hiking and winter camping in negative degrees. We want our customers to be their best and our employees to be their best. Everything we do comes down to that.
Obviously a startup is a tremendous amount of work and nothing is certain. However, by staying true to our mission and empowering our customers and employees, we know that we’ll be here for the long haul.
Snapchat CEO Evan Spiegel could learn a huge lesson from another startup run by a few 20-somethings.
How to apologize.
This weekend, Rap Genius, a website that annotates lyrics of songs to help you understand them better, apologized for the methods it used to game Google searches so its site appeared higher in results. The site got caught gaming the system about two weeks ago, and Google decided to punish it by effectively unlisting Rap Genius from search results. Its traffic tanked.
In a lengthy post on its company blog, Rap Genius came clean about how it was gaming Google and how it fixed the problem. Google now lists Rap Genius in search results again.
Rap Genius also apologized to its users:
To Google and our fans: we’re sorry for being such morons. We regret our foray into irrelevant unnatural linking. We’re focused on building the best site in the world for understanding lyrics, poetry, and prose and watching it naturally rise to the top of the search results.
Let's put this in perspective.
The Rap Genius Google game didn't hurt anyone but Rap Genius. The site may have lost precious traffic, its lifeblood, but its users felt no negative effects. No personal data was leaked. No money was stolen. Yet the company sucked it up, took responsibility for its actions, and apologized anyway.
It's a different story with Snapchat. This week, 4.6 million phone numbers belonging to Snapchat users leaked publicly online. This, after a security research group warned Snapchat about a hole in the app that could allow such a hack. Snapchat did next to nothing to plug the hole though.
When Snapchat finally commented on the leak, it only explained how it happened. It did not apologize for ruining the reasonable expectation that any personal information users give to Snapchat would remain private. It didn't explain how it would plug the hole. It didn't even say it takes user privacy seriously.
As I wrote yesterday, Snapchat owes all its users an apology. We pay Snapchat with something that's arguably more valuable than money — our personal information. By giving Snapchat your phone number, you make it easier to find new people on the service to share with. Snapchat gets a way to grow its user base, something that's immensely valuable to the company. In fact, it's the biggest reason why the startup is worth billions.
But Snapchat still hasn't apologized for breaching its users' trust. I've emailed Spiegel and his PR boss Mary Ritti several times over the last few days asking if they plan to apologize or if there's a security fix coming for the Snapchat app. No response.
If the Rap Genius founders can apologize for gaming Google, a tactic that hurt no one, why can't Snapchat apologize for letting 4.6 million phone numbers leak?
If there's one thing that vexes people, it's when hot, growing startups fail to generate revenue.
It's somehow seen as a sign of failure if a company isn't making money on day one. Twitter was dogged by the revenue question for years. Today it's doing billions in sales, and it's publicly traded at a ~$38 billion valuation. Same with Facebook, which faced the revenue question. It's making plenty of money.
Despite the lesson of these companies, people have the same sorts of questions about companies like Snapchat, and Pinterest, which have been valued at billions of dollars despite the fact that they have zero in revenue.
Venture capitalist Marc Andreessen addressed this topic in an interview with the Wall Street Journal. As someone that invests in no-revenue companies, his answer is worth reading. Basically, he says, some companies know how to make money, they just haven't done it yet. Other companies are trying to figure it out, and you have to be careful with those companies, because they might figure it out and be huge (or they might fail).
There are two categories of companies like this. You can guess which one I think Pinterest is in.
There are the ones where everybody thinks they don't know how they're going to make money but they actually know. There's this kind of Kabuki dance that sometimes these companies put on where we're just a bunch of kids and we're just farting around and I don't know how we're going to make money. It's an act. They do it because they can. They don't let anyone else realize they have it figured out because that would just draw more competition. Facebook always knew, LinkedIn always knew, and Twitter always knew.
They knew the nature of the valuable product they were going to be able to offer and they knew people were going to pay for it. They hadn't defined it down to the degree of being ready to ship it, or they didn't have a sales force yet, so there were things that they hadn't yet done. But they knew. They had a high level of confidence and over the passage of time we discovered they were correct.
Now, there are other companies that honestly have no idea. Like, they really honestly have no idea. You need to be very cautious on these things because one of the companies that had no idea how it was going to make money when it first started was Google.
Talk about some good timing!
Two New York City technology executives are launching a new startup that wants to be a Snapchat for business.
The startup is called Confide. It's aim at professional people that want to send messages to each other, but have no desire for those messages to exist in the long run for fear of them coming back to embarrass them.
What kind of messages might embarrass someone?
Well, today's lead story in the political world involves New Jersey governor, and presidential hopeful Chris Christie. He's being accused of creating a massive traffic jam in the town of a political foe.
Supposedly Christie's office authorized shutting down a lane of traffic on the George Washington Bridge just to cause problems in the New Jersey town of Fort Lee.
The charges are based on a trail of emails and text messages from one of his top aides. The messages suggest Christie's office took delight in messing with the town for no apparent reason other than the fact that the town's mayor didn't support him in his bid for re-election.
It's a strange story, and it makes Christie look petulant and unpresidential.
Now, if Christie's aide had used Confide, this wouldn't be happening.
Confide is the work of Jon Brod, a former AOL executive, and Howard Lerman, CEO of Yext, which provides marketing software for enterprise companies.
Bloomberg Businessweek likens Confide to LinkedIn. There is Facebook for your personal stuff, and LinkedIn for your professional stuff. Similarly, Lerman and Brod want Confide to be the professional counterpoint to Snapchat.
The way it works is fairly simple. You sign up, and then you send messages to others. It's like email with a subject line and a body of text. The text comes in with blocks over it. To read the text you swipe across the blocks and the words are revealed. You can't take screen shots of the messages.
The messages are never stored on Confide's servers. According to Bloomberg BusinessWeek, "Confide’s other security advantage, co-founder Lerman says, is end-to-end encryption, which means that the key needed to decrypt a message resides only on the recipient’s mobile device and is never transmitted over the company’s servers."
Lerman says, "We don’t have the technology to read your messages."
This actually sounds like a good idea for people in business that don't want a paper trail. It's such a good idea, that a lot of startups are forming. We've heard of two yet to launched companies doing something similar. And then there's Tiger Text, the original, which was inspired by Tiger Woods' infidelity. There's Wickr, which does the same, and probably many others were forgetting.
The trick for Confide is getting corporations to use the app. Bloomberg Businessweek notes that a lot of companies are urged to keep records not destroy them, so this could bump into some regulatory problems if it gets popular.
2014 promises to be another hot year for startups creating tech for businesses rather than consumers.
VCs are still tripping over themselves to fund enterprise startups and a slew of them are getting ready to go public this year.
All of that is reason to consider a career with an enterprise startup that could make you rich on stock options.
Plus, many of these startups are creating amazing, important new technologies and showering their employees with perks.
Apttus: A winner with Salesforce.com.
Apttus plays in a hot market called "quote to cash" (CQT). That's software that helps an enterprise deal with bids and quotes.
Apttus is a service specific to Salesforce.com.
When Oracle bought one of its competitors, Big Machines, for what was reported to be more than $400 million, Apttus gained attention.
Salesforce.com had a minor stake in Big Machines but it had, a month earlier, bet even bigger on Apttus, partaking of its $37 million round of investment. That put Apttus under the protective arm of Salesforce and maybe, one day, to be fully acquired by it.
