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- 10/09/14--12:11: _Developers Are Buil...
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- 10/12/14--09:54: _Startup God Paul Gr...
- 10/15/14--06:22: _Here's How This Sta...
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- 10/19/14--05:37: _Why Selling A Start...
- 10/20/14--06:48: _Marc Andreessen Ask...
- 10/21/14--08:31: _It's So Rare For Go...
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- 10/23/14--09:07: _Hedge Fund Supersta...
- 10/24/14--12:10: _What 33 Successful ...
- 10/24/14--15:38: _Meet The Investor F...
- 10/25/14--19:16: _6 Potential Legal S...
- 10/27/14--05:20: _A Startup Founder H...
- 10/27/14--06:16: _A Male Startup Foun...
- 10/28/14--12:33: _Male Startup Founde...
- 10/10/14--14:58: The 12 Best-Funded Startups You Probably Never Heard Of
- Bleacher Report sold to Turner for a little more than $200 million five years after it was founded. But between four founders and more than $40 million raised, each was diluted to 5-10% stakes. That means each founder walked away with about $10 million after the sale.
- Arianna Huffington, Ken Lerer and Jonah Peretti also sold their startup, The Huffington Post, to AOL six years after it was founded. Their price was a lofty $315 million. Each owned different percentages, with Ken Lerer earning significantly more than Huffington. Huffington reportedly owned less than 14% of the company and took home an estimated $18 million.
- But look! Michael Arrington sold TechCrunch to AOL for about $30 million five years after he founded it. He reportedly owned 80% of the company when he sold it because he never raised any venture capital. That means he took home about $24 million before taxes – more than Arianna Huffington.
- For a non-media example, there's ThinkNear, a TechStars company founded by Eli Portnoy. It sold to Scout Advertising for $22.5 million 18 months after its launch. It had raised $1.63 million. At the time of its acquisition, it had a Series A term sheet for $4 million. If ThinkNear had turned down the acquisition and taken the Series A investment, Portnoy says his share of the company would have been diluted an additional 25-30%.
- Jeff Richards, who is now an investor at GGV Capital, tried both kinds of companies. Early in his entrepreneurial career, he founded a company that was valued at $250 million but Richards says he walked away with nothing. In 2003 he started another company, R4. Two years later he sold it to VeriSign for less than $20 million. That time, Richards says both the founders and investors were "thrilled" with the outcome.
- 10/23/14--09:07: Hedge Fund Superstar Lee Ainslie Is Launching A Venture Capital Fund
- 10/24/14--12:10: What 33 Successful Entrepreneurs Learned From Failure
- 10/25/14--19:16: 6 Potential Legal Snares All Entrepreneurs Need To Know About
- 10/27/14--05:20: A Startup Founder Hacked Into A VC's Voicemail To Try And Pitch Him
Lately, there's been a "stupid app" trend.
Some developers say they're setting out to make the most ridiculous apps they can think of. But instead of the products getting ignored, ridiculed, or quickly crushed, they're going viral and earning lots of downloads.
Yo, for example, went viral for being a dead-simple notification tool that merely lets users send the word "Yo" back and forth to each other. Within its first few months, 100 million Yos were sent on the platform. Yo only took eight hours to build; its founder, Moshe Hogeg, admits Yo started as a "stupid" idea. Still, it raised $1.5 million at a $5–10 million valuation from investors.
Venture capital associate Abram Dawson noticed the dumb app trend and set out to make the "stupidest app he could think of." The result: TD4W, an app that starts playing the hook of hit song "Turn Down For What" as soon as it's opened. It's gotten a few thousand downloads and it only took 45 minutes to build.
Today, another simplistic app called Ethan launched. It's already gotten more than 200 upvotes on Reddit-like discovery site, Product Hunt. The idea: Easily text message the guy who made it, Ethan. This is the creator's actual description of the app:
"Hi I am Ethan, who made Ethan, a messaging app for messaging Ethan. Ask me anything I'm here. To chat privately, find me on Ethan."