Birst: Google for the enterprise.
Birst offers a cloud service that lets businesses search through their own corporate data as easily as Google lets people search for stuff on the Web. And it also offers businesses Amazon.com-style recommendations.
The company is trying to disrupt the traditional "business intelligence" enterprise market and has nabbed a long list of customers, including American Express, Cisco, and Kellogg's.
It raised $38 million in 2013 ($64 million total).
Box: A Valley star on a roll.
File-sharing and collaboration startup Box was on a roll in 2013 and Valley insiders think the company will go public in 2014.
In December, Box raised another huge round of funding, $100 million, with a valuation of $2 billion. It has raised more than $400 million so far from a who's-who roster of investors.
In addition to funding, Box made four acquisitions in 2013 and now claims over 20 million users.
See the rest of the story at Business Insider
Shafqat Islam’s phone was ringing. He rubbed his eyes and looked at the number on the screen. It said unknown, but he took the call anyway.
"Hi, this is Travis," a voice said. "I know Lukas Biewald, and he said you were the only guy he knew in Switzerland."
Islam, part of the tech team at Merrill Lynch Bank Suisse, sat up and wracked his brain.
Biewald? He had met the man once or twice, but he certainly didn't know this Travis character.
"Let's go out!" prodded the restless out-of-towner.
Islam resisted. It was getting late and he was tired. He wasn't in the mood to give his night to a stranger.
"Come on, I'm only in town one night!" Travis persisted. "You gotta show me Geneva!"
Islam finally gave in. He hopped in his second-hand BMW, picked up Travis and took him to a favorite bar, where Islam learned a bit more about the mystery man. A tech founder named Travis Kalanick, he’d sold a startup for millions to Akamai. He was now an investor in a couple of companies, including CrowdFlower, which was run by their mutual friend. After a night of drinking and swapping tech war stories, the pair parted ways.
Years later, they met again at a business event in the States. Islam had founded a content marketing company called NewsCred. Kalanick was running a startup called Uber, designed to link car services and passengers at the tap of a finger.
Now that Kalanick's startup has grown into one of the world’s most admired tech companies, recently valued at $3.4 billion, Islam can’t help wondering: Was he the world's first Uber driver?
"Travis pressed a button and I was his ride for the night!" Islam says now, reflecting on that fateful evening. "I wonder if he has ever put that together."
Now 37, Kalanick has recently found himself anointed king of Silicon Valley, his unlikely throne, that car-service app — or perhaps more accurately, a real-time, mobile logistics company, for which the town car business is likely just the beginning.
Founded just three and a half years ago, the service works like magic. Press a button on your smart phone to summon a ride. A few minutes later — during which you can chart a driver’s progress toward your location — up rolls the car. The driver doesn't accept cash, not even for a tip. Instead the app automatically charges the passenger's credit card once the transaction is complete. Then, both the customer and driver rate each other on Uber's application. (Passengers who leave a driver waiting may see their ratings fall, which can result in fewer drivers agreeing to pick them up.)
Kalanick's business achievements have won him widespread respect in the tech industry. In just a few years, he has turned Uber into a tech powerhouse that sometimes generates $20 million per week. But he hasn’t done it without stepping on a few toes.
Although Kalanick declined through a spokesperson to comment for this story, interviews with more than a dozen acquaintances from various periods of the entrepreneur’s life and career, most of whom asked not to be identified, painted a picture of a hyper-rational individual whose distaste for organized religion is matched only by his enthusiasm for whiteboard sessions, a driven executive whose intensity can seem off-putting.
Acquaintances seem to be of two minds about him: On the one hand, many agreed he is a phenomenon. "Travis is smart," says Kalanick's former investor Mark Cuban. "Busts his ass and is a true entrepreneur. Can’t be much more complimentary than that."
Equally common was the view of Kalanick as — in a word that came up again and again in interviews, "an asshole."
Or as one entrepreneur who has worked with him puts it, "Travis is ego personified."
Often, those impressions overlap.
"Sometimes," an acquaintance of Kalanick's told Business Insider, "assholes create great businesses."
Travis, the Salesman
Travis Kalanick has always been the entrepreneurial type. He grew up near Los Angeles in a suburb called Northridge.
As a kid, he wanted to be a spy. But his innate confidence, persuasiveness and implacability made him better suited to a career in sales, like his mother, Bonnie.
She worked in retail advertising for the "Los Angeles Daily News." Kalanick's own ability to sell became apparent when he excelled as a young door-to-door salesman for Cutco knives. Kalanick's father, Don, was an engineer. His brother Cory is a firefighter; Kalanick also has two half sisters.
At age 18, Kalanick launched his first business, an SAT-prep tutoring service called New Way Academy. He created a course called "1500 and over" and has claimed that the first person he tutored boosted their score by 400 points. Kalanick himself scored 1580 on his SATs, whiffing two questions in the verbal section. He’s better with numbers, and likes to say he can zip through the math portion in eight minutes.
Even as a teen, Kalanick was exceptionally self-assured. He always had "his game face on" a former classmate recalls. "The fact that Travis is a good salesman — I think originally he let that be the entirety of his personality, both to his friends and within work."
This person described Kalanick as a chronic hustler. "There was definitely a feeling for me that he was always trying to sell something to me, like a used car salesman. You know it's their job, but it doesn't make it any less annoying."
There was definitely a feeling for me that he was always trying to sell something to me, like a used car salesman. You know it's their job, but it doesn't make it any less annoying.
Another former classmate was more sympathetic, describing him as "an excellent storyteller but in a good sense. He can illustrate a lot of different things. He’s also driven and opportunistic, which can be good or bad."
Despite his impressive SAT scores and ambition, Kalanick stayed local for college, enrolling in the computer science department at UCLA. He looked much like he does now, with shaggy black hair and generally clad in a T-shirt.
In recent years, Kalanick has been connected to a long line of beautiful brunettes. But he wasn't always a lady's man. A college friend said he "had to grow into that."
At UCLA, Kalanick studied computer engineering and joined the Computer Science Undergraduate Association, where he met classmates Michael Todd and Vince Busam, then working on a side project called Scour, meant to help users share files.
The project began in Busam's dorm room, with five friends cobbling together the application, before the team moved into a house in Los Angeles' South Bay.
Scour was the first popular peer-to-peer search engine for files, videos, movies, and images, employing SMB protocol to crawl people's Windows directories, index their files and let others download them. One early user was Shawn Fanning, who would go on to co-found a similar service — Napster — some 18 months after Scour came online.
The startup was running on angel funding raised mostly from one of the co-founders' family members and friends, and in 1998, Kalanick came aboard as an employee, eventually dropping out of school and collecting unemployment while working for the startup full time.
Kalanick often describes himself as a co-founder of Scour, which irks some of the company’s actual founders. Nonetheless, investors saw him as one, because he did so much for the company, and some of the co-founders now consider him one in retrospect. Technically, he was the company’s second employee, though was given founders stock and didn’t take a salary for the first year.
The team soon moved to a high-rise apartment building in Westwood, Club California, where Todd and co-founder Dan Rodrigues were living. Most employees worked in the living room. Kalanick worked from Rodrigues' bedroom. At one point, the apartment housed 13 Scour employees, putting a strain on the electrical system. Printing a document was sometimes enough to blow a fuse, and when a team member wanted to microwave lunch, he would often ask colleagues to power down their monitors for a minute.