You could ask what's wrong with these developers for wanting to create such asinine products. Or you could ask: why does the world find gimmicky startups so amusing and reward them with tons of downloads?
Stupid-sounding ideas have been gone viral forever, long before the web and mobile devices existed.
There was the Pet Rock in the 1970s, created by Gary Dahl, who generated about $15 million in the product's first six months. Dahl, a former advertising executive, sold his rocks for $3.95 on a bed of hay. Each sale earned him a profit of roughly $3.
Ken Hakuta's 1980s toy, the Wacky Wallwalker, sold more than 240 million products, netting him about $80 million.
And in the app world, dumb ideas have found success too. The iFart came out a few years ago, a mobile whoopee cushion, and its creator Joel Comm earned half-a-million dollars in sales. Before that, there was the million-dollar homepage, where a teenager was able to sell one million pixels to one million advertisers for $1 each.
Ryan Hoover is co-founder of app discovery site, Product Hunt. His site is responsible for unearthing the Yo, TD4W and Ethan apps. He believes people appreciate silly-sounding light-weight distractions.
"People hate on silly, 'stupid' apps, but in my opinion experimentation is a good thing, especially as the cost, money and time to build [technology] decreases," Hoover tells Business Insider. "[These apps are] lightweight distractions that aren't intended to provide long-lasting utility."
But the real reason silly apps and products have always gone viral may be pretty simple: People get bored quickly and like to be entertained. Many apps are nothing more than toys, just in a more technical form.
"People need to stop thinking of apps so narrowly," Tyler Hayes, founder and CEO of private communication app Prime, tells Business Insider. "They're products. Not just digital. How would we feel if toys didn't exist?"
For startup founders looking to make it big, San Francisco can seem like a promised land. The tech industry is booming, with plentiful Silicon Valley venture capital and a community that's supportive of innovation.
But San Francisco is also crowded and competitive, and living there is getting more and more expensive. A recent study by real estate marketplace Zumper found that a one-bedroom apartment costs more in San Francisco than anywhere else in the country.
In part because of the rising cost of living, some startup founders have decided it's time to leave San Francisco for other cities.
Tilde, an open-source-centric startup, recently took the plunge and moved its five-person team north to Portland, a smaller city where real estate is still affordable and people come from all walks of life.
"In San Francisco, you go to Blue Bottle and every guy around you is pitching an investor or talking about funding," Tilde cofounder Tom Dale said to Business Insider. "Many of my friends who weren't in tech had to go very far east to find somewhere affordable to live. It means that generally the people you interact with on a daily basis are in a limited set of professions."
"There are people with other points of view in Portland," he added.
That's not to say that Portland doesn't have a growing tech scene — Tilde joins startups like Simple, Panic, and Sprint.ly, which have already set up shop in the city. Big-name companies like Salesforce, eBay, and Airbnb have also opened outposts here in recent months.
"It’s a big community without being overwhelming. It helps people step up. There’s less of an intimidation factor," Tilde cofounder Leah Silber said. "Companies are showing people that it’s OK, that you're not losing much by leaving San Francisco."
For real estate startup Cozy, which builds rental management software, moving away from San Francisco was never really part of the plan.
"We found that after we raised seed funding, we were having a hard time finding top-notch Ruby engineers. We decided to look in Portland, just because we knew of conferences they had there before, and we immediately found three people," Cozy founder and CEO Gino Zahnd said to Business Insider.
"Over the course of 2013 and 2014, we hired people from all over the country and gave them the choice between living in San Francisco or Portland," he said. "100% chose Portland."
For Zahnd and his Cozy team, quality of life was a major motivator in considering a move. In Portland, they can walk or bike to work down wide, tree-lined streets — a major change from fighting San Francisco traffic during the morning commute.
Plus, the city has a food, music, and cultural scene that's just as good as what you can find in San Francisco, Zahnd says.
"The biggest perspective change is that the struggle is not necessary to build an insanely high-quality product or work with insanely talented people ... Being in Portland gets us out of the echo chamber and insane recruiting tactics, and it helps us focus on our goals," Zahnd said. "I’ve been in San Francisco for 20 years, so I was a little nervous at first. But for me personally, with each week that passes, I miss San Francisco less and less, and I’m more confident in my decision."
For a real estate company like Cozy, the housing market was another obvious consideration.
"San Francisco has a stigma for being so expensive. The number I like to use as a base line is that in San Francisco, the median price for a single family home is $1 million," Zahnd said. "In Portland, it's under $300,000."
The team at Tilde experienced a similar phenomenon. All five cofounders were renters in San Francisco, but four of them were able to buy homes when they moved to Portland.
"I have a mortgage payment that's half of what my rent was in San Francisco," Silber said.
Dale agreed: "You can afford to live downtown, and you don't feel unsafe like in SOMA," he said. "Plus, the public transit is amazing for a city of its size, and parking is plentiful."
Last summer, just before he moved to Portland, Dale shared his feelings towards San Francisco and tech in a blog post. The whole piece is worth a read, but we found this selection especially interesting:
The brobdingnagian salaries we’re getting paid haven’t just skewed the market; they’ve taken it in two hands, turned it upside down, and shaken it like a British nanny. My friends who are not in technology keep getting pushed further and further away, or into smaller, dingier accommodations.
The recent BART strikes are just a single data point in a larger trend: we’re alienating everyone who isn’t in technology. It’s not sustainable. The stomach-turning coverage of the BART strikes should throw into stark contrast just how bad things have gotten. Even I, who makes a decent salary, have seen the great American dream of home ownership recede into the distance.
It took a long time for me to realize I was part of the problem. Yeah, I might be in tech, but I’m not one of these social media douchebags, I thought. Doesn’t matter. The fact that I get embarrassed when a girl at a bar asks me what I do should have been my first clue.
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Before a startup has a product ready to sell, it usually keeps its mouth shut about what it's working on. In the tech industry, that's called "stealth mode."
Most startups either bootstrap or live on a small seed investment while in stealth mode. They use that time to build the product, get some beta testers, and make a business case. They take all of that to the venture capitalists to raise the funds they need to operate.
But some startups are able to raise huge amounts of cash while still underground.
The folks at CB Insights, which collects data on venture funding startups, recently sifted through its massive database to find the most well-funded startups still in stealth mode.
ProtectWise: $17 million
Company name: ProtectWise
Total raised to date: $17 million from Crosslink Capital and Trinity Ventures.
What we know about it: ProtectWise is a Denver-based startup doing a cloud-computing product for the computer security market.
It's led by Scott Chasin, founder of MX Logic, which he sold to McAfee for $140 million in 2009.
NextBit Systems: $18 million
Company name:NextBit Systems
Total raised to date: $18 million from Accel Partners and Google Ventures.
What we know about it: NextBit Systems is doing something in mobile, possible a mobile storage product. Cofounded by Tom Moss and Mike Chan. Moss ran the Android Business Development team at Google from 2007 until 2010) and is a board member at Cyanogen, an open version of Android.
Chan was an Android engineer at Google, left for Android security startup 3LM, acquired by Motorola Mobility, and then Google bought Motorola.
CNEX Labs: $20 million
Company name:CNEX Labs
Total raised to date: $20 million from IDEA Fund Partners and Sierra Ventures.
What we know about it:CNEX Labs is a San Jose startup working on big data storage. Cofounded by Yiren Huang, a chip engineer formerly of Huawei/Brocade/Cisco and Alan Armstrong, formerly of semi-conductor company Marvell.
See the rest of the story at Business Insider
CLASH isn't your typical company, so it makes sense that its "office" spaces are quirky too.