"It was very, very scrappy and none of us knew what we were doing," an early Scour employee recalls.
It became clear Scour had outgrown its apartment office one day after the founders reported a major hack to the FBI. A female officer showed up expecting to find a large company under siege. Instead, she was invited to squish into a tiny chair, huddled among scruffy young men who were buried in computer screens.
"We all tried to convince her, 'Really, we are a serious, legitimate company,'" the source recalls. "'We have 100 servers somewhere in some data center. Don't mind the fact that we're a bunch of young kids and that this is a living room.'"
The Rise and Fall of Scour
The company soon got some real traction, and before long the peer-to-peer file sharing and search service was being used by a few million people. Eventually, there was so much interest in the company that an early investor, former mega-agent Michael Ovitz (who along with supermarket kingpin Ron Burkle had invested some $10 to $15 million), threatened to sue to keep the startup from shopping itself to other venture capital firms. As it happened, the paperwork Kalanick’s team signed included a no-shop clause.
Kalanick’s role was marketing and business development, and he was dauntless in calling up anyone and everyone to push the product. He also came up with controversial yet effective guerrilla marketing campaigns. For the Scour Exchange product, which he conveniently shortened to SX, Kalanick hired a marketing company to hang bottles of personal lubricant on dorm-room doorknobs along with Scour hang tags and stickers which read, "Do not enter, SX in progress."
"It was surprisingly effective at spreading awareness for Scour as well as earning the ire of various colleges," a former colleague recalls.
Meanwhile, a file-sharing competitor came onto the scene. Fanning launched Napster in 1999, implementing a key innovation. Unlike Scour, which crashed frequently due to too much demand, Napster automatically made files sharable once they were downloaded. As a result, the more people used the service, the more sources there were where popular material could be found and downloaded. Scour quickly followed suit, borrowing Napster's approach.
Despite Scour's initial success, the startup was a tough learning experience for Kalanick. The setbacks hardened him as an entrepreneur, as did the sometimes difficult people he had to answer to.
Once, Kalanick recalled in an interview with Uber investor Jason Calacanis, he was threatened by one of his Ovitz's cronies. The former Hollywood agent, who had built CAA into a powerhouse before an ill-fated stint as president of Disney, was infamous for his hard-knuckled style (he used to hand copies of Sun Tzu’s "The Art of War" to staff members). Ovitz’s lawyer, Kalanick recounted, wanted to be sure the former executive was afforded the proper respect in Kalanick’s speech.
"He basically tells me about how certain people in the industry have worked very hard to get where they're at," Kalanick recalled to Calacanis. "My life and physical well-being were essentially threatened at that table. He basically said, 'There's an alley in the back. If you fuck this up, you're going to be very familiar with it.'"
My life and physical well-being were essentially threatened at that table. He basically said, 'There's an alley in the back. If you fuck this up, you're going to be very familiar with it.'
Kalanick came on stage visibly shaken. According to Calacanis — with whom he shared the stage that day — he looked close to tears.
Ovitz and Kalanick have since discussed the incident and moved on. The alleged encounter occurred when Kalanick was young, and perhaps it’s not surprising that he would have been intimidated. Ovitz says he found it difficult to wrangle five young founders, each with differing ideas on how to run Scour. He adds that he respects and likes Kalanick, and says no life-threat was ever delivered on his behalf.
"I think there's a really good story in a person overcoming adversity," an early RedSwoosh employee says. "I think sometimes that story can get even better if the adversity is more significant. None of these things didn't happen. It's just the details. Travis is going to tell the story his way."
Although users enjoyed Scour, content providers did not. Scour was making it possible for consumers to acquire their content without paying for it. Ultimately, a collection of entertainment companies sued Scour for $250 billion.
As lawsuits piled up, Scour's failure grew imminent. The final days were emotionally grueling for Kalanick. But the salesman in him was indomitable, ceaselessly working the phones to make his pitch, ever hopeful of scaring up new business.
"I was getting on the phone every day still trying to make revenues because we had millions of people coming to our site," Kalanick told a group of entrepreneurs at the 2011 Failcon conference, a forum in which founders offer hard-won lessons from their business failures. "I was telling our partners [that working with us was] a strategic move. The longer I had to make that ‘strategic move’ pitch, the harder it was to get up in the morning."
By the time Scour finally failed, Kalanick could barely face the workday, often spending 14 hours at a time lying in bed.
"I was doing the game, fake-it-til-you-make-it, or fighting reality," he told the Failcon 2011 audience. "When you're in that failure state, it will eventually crush you."
Finally, Scour filed for Chapter 11 bankruptcy. The assets were divvied up in a 20-minute court session.
Rebounding With RedSwoosh
Almost immediately, Kalanick began plotting his next business with Scour co-founder Michael Todd, who had been consulting on the side. The pair bootstrapped their new startup, which they dubbed RedSwoosh. Kalanick has called it his "revenge business." He wanted to turn every entertainment company that sued Scour into a paying customer.
RedSwoosh launched in 2000 from a small office space in Westwood, Calif. Instead of unearthing content they didn't have the rights to, Todd and Kalanick's new business focused on delivering web content to users more cheaply by allowing them to share bandwidth. They brought a few friends over from Scour, including the engineer who’d built most of the Scour Exchange service.
But RedSwoosh turned out to be an even tougher challenge. By August 2001, the company was nearly out of cash and could barely cover payroll for its seven employees.
A few weeks later, Kalanick had a meeting scheduled with Akamai CTO Daniel Lewin. Lewin was flying in from Boston. His American Airlines flight from Logan Airport never made it to LAX.
Lewin was one of 92 passengers killed when Flight 11 crashed into the World Trade Center’s North Tower on Sept. 11, 2001.
Among its other terrible consequences, the attacks of September 11th were devastating to the tech scene, accelerating the stock market crash, which resulted in a market value loss of $5 trillion between 2000 and 2002. As a result, startup funding resources dried up.
It didn’t help that RedSwoosh — a networking software company — wasn't a particularly compelling business for investors. Software wasn't a popular investment sector in the early 2000s, and the leading company in RedSwoosh's industry, Akamai, had a relatively tiny $160 million market cap. Kalanick remembers an investor telling him then, "Look man, this whole software thing is done."
Kalanick and Todd had different opinions about how to keep the company afloat, which blossomed into serious disagreements. They began cutting corners to get by, in some cases pushing the ethical and legal boundaries.
For instance, at one point, the company stopped withholding income taxes from employees’ paychecks — a criminal offense.
Kalanick insists that Todd made this move without his knowledge, publicly blaming his co-founder for the infraction. Todd insists the decision was made jointly.
As Kalanick has recounted the story: "We owed $110,000 to the IRS in un-withheld income taxes, which is a white-collar crime that pierces the corporate shell, and it doesn't matter whether you knew or not. If you're an officer of the company you're going to jail."
"Travis is a very smart guy but he and I clearly have different memories on this 13-year-old detail," Todd says. And an email sent by Kalanick at the time and obtained by Business Insider appears to demonstrate his participation in the tax plan. Nonetheless, Todd insists he has no hard feelings about the incident, adding, "The important thing is that my technical idea and his execution made RS successful."