Founded by Joe Garvey in 2012, CLASH is a social scavenger hunt startup that has hosted events for major Silicon Valley tech companies like Google, Facebook, Salesforce, Lyft, Vox, Yelp, Pinterest, Fitbit, Cisco, Pandora, and Sony, among others.
Garvey describes the hunts — which typically involve drinking, neon facepaint, and goofy pictures — as "high octane."
Instead of your regular cubicle-filled office, CLASH has three locations, each one chock-full of neon colors and a touch of the wild side.
The most recent addition to Garvey's CLASH empire is the Romper Room, a bar he opened in San Francisco's Union Square.
Because many of CLASH's scavenger hunts start with a drink or two, Garvey says the two businesses support each other perfectly.
There's plenty of room, because next to the bar area is a staircase that leads up to the...
See the rest of the story at Business Insider
Paul Graham, one of founders of prestigious startup incubator Y Combinator, has seen hundreds of startups come and go over the years. Not all of them turn out to be massive successes like Dropbox or Airbnb, but Graham revealed in an interview with Bloomberg's Emily Chang the single most important thing to look for: authenticity.
A lot of it has to do with luck, Graham said, but if you had to boil it down to one quality to look for, authenticity would be the most important one.
"You're looking for people who are real friends," he said to Chang. "Not just for people who got together for the purposes of this startup. You don't want people who were in it just for the money."
Graham cited an example, saying that if Facebook CEO Mark Zuckerberg would have sold his company to Yahoo back in 2006, it would never be the massive social network it is today.
If you live in New York City, you’ve likely seen one of vans operated by FlyCleaners: They’re boxy, blue and sporting an underwear logo.
They also run on a well-oiled supply chain that has turned the laundry startup into one of the best executors of “on-demand” that we’ve seen so far.
The way the FlyCleaners service works for users is dead simple: If you can’t be bothered to make a laundry run, download the app, adjust to your personal cleaning specifications, and request one of the “Fly Guys” come pick up your stuff, either as soon as possible or in another time slot.
If FlyCleaners picked up your laundry before 11 p.m., your clothes will be available by as early as 7 a.m. the next day. Once you're notified your clothes are washed, all you need to do is schedule a drop-off the same way you requested a pick up.
After you give a FlyGuy your laundry, they schlep it to one of FlyCleaners’ partner laundromats, which charge the startup a wholesale cleaning rate.
The magic of FlyCleaners is that the pickup and delivery windows are both super-quick and quite specific.
One Business Insider editor described it as impressively exact.
Although the process seems simple to the user, it is incredibly complicated and tech-heavy on the backend. Max Adler, who heads up operations at FlyCleaners, told Business Insider that company has mastered its on-demand acumen thanks to a constantly evolving calculation.
“Our special sauce is our 'instant algorithm,'” Adler says. Of FlyCleaners’ 20 non-delivery employees, six are developers, working to make the company's algorithm better and more efficient every day.
Right now, the company has 100 drivers and 30 trucks, and the algorithm helps determine which drivers should deploy for which pick-ups. When a FlyGuy is on duty, he or she will get pinged with drop-offs or deliveries in real time, with the algorithm both figuring out how to group sets of deliveries in the most logical way and also what specific route drivers should take to get to each destination.
FlyGuys and gals use the FlyCleaners app on a company-provided tablet, which will automatically route them using a GPS system that takes into account New York City traffic, weather, and special events (FlyCleaners works off the API of another mapping application, but made its own modifications). Meanwhile, the end user will be able to track that driver’s progress in real time.
When we tried FlyCleaners, our estimated pick-up time was 20 minutes and drop-off came in 20 minutes. Compare that to a four hour window for Google Shopping Express deliveries or the three hours it took one former Business Insider employee to order a bag of chips through the delivery app WunWun.
While the algorithm is major driver of the impossibly fast service, FlyCleaners can also achieve peak speediness because of the way its trucks are configured. When the company first launched little under a year ago, it was using rented vans loaded up with Ikea bins in the back to sort people’s clothes.
Today, the company’s big fleet uses proprietary shelving, custom-made laundry bags, and barcode scanning to make sure the process of getting things into and out of the truck is quick and flawless. Drivers will usually have about 50 or 60 orders on the vehicle at any given time, so sorting through them quickly is essential. Anyone who uses FlyCleaners can also leave any special instructions within the app.
FlyCleaners operates from 6 am to midnight, seven days a week, and has washed over 500,000 pounds of laundry so far, according to its website. Prices are comparable to drop-off locations in Manhattan: $1.25 per pound for laundry and between $4.50 and $12.00 for dry-cleaning. Right now, FlyCleaners only serves Manhattan below 50th Street or a few places in Brooklyn.
“We are making sure to keep up with the demand and expand as quickly as possible while still maintaining our quality and that 'wow' factor with the instant, on-demand delivery,” Adler says. “It's a really personal business — people are literally trusting us with their dirty laundry. It’s been a wild ride.”
The secret-sharing app Whisper faced some serious heat this week when two reporters from The Guardian wrote a scathing exposé that accused the startup of gathering information about users and violating their privacy.
Whisper immediately fired back that The Guardian's story was full of "lousy falsehoods," and that it does not collect or store any personally identifiable information from users, insisting its service is completely anonymous.
The Guardian has since responded, reiterating that Whisper does collect users' smartphone ID codes, their IP data, and, if people turn on their geolocation services, their location within 500 meters.
So, what kinds of things are people sharing on Whisper anyway?
See the rest of the story at Business Insider
It sounds impressive when a founder sells a startup for tens of millions of dollars.
But it sounds really impressive when a company sells it for hundreds of millions of dollars.
As a founder, which option is better? For many, a smaller exit should be the desired outcome.
The short reason: lower-valued startups take less time to scale and less venture capital to fuel, which means founders will likely own higher percentages of their companies when they sell.
There are also fewer acquirers as the price of your company increases. And when an acquirer does come along, there's more due diligence which means sealing the deal can take much more time.
Unless you have a hot company like Instagram. Then you can forget all of that and close a billion-dollar acquisition in 48 hours.
Let's look at some examples.
So who would you rather be, a Portnoy and an Arrington? Or a Huffington? All made roughly the same amount of cash but for Portnoy and Richards, the smaller exits took significantly less time.
The decision to go big or stay small is one entrepreneurs shouldn't take lightly.
Arrington says he nearly accepted VC money for TechCrunch four times. He initially didn't raise money because it wasn't an option. In 2005 investors were less willing to write checks.
"When I started my first company, Achex, we raised $18 million in venture capital in 2000 from DFJ," Arrington wrote to Business Insider in an email. "The company later sold for $32 million, but due to a 2x liquidity preference (common in those days), the founders essentially got nothing, just a few hundred thousand dollars to not block the deal."
Arrington says he raised so much then because it was nearly impossible to build that kind of business without a lot of capital. "These were the days when you had to buy Oracle database stuff, and there were no easy hosting options like Amazon and Google offer...Today, most startups don't have multi-million dollar infrastructure costs just to get the service launched. So there is less need for capital to get to market."
Raising a lot of money at a high valuation has its benefits. It can mean overtaking competitors, which are prevalent in early stages (GroupMe had to battle Fast Society before selling to Skype, Foursquare had to beat Gowalla, etc). It can also make a difference in hiring.
It's easier to attract engineers and other talent when you have brand-name investors tied to your business and you can offer attractive salaries. Arrington recalls his difficulty luring his business partner, Heather Harde, away from News Corp where he says she was making $1 million. All he could offer was a $150,000 base and stock options.
Arrington sometimes wonders how much further he could have taken TechCrunch had he taken funding. "I often wonder if we could have grown faster, expanded in other ways, if we had raised money and were less frugal," he wrote.