In the end, neither founder did any time. Instead, Kalanick hustled together a round of financing and used most of it to pay off the IRS before the year was up. But the relationship between Kalanick and Todd was permanently damaged.
For Kalanick, the final blow was when Todd secretly emailed an investor, asking him to consider what’s called an "acqui-hire" of RedSwoosh's engineering team.
"My co-founder on RedSwoosh, I found out, sent an email to a VC at Sony Ventures," Kalanick told the Failcon audience. "I wasn't cc'd on this email. It was basically saying, 'Look, this isn't gonna work out. Why don't you just hire me — this is my co-founder — and the rest of the engineers. So that's what 'Et tu, Brute?' means.'"
It was a nasty corporate divorce. A former employee says Todd and Kalanick were both to blame for the falling out; each made key business decisions behind the other’s back. The source also said he sided more with Todd at the time, and left RedSwoosh with a negative impression of Kalanick.
It took me a couple of years of having nice, cordial, friendly relations with him — but not 'Woohoo, go Travis!'-type stuff — for my feelings about him to change.
"Maybe it was his way of dealing with that stress and his response to it that I just didn't appreciate," the former employee tells Business Insider. "It took me a couple of years of having nice, cordial, friendly relations with him — but not 'Woohoo, go Travis!'-type stuff — for my feelings about him to change."
Kalanick's colleagues also grew tired of his tendency to spin every situation in his favor.
"If somebody chooses to disassociate themselves from Travis, I don't think it's because he's a bad guy," a former friend says. "I think it's because they see what he's doing, all the selling, and they don't want to deal with that anymore."
Looking for an Exit
In the wake of his falling out with Todd in 2001, Kalanick found himself living in his parents’ house, a move that seriously cramped his style. He "wasn't getting ladies," he told the Failcon 2011 audience. "It sucked."
By mid-September, the company had run out of cash and Kalanick was yet again busy hustling up a round of financing.
To replace Todd, he hired Rob Bowman, an engineer turned startup consultant, who became CEO until 2003.
Meanwhile, all but one of the company’s engineers, Evan Tsang, departed. Many left angry, partly because they had gone various lengths of time without being paid, and partly over disputes involving stock options.
"Some sort of recapitalization was attempted at one point," a former RedSwoosh employee says. "People got different option grants, where the amount of shares ballooned. There was a lot of confusion as to what stock options were worth and how people should exercise them...and a lot of people ended up feeling cheated."
Eventually, Tsang, too, walked out, moving over to Google, where Todd was then employed. Fucked Company, a popular blog that chronicled the struggles of tech startups, caught wind of the resignation. Its post about Tsang’s departure was published just as Kalanick was about to sign a million-dollar deal with AOL. The dial-up behemoth saw the headline and walked away. Shortly thereafter, in April 2006, Kalanick moved what was left of the company to Thailand as a cost-saving (and rejuvenating) measure.
Perhaps as an indication of how blindsided he felt, Kalanick later told the Failcon audience that Tsang resigned via tweet. That wasn't possible though, since Tsang’s departure happened several years before Twitter was founded.
Meanwhile, other companies were courting RedSwoosh, and Kalanick sensed a successful exit on the horizon. Microsoft showed particular interest, and one day in mid-2003, several executives flew from Redmond to Los Angeles to meet Kalanick and present him with their offer.
They’d like to acquire his assets, they told him, for $1.2 million. Kalanick did the math; $900,000 of that would be put toward paying off notes and liabilities. That left just $300,000.
Kalanick — who friends say rarely shows a temper — berated them relentlessly before finally ending the meeting.
As disappointing as such encounters were, they helped Kalanick refine his skills as a negotiator and toughen his resolve. He could be indomitable, showing a stamina that sometimes tended toward the absurd. According to a source, Kalanick once spent nine hours at a Googler's house, trying to convince the person to join Uber.
"I got really good at negotiating from a place of weakness," he told the Failcon audience.
Finally, seven years of grueling work paid off. Todd, who hadn't heard from Kalanick in years, came home one day to find a package on his doorstep. Akamai was interested in buying RedSwoosh.
In 2007, the server giant acquired RedSwoosh for $23 million — $19 million in stock and $4 million in earn-outs.
Even those who had doubted Kalanick or bristled at his pompous style had to hand it to him. He’d made RedSwoosh a success, even though doing so required him to go more than three years without salary, sever ties with his co-founder, move to Thailand, and turn over his team multiple times.
Today, Kalanick's perseverance serves as a lesson to his former colleagues.
"He would get up in the morning with nobody on his team. and he still made it in the end," says a former RedSwoosh employee. "It's inspirational in a lot of ways that when things got tough and he was down to nothing, he still kept going."
The Founding of Uber
Kalanick was now a millionaire, in possession of a large house, a personal chef and a thick wad of investment capital to put into other people's startups.
His new home, called "the jam pad," got its name for the tendency of young entrepreneurs
to congregate there, "jamming" on business ideas and playing Wii Tennis until the early hours of the morning. Aaron Levie, co-founder of the cloud-computing firm Box, and marketing guru Gary Vaynerchuk were among the many techies who crashed on the couch when they were in town.
Before long, Kalanick began blogging about his investments and his philosophy, occasionally boasting about his new millionaire lifestyle.
"Chris Sacca got a pretty killer techie crew hanging together," he wrote in January 2009 after he was invited to attend President Obama's inauguration. "The Zappos guys (Tony and Alfred), a few Google peeps (Sacca and company), VC-dudes and Twitter home slices (what up Ev and Sara), … a truly solid crew of great people is the icing on the cake. When you’ve got the kind of crew we’ve got, the party is wherever we are."
When you’ve got the kind of crew we’ve got, the party is wherever we are.
Kalanick spent his first year of affluence traveling and investing. He visited Spain, Japan, Greece, Iceland, Greenland, Hawaii (twice), France (twice), Australia, Portugal, Cape Verde, and Senegal. It was during this time that he called up Newscred founder Shafqat Islam for their spontaneous night out in Geneva.
In late 2008, Kalanick attended the LeWeb technology conference with Vayner Media's Gary Vaynerchuk, StumbleUpon founder Garrett Camp, and Camp's former flame Melody McCloskey. That's where he first heard the idea for Uber.
One New Year's not long before, Camp and a few friends had spent $800 hiring a private driver. While Camp had made a fortune selling StumbleUpon, he still felt nearly a grand was too steep a price for one night of convenience. He had been mulling over ways to bring down the cost of black car services ever since.
He realized that splitting the cost with a lot of people — say a few dozen elite users in Silicon Valley — could make it affordable. The idea morphed into Uber, essentially the equivalent of nightclub bottle service for the taxi industry, a premium service for more high-end customers.
Kalanick gives Camp full credit for the idea.
"When you open up that app and you get that experience of like, 'I am living in the future. I pushed a button and a car rolled up and now I'm a frickin’ pimp,' Garrett is the guy who invented that shit," Kalanick said at an early Uber event in San Francisco. "I just want to clap and hug him at the same time."
As to the rest of of Uber's founding mythology, as in most cases, it depends on whom you ask.
The first prototype of UberCab — as Uber was first called — was built by Camp and two graduate school friends, Oscar Salazar and Conrad Whelan, with participation from Kalanick, who’d been brought on as "mega advisor" to the company, according to early documentation. (Kalanick has said his official title at the time was "Chief Incubator.")
UberCab was a black car service, which allowed a user to call a car by pressing a button on a smart phone or sending a text, for a price that hovered around 1.5 times as much as a typical San Francisco cab.
"My job was to temporarily run the company, get the product to prototype, find a General Manager to run the operation full time and generally see Uber through its San Francisco launch," Kalanick wrote in an early post on Uber’s company blog.
"Garrett and I incubated Uber at first because we thought it was like this limo company," Kalanick explained at an event in San Francisco. "We were like, 'Dude I don't want to run a limo company. I just want a car to take me around. We need to find someone who can come into a city like San Francisco and kill it. Bring a really high quality to the table, a really sound operational system and make Uber San Francisco an amazing place so that basically Garrett can ride around like a pimp."
In essence, Kalanick and Camp both wanted Uber to exist, but neither of them wanted to run it.
That’s where Ryan Graves came in. The recently-engaged Chicago resident had spent two years at General Electric Healthcare, spending nights and weekends on a startup of his own that never quite got off the ground. He later spent three months as an unpaid "pseudo intern" working alongside Foursquare’s business development lead, Tristan Walker, but despite what a former colleague calls his "tireless" efforts, Foursquare declined to offer him a permanent position.
Then one day, he spotted a tweet: "Looking for a business development & product badass," it said.
It was written by Travis Kalanick.
"Here’s a tip," Graves responded, tweeting back his gmail address.
In early 2010, Graves came aboard as UberCab’s General Manager. "It’s a combination of everything I was looking for," Graves wrote of his new job. "I’ll be working with some of the most bad ass entrepreneurs & investors in the industry… I’ll be at the ground floor of a startup that has the opportunity to change the world. I found the opportunity with a little bit of luck, a little bit of right time & right place, and a lot of hard work and preparing for an unidentified opportunity." The team officially launched UberCab that June in San Francisco, working out of a tiny shared office space.
The app was a sensation, at least among the target demographic of Bay Area techies. Two weeks after it became available in the App Store, UberCab's 10 drivers were doing more than 10 rides per weekend night. TechCrunch co-founder Michael Arrington was an enthusiastic evangelist.
"I can imagine it now – click a button and see a variety of options,"Arrington wrote that summer."A five-star rated driver 15 minutes away in a late model Prius at 2x taxi rates, or a 1975 Camaro 1 minute away with a three star rating for .5x taxi rates. Choose your car, driver and price and get exactly what you pay for. And help break the back of the taxi medallion evil empire."
Shortly after the launch, Graves was named CEO of the fledgling company.
Funders quickly warmed to UberCab, but they didn’t clamor to invest. As early-stage deals go, Uber wasn’t a particularly competitive opportunity. For would-be backers, the two main concerns involved whether it was scalable, and whether Graves, a relatively inexperienced entrepreneur, could run it effectively.
That summer, startup investor and entrepreneur Jason Calacanis hosted an Open Angel Forum event in San Francisco's Dog Patch Labs. The evening was to be UberCab’s big chance to wow investors. The company was seeking a $1 million seed investment — the first round of funding by angel investors — at a $4 million pre-money valuation.
Calacanis told the audience he was investing in UberCab. Then, another hand shot up.
"I'm in for $500,000!" First Round Capital's Chris Fralic proclaimed.
A bystander remembers thinking Fralic was crazy. But his firm had already solidified its investment in Uber in early July.
Rob Hayes, who led the deal on behalf of First Round Capital, knew Garrett Camp from a previous investment in StumbleUpon. He had learned about Uber months prior, when he saw Garrett tweet about it.
Hayes, Fralic, and First Round Capital bet on Graves. But they didn’t realize his brief turn as CEO was soon to come to a close.
Punching the Gas
Ultimately, Uber raised a $1.25 million seed round. First Round Capital was its first institutional investor. Other investors included Chris Sacca, Kalanick's friend, who had organized the Obama Inauguration trip, and Shawn Fanning, who had been Scour's competitor at Napster.
Then, in December 2010, an unexpected change: Kalanick stepped in for Graves as CEO, and Graves became Uber's general manager. The pair made the executive shuffle sound cordial.
"Personally, I'm super pumped about how well-rounded the team has become with Travis on board full time," Graves told TechCrunch.
"This is not a replacement,"Kalanick wrote after TechCrunch's story. "This is a partnership between Ryan and me."
Some early Uber employees scoffed when asked if the transition had been pleasant. Others say it was remarkably cordial. "The teamwork and camaraderie that you see in the company today was evident back then when they had like six people," says one person familiar with Graves and Kalanick’s relationship. "They all seemed to genuinely like each other."
While handing over the CEO reins to Kalanick couldn't have been easy for Graves, he made the switch graciously. Transitioning from CEO, "requires a little bit of an ego/gut check," he said in an interview following his move to general manager. "When you spend a year investing yourself in a project, you feel pretty strongly about how it should be run or which direction it should be taken in… When Travis asked me about the transition, I told him I was excited about it. I think he was a little thrown off by that, because very few CEOs embrace their succession plan so willingly."
His calm response to being benched may have saved both his job and his financial participation, now potentially worth tens — or even hundreds — of millions.
A well-placed source says that had he chosen to fight, Graves could have easily become the Noah Glass of Uber.
Who’s Noah Glass? Good question. Glass, the largely forgotten co-founder of Twitter, was fired by former Twitter CEO Ev Williams and had to fight to recover the stock options due him.
"Unlike Noah, Ryan knew his role and knew when more experienced people were needed," said one person with knowledge of the situation. "He played nice in the sandbox and didn't have an ego whatsoever. And he carved out a nice role for himself in the company."
There is absolutely no way this business would have gotten where it is without Travis and his arrogance.
Another person who has worked with Graves agrees. "He's a good guy who works really hard and deserves all the success he has gotten. He's a hustler."
Meanwhile, no one seems to doubt that putting Kalanick in the CEO role was the right move.
"There is absolutely no way this business would have gotten where it is without Travis and his arrogance,"
says an acquaintance of Kalanick's. "Not without him being like, 'I'm going to take over the world.' He has the Steve Jobs mentality that 'It's my way or the highway.'"
Says another person who served on a board with Kalanick: "With Uber, Travis has finally found something to put his fight behind."
Into the Smoke-Filled Rooms
Not long ago, while waiting in the security line at an airport, a tech executive spotted Travis Kalanick.
"Hey, where are you headed?" this person asked.
"Miami," Kalanick replied with a shrug. "Gotta change a law."
For decades, as the digital revolution transformed one industry after another, the taxi and limo business puttered along, rarely showing any interest in innovation (unless you consider the adoption of video in the back seat an innovation). It took a fighter like Kalanick to take on the industry’s entrenched interests and bring a tech-friendly new approach to bear.
Kalanick has forced Uber into 60 cities now, generally by ignoring pre-existing laws and shrugging off the fury of taxi companies. In his wake, a slew of competitors, including SideCar, Hailo, GetAround, and Lyft have followed. Meanwhile, predecessors, like Cabulous (now Flywheel), have largely fallen off the radar.
Not that Kalanick has much patience for Uber’s competition. He once went after ride-sharing startup Lyft on Twitter, demanding information about its insurance policy. Kalanick ended the conversation with a dig: "You've got a lot of catching up to do...#clone."
Kalanick's strategy with longtime industry fixtures has been reckless, and effective. He has adopted an aggressive posture, taking Mark Zuckerberg’s credo — "Move fast and break things"— very much to heart. A former colleague equated Kalanick's behavior to "swinging at the hornet's nest," sometimes escalating situations unnecessarily. Three months ago, after receiving one of many "cease and desist" letters, Kalanick posted it to his Instagram account, adding the comment: "Charming greeting card from a taxi cartel representative."
Taxi companies are comprised of some intimidating figures, and they haven't taken too kindly to Uber.
One former Uber employee recalls meeting with some pretty intimidating industry veterans who fit the goombah stereotype: men in their 60s wearing gold chains and rings, delivering threats.
"I can't say [the taxi industry] is actually mafia-run but I was certainly taken out to a lot of really sketchy steak lunches where they'd sit on the other side of the table smoking cigars saying, 'You gotta come into this on our terms or things will happen,'" a former Uber employee recalls. "You know, 'Watch out.'"
New York Taxi and Limousine Deputy Commissioner Ashwini Chhabra, who first met with Kalanick in the fall of 2010 when Uber was preparing to launch in Manhattan, acknowledges Kalanick received a less-than-warm welcome. "Is the taxi industry going to welcome a San Francisco company in with open arms because they want to disrupt the business model?" he asks. "Not by any means. I'm sure everyone they met with was suspicious in the beginning."
Kalanick once lashed out publicly after Chhabra's TLC told him they couldn't allow UberTAXI — Uber’s e-hail service for yellow cabs — to operate in the city. "New York’s TLC (Taxi and Limousine Commission) put up obstacles and roadblocks in order to squash the effort around e-hail," Kalanick wrote in a blog post. "We’ll bite our tongues and keep our frustration here to ourselves."
On the contrary, Chhabra explained, the issue involved pre-existing contracts with companies to provide credit card processing for yellow cabs.
New York is hardly the only city whose officials have bristled at Kalanick’s approach. "I can recall numerous instances where he may have said stuff about regulators in different markets and people took it one way or the other," says Chhabra.
"Their strategy has been 'try and stop us, and if you try and stop us, then we'll cross that bridge when we come to it,'" former Uber New York General Manager Matt Kochman told The Verge. "Discounting the rules and regulations as a whole, just because you want to launch a product and you have a certain vision for things, that's just irresponsible."
That said, the deputy commissioner admits the hard-knuckled tactics can be effective. "That approach actually works if you want to come in and you're challenging an orthodoxy," he says, noting he personally has no hard feelings toward Kalanick or criticisms of his business style. "He's a good and tough negotiator, and when you're negotiating, sometimes there is some posturing on everyone's part, whether it's as the regulator or disruptor."
Another of Kalanick’s signature moves is to enlist passionate residents to rally against authorities. Last week, at the Consumer Electronics Show in Las Vegas, where Uber is not available due to a local ordinance requiring town cars to be hired for a minimum of one hour, he launched a Twitter campaign, #VegasNeedsUber, to apply pressure on officials there. The company encouraged citizens to share their experiences with Uber in other cities on social media and demand Uber be allowed in Las Vegas.
Finally, Uber has to worry about its drivers — who are not employees of Uber but instead work independently or for existing car service companies. They've sued the company, threatened to go on strike, and occasionally gotten themselves arrested. On New Year's Eve, a driver associated with Uber hit and killed a 6-year-old pedestrian. Uber said it was sorry for the family's loss but maintained that the driver wasn't running an Uber errand during the accident. It essentially fired the driver, deleting him from its system.
Later, when Uber was criticized for charging fares eight times higher than usual during a snowstorm, Kalanick posted an email from a concerned user to his Facebook page.
"Get some popcorn and scroll down," he wrote.
Lately, Uber's surge pricing model has become a source of contention for new and loyal users. While some agree with Kalanick — that raising fares is the only way to maintain a balance between supply and demand during busy times — others have pointed out that the dynamic pricing scheme challenges users’ faith in Uber at a delicate time for the company. Since Uber makes it clear to users that surge pricing is in effect before they accept rides, it hardly seems fair to blame the company for simply offering a service. And Kalanick doesn’t seem too likely to buckle. He has taunted his critics on Twitter, pointing out the use of such pricing by airlines and other industries. And in a recent interview with The Wall Street Journal that seemed to take a less hostile stance, he nonetheless insisted that surge pricing was here to stay.
For all the controversies that have accompanied Uber’s rise, Kalanick is now routinely touted as one of the world's best entrepreneurs; some have compared him to Jeff Bezos and Steve Jobs. Against all odds, he has turned Uber into a $3.4 billion business that customers fiercely love. While a lot of startups have gained popularity — and jaw-dropping valuations — without offering any clue of how they might make money, Uber is already generating impressive results. Leaked revenue figures show the company generates as much as $20 million per week.
Kalanick has worked tirelessly to achieve this success. A friend remembers him spending the majority of a Vegas bachelor-bachelorette party on his phone in the hot tub. But Kalanick's form of hustling also means doing things most people wouldn't: picking fights, bending laws, challenging governments, and throwing tantrums.
His ego is not to everyone’s taste. Casually dropping lines like "VCs ain't shit but hoes and tricks," as he did at Failcon, rubs some in the industry the wrong way.
One investor says his firm passed on Kalanick because he didn't get along with the partners. "He came in like he was God's gift," this person said.
As writer Paul Carr pointed out, Kalanick's one-time Twitter avatar — the cover of "The Fountainhead," Ayn Rand’s libertarian classic about the triumph of a Nietzschean individual, an "ubermensch," over the foolish and short-sighted masses — seemed telling.
And yet for the first time in his life, Kalanick is in a position of real power. He's a perpetual underdog who is finally able to flick off the world. Many interview requests for this story were forwarded directly to him. One high-up venture capitalist, when asked to talk about the CEO, replied simply: "No freaking way." Others who agreed to be interviewed later felt skittish. He's loved, respected, feared, and loathed in seemingly equal measure.
Some wonder if Kalanick, increasingly viewed as a standard bearer of Silicon Valley arrogance, is the right role model for the new generation of entrepreneurs. "If Travis Kalanick is the Michael Jordan poster that young entrepreneurs have hanging on their walls, that's sad," one person said. "Being a jerk isn't 'awesome' or 'badass.'"
"As much as he is inspirational, he’s controversial," a former colleague says. "If he were less brash, I don't think he would get half as far as he did."
Ed Hubbard, who attended UCLA with Kalanick, and later joined Uber as one of its first employees, insists Kalanick will succeed, whether anyone likes it or not.
"There’s a great argument to be made that there are founders with 'special' DNA that makes them some of the world’s greatest leaders," Hubbard says, noting that he borrowed the insight from one of his investors, Bill Burnham.
"The list includes Bill Gates, Steve Jobs, Larry Ellison, Michael Dell, Larry Page and Sergey Brin, Mark Zuckerberg, etc. In my opinion Travis is going to be on that list and will be widely recognized among those tech leaders as a peer.
"Maybe he’ll do it with Uber, maybe it will be another company, but I’d bet on Travis any day."
Matt Rogers just became a very wealthy man with the news that Google bought his company, Nest Labs, for $3.2 billion.
Rogers is the co-founder of Nest along with Tony Fadell. Fadell is known for being the guy who designed the iPod. Rogers was also working on the iPod before founding Nest. He designed the software that ran it. Rogers was also one of the first engineers on the original iPhone, and worked on the first iPad, too.
Rogers said it was really hard to leave Apple back in 2010 to strike out on his own with a startup. In an interview from May (posted in full below) he said:
"It was honestly probably the hardest decision of my life. Apple was my dream job. I was making tons of money. The stock was on the craziest ride of all time ... my family told me not to do it. My friends told me not to do it, said 'you're crazy.'"
Fadell and Rogers bootstrapped the company to build a prototype, he says, and used the prototype to raise money. Google Ventures, the VC arm funded by Google, was an early investor, among others.
In three years, the company grew to over 200 employees. As of a year ago, it was reportedly shipping 40,000 - 50,000 thermostats a month. At that time, it raised $80 million at an $800,000 million valuation, GigaOM reported at the time.
Nest was thought to be in the process of raising another mega round of investment, $150 million at a valuation of over $2 billion, Kara Swisher at Re/Code reported two weeks ago.
So the $3.2 billion that Google paid represents a premium price to pay for Nest.
And it sure validates that Rogers made the right decision in leaving Apple.
Here's the video:
Yesterday, Branch announced it was being acquired by Facebook for $15 million. Josh Miller is the 22-year-old CEO of the once-buzzy online discussion company, which he dropped out of school to start.
When Branch first launched, it was an incredibly hot deal to invest in. It easily raised $2 million from top-tier angel investors like TechStars' David Tisch, Foursquare investor Rick Webb, and Twitter co-founder Evan Williams.
At the time, Miller was hit with unsolicited term sheets from investors. Unsolicited term sheets are when investors are pledging to give founders thousands — sometimes millions — of dollars without them ever asking for it.
One investor offered Miller $500,000 out of the blue. Miller says it wasn't flattering, it was weird.
"There was a weird experience for me at a Starbucks once," Miller told us on stage at Business Insider's Startup 2012 conference. "I was in San Francisco for a brief trip and I didn't have a lot of time and this guy really wanted to meet so I said, 'Sure, I've got 15 minutes, meet me here for coffee.' I met the guy for 15 minutes and at the end he offered me $500,000."
Miller was taken aback. "That was really weird — it was really bizarre," he laughed.
The other two founders on stage, Brad Hargreaves of General Assembly and Sahil Lavingia of Gumroad, could relate, and it doesn't make them think highly of investors.
"There's a saying, 'I don't want to go out with a girl who wants to go out with me,'" Lavingia said. "If an investor offers me that after 15 minutes I don't know how good of an investor they might be — if they're making such an impulse decision."
That was in 2012. Since then, Branch struggled to gain traction online and pivoted its product a number of times. Most recently it launched something called Potluck. Now, it's in the hands of Facebook.
Miller says his team of nine and his (non-"weird") investors/advisors are to thank.
Video produced by Robert Libetti
Social news site Viral Nova is trying to sell.
In an email obtained by Business Insider, Viral Nova is essentially cold-pitching itself to online media companies. Viral Nova is run by one editor, Scott DeLong, and two freelancers. The company is bootstrapped and doesn't have any outside investors.
DeLong, 31, confirmed in an email to Business Insider that he is "feeling out" potential buyers for Viral Nova with the help of a man named Derek Giordano, a self-employed website domain name broker. DeLong wouldn't name a price, but did say he's thinking about selling Viral Nova for "well into seven figures."
"I'm entertaining a sale of the site. It's still growing and doing well, but it's becoming a bit too much for me alone and I don't really want to go down the path of opening an office, hiring people, etc.," DeLong wrote.
Giordano's pitch being sent to media companies says Viral Nova had more than 100 million visits in December and generates "well into six figures" of revenue per month. DeLong would not comment more specifically on the company's revenue. The site launched in May 2013, so its traffic growth is especially impressive.
Here's an excerpt from the email Giordano is sending to media companies:
ViralNova.com is a collection of fascinating daily stories that make their way around the web. Each day Viral Nova focuses on emotionally potent or striking stories that will provoke maximum shareability on Facebook and Twitter. This website has grown significantly in a short time, and continues to grow each month.
Here are a few key points about the ViralNova.com:
Since Google Helpouts launched in late 2013, we've seen a host of interesting, tech-related tutorials from budding online entrepreneurs offering the likes of WordPress support and gadget training.
Now, a recently-posted Helpout has caught our attention: Former senior writer at TechCrunch, Jason Kincaid, is offering startups 45 minutes of advice for a not-so-paltry $300.
Kincaid describes a potential Helpouts session as a combo of PR advice, mock interview time, product consultation, and general idea guidance, to ultimately help startups "navigate the minefield that is the tech press."
Google Helpouts is a service on Google+ that lets you pay to have video chats with an expert to get a lesson in a particular subject.
Kincaid worked at TechCrunch for four years, until 2012, and now does independent consulting work. He has referred to his imminent Helpouts as "bite-sized" consulting.
Will any startups sign up? Is the price too steep? Maybe.
Kincaid writes the following near the end of his description:
"Finally, this is an experiment; if demand is really high the price may rise accordingly, if it’s low, I’ll slink away and hope no one noticed."
The first Helpout session will take place tomorrow afternoon.
Google has been on a buying spree.
It has spent a total of $17 billion on hardware, software, and adtech companies in the last two years, which is more than what Apple, Microsoft, Amazon, Facebook, and Yahoo have spent on acquisitions combined, according to a recent report by Bloomberg.
Piper Jaffray analyst Gene Munster told Bloomberg that Google will need to continue make “big bets” to expand its leadership beyond search.
“They’re trying to solve bigger longer-term problems, and to do that they need platforms,” Munster said. “They’re willing to pay up for those platforms.”
It's not often you find a startup used by 25 million people every month.
It's also rare to find a startup that serves 50 billion images per month.
It's even more rare for that fast-growing startup to be incredibly lean.
WeHeartIt is a Pinterest-like startup that only has 20 employees. More spectacularly, it has only raised $8 million to Pinterest's $338 million. That means any new WeHeartIt hire has the opportunity to get on board, experience serious traction, and snag valuable stock options.
Until last June, WeHeartIt was primarily bootstrapped by its Brazilian founder, Fabio Giolito. He created the Pinterest-like service in 2007 for himself. A designer, he wanted a way to collect inspiring images from across the web. His friends wanted to be able to use the tool too, so he set up user accounts.
Now WeHeartIt has grown into a cross between Pinterest, Twitter and popular secrets app, Whisper. People can share and collect photos online, like Pinterest. One-third of WeHeartIt's user activity is image searches.
But people often share images that reflect how they're feeling in that moment, like Whisper. Also like Whisper, people can write text overtop of images.
"If there's a song about an emotion, you can express that feeling through images too," says WeHeartIt CEO Ranah Edelin.
WeHeartIt's page is often flooded with reactions to emotional newsworthy events. In that way, it resembles Twitter or Tumblr.
"Nelson Mandela's passing took over our feed," says WeHeartIt CEO Ranah Edelin. "When Cory from Glee died, it took over our service. I don't know if he took over Twitter, but he certainly took over WeHeartIt."
WeHeartIt, like Whisper, attracts younger users than Facebook or Pinterest. Edelin says 80% of the company's users are 24 or younger and that 80% of activity occurs on mobile devices.
Pinterest is a lot bigger than WeHeartIt; it had 53 million uniques in May according to modest Comscore stats. But Edelin says WeHeartIt is growing by 1 million active users per month.
When Pinterest was about the size of WeHeartIt, Google reportedly was interested in acquiring it for "hundreds of millions." Business Insider's Henry Blodget felt then that Google should buy it for $2 billion. WeHeartIt could grow to become a similar size opportunity.
Because it hasn't raised too much money, WeHeartIt's list of potential buyers is likely much larger than Pinterest's. Even Whisper, which has fewer active users than WeHeartIt, has raised $20 million more than Edelin's company.
Part of the reason WeHeartIt is relatively unknown is because it didn't have a management team until June. That's when Edelin came on board. Before he joined, all press and investor inquiries went into an email abyss.
"WeHeartIt has been on a great path since [Edelin and President Dave Williams joined]," says an investor. "It's a great example of how a really strong executive team can make a huge difference.
Another lean rocket-ship startup is messaging app WhatsApp, which has only raised $8 million from Sequoia Capital. Instagram's team was famously lean, with just 13 employees when it sold to Facebook for $1 billion. Even then, it had raised $57.5 million.
Edelin says he's only hunting for a few engineers and possibly a business development person right now. But if you're looking to join a rocket ship, you might consider bombarding his inbox.
Andreessen Horowitz, commonly referred to as A16Z, is raising $1.5 billion for its fourth fund, Fortune reports.
A16Z is the venture capital firm with investments in hot companies like Airbnb, Pinterest, GitHub, Twitter, Foursquare, Lyft, and Fab.
It's expected that the new fund would have about $1 billion for the general fund, and $500 million for a "parallel" fund. The fund, Fortune's sources say, is already oversubscribed.
Back in 2012, A16Z raised a $1.5 billion fund, which included a $900 million fund for early-stage investments, and a $600 million "parallel" fund for bigger opportunities. The new fund is expected to similar in structure to the one from 2012.
We love stories about the Valley's over-the-top tech culture.
For instance, it's downright common for startups to hire full-time chefs to cook them gourmet meals three times a day. (At MemSQL, for instance, the chef was employee No. 9.) Other companies offer fantastic international "work-cations." And all of them throw fabulous parties.
The newest trend in parties was started by an up-and-coming enterprise startup called Zuora:
Zuora hired a professional Hollywood screenwriter, Brian Narelle, to write a skit that execs performed in front of the whole company during a corporate off-site party.
One of those execs, senior VP Todd Pearson, was kind enough to send us a photo. He's in the blue shirt, with a stethoscope. (He played the Bones character.) Zuora's CEO didn't go the cliché route and play Captain Kirk. He's the guy in the mask playing an alien.
The story goes that someone promised the employees that the highlight of the party would be the execs performing a skit, but the one that the wrote themselves was terrible. Instead of putting the kabosh on the idea, Tzuo went the hire-a-pro route, he told Business Insider. It was surprisingly cheap, he said, only a few thousand dollars. That's about what a corporation would pay for any freelance writing gig.
Since then, other Valley execs have been asking Tzuo for Narelle's number.
The most brilliant ideas are destined to flop if they’re not backed by the right people. Even the most tenacious leaders are only as strong as their employees, and attracting talent and making critical hiring decisions can be make or break for companies.
I’ve learned a few things in hiring my first 100 employees over the past 5 years. These lessons have fundamentally changed the way we approach building our team.
1. Figure out who is hungry. Hire them.
People are getting good at interviewing and many have it down to a science. Some come equipped with stock answers that sound perfect but might not tell you much about what the person is really like. It’s easy enough to separate the people who know their stuff from those who haven’t bothered to do their research but when people are really hungry for the job and have passion for the company you can feel it.
I now ask top candidates to go the extra mile to show that they not only want the job but are willing to make sacrifices for it and have the capacity to dive right in and do it. For us this might mean a case-style interview that places candidates in a situation where they’ll need to perform as they would on a regular day on the job, interacting with the people that they would be working with. This is a great way to see how resourceful people can be in situations where all they have is their own background research and creativity.
One of the best people we ever hired was our Creative Director of Product, Jon Patrick. At the time we were just getting started and set up a cardboard box of an office in New York. Jon was coming from Ralph Lauren, a storied American apparel brand, and a company known for having some of the most stunning offices in the industry. Not only was he undeterred by the surroundings, he had a clear vision for where he wanted the company to go and was willing to risk everything for the opportunity to be a part of it.
2. Screen against your company values.
There are thousands of exceptional candidates out there, but not every one of them is going to be the right fit. As a startup you don’t just need people who are capable of doing the job, you need to find people who are passionate about what the company does and believe in its vision. This might mean hiring someone with less experience in your field and turning down someone who is perfect on paper.
One of my goals as an interviewer is to figure out what characteristics the candidate has and then get a feel for how they map to our company values. Have they done something entrepreneurial in the past? Have they demonstrated integrity in a tough situation? Are they driven toward innovation? These priority values will be different for every company and its extremely important to know what is most important. The reality is, working at a startup is tough at times. To make it you need to have passion for what you’re doing and you need to mesh with the ideals of of the company.
There are a few boxes we like to tick in the interview process, but references tend to be the most revealing background check into a person’s character.
3. Attract the best people.
Post an ad for a great job and you’re bound to get hundreds of applicants; getting the right people to apply is another story. Early stage startups are asking people to make a bet on the company. You have to convince talented people to leave their secure and potentially higher paying jobs in exchange for an opportunity to go further in the future.
Our company is based in Dallas, Texas; its a great place for our business to be, but the challenge is that while there are many talented professionals, you don’t have the same pool of startup-veterans that you might find in hubs like Silicon Valley or New York. As a result you have to work harder to identify top local talent or convince people to make the move across the country. It comes back to finding people who are looking for more than just a job. You need people who will go the extra mile for the opportunity to build a career at a company that is doing something great, and you need people who are driven to pursue personal and professional development.
4. Make the best people better.
At the very beginning it might be possible to build your team on an ad hoc basis but as growth accelerates its essential to invest in getting the most out of your people. I like to tie performance measurement directly to company goals so that I can understand who is having the greatest impact and identify where the weaknesses are. The best people understand that professional development is a shared responsibility between the employee and employer, and they’re eager to ask for and respond to personal feedback on their performance. This is particularly challenging at the start-up phase, because everyone has an impact on multiple dimensions of the business.
A simple way to get more out of people is to give them a vested interested in the outcome of their work. When it comes time to review performance, employees should be just as concerned with how they are progressing against shared goals as the company is. Whether it means a promotion, higher responsibility, compensation or some other reward, it is critical to make it clear to employees why their hard work matters to them.
5. Hire the best.
When you’re just getting started, hiring great people is hard. No amount of perks will make it easier to convince people to leave their perfectly good job to join a startup they may never have heard of. You need to find the unicorns out there who are looking for something more.
What’s the number one thing I think about when it comes to hiring? This might be obvious, but it's never just one thing. You have to look at the full picture of the person and understand why they want the job, what they want to do for the company and how they plan to execute. The best people to hire are the ones who are in it for the opportunity. They’re not there for the paycheck or the work life balance. They’re there because they believe in the company and are hungry for the opportunity to be a part of something special. The good news is the more established your company gets, the easier it is to find people who want to jump on that opportunity.