For Portnoy, the pros of staying small and selling early outweighed the risk of raising a lot.
Portnoy had a family to support and no nest of cash to fall back on. An acquisition would make his financial situation much more comfortable. In addition, one of his board members had run a company that took a lot of funding and eventually went public. Even though that board member's company had an exit 30 times larger than Portnoy's, he ended up with about the same amount of cash.
Lastly, Portnoy knew most entrepreneurs only get one shot at a startup. If they fail, it's the end of the road. But if they're able to get an exit under their belts quickly, more opportunities present themselves later. Investors are eager to back founders who have successful track records. And obtaining personal wealth means a different, sometimes bigger mindset the next time around.
It's important to note that while smaller exits may benefit entrepreneurs, it doesn't always benefit investors.
"As a VC, I am now investing in companies shooting for outcomes >$200M, but it’s not the right model for every entrepreneur or every company," Richards says.
Arrington, another entrepreneur turned investor, referred to a startup his firm CrunchFund backed that sold early against investors' wishes.
(Side note: When an investor's and entrepreneur's exit plans don't align, investors occasionally offer to let founders take money off the table. Then, even if they go for a big exit and the company fails, the founders have a financial cushion. Snapchat's founders just did that; each was given $10 million in addition to the $60 million their startup raised.)
Although Arrington doesn't see himself founding another company, he says he'd always opt to raise as little money as possible. "In general I'd only raise venture capital if I absolutely had to. I'd raise it opportunistically based on market conditions to take as little dilution as possible. And I'd spend that VC money the same way I spend my own money in business - extremely frugally," he said.
Jonah Peretti, who co-founded The Huffington Post and now runs another high-valued company BuzzFeed, offers different advice.
"My advice is you shouldn't do a startup for financial reasons," he wrote via email. "Most startups fail and there are easier ways to make money with less risk...And if a company is successful, which is very hard to achieve, the money comes whether you build a fat company or a lean one. Mike [Arrington] and Arianna [Huffington] both did great financially. So did Mark Zuckerberg and Kevin Systrom. How many yachts can you water ski behind?"
Marc Andreessen, founder of Netscape and early investor in Pinterest and Facebook, is an optimist.
In general, he believes optimists win, and pessimists lose.
In an interview with New York Magazine's Kevin Roose, he discusses why having a positive attitude has helped him make smart investments.
"There are people who are wired to be skeptics and there are people who are wired to be optimists," Andreessen tells Roose. "And I can tell you, at least from the last 20 years, if you bet on the side of the optimists, generally you’re right."
So when he's critiquing startup ideas, Andreessen says he tries not to ask the common question: "Will this idea work?"
Instead, he asks: "What if it does work?"
He uses his initial snubbing of eBay as an example.
"I remember when eBay came along, and I thought, No f---ing way. A f---ing flea market? How much crap is there in people’s garages? And who would want all that crap?"Andreessen tells Roose. "But that was not the relevant question. The eBay guys and the people who invested early, they said, 'Let’s forget whether it’ll work or not. What if it does work?' If it does work, then you’ve got a global trading platform for the first time in the world, you’ve got liquidity for products of all kinds, you’re going to have true price discovery."
In May, Google bought an enterprise app called Divide for $120 million in cash and stock. One of its founders was based in New York. Another was based in Hong Kong. And the third, Alexander Trewby, was based in London.
Trewby says getting acquired by Google in England is so rare that he was invited to meet Queen Elizabeth II one week later.
"In California, if you get sold to Google you better get in line," Trewby told Business Insider. "In London, it's less common. I believe it was the following week I met the Queen. So the acquisition was somewhat rare."
Divide is a mobile productivity app that allows employees to carry one device instead of two to work. Once downloaded, the app splits a phone into two modes: work, which can be controlled and monitored by a corporate IT department, and personal, which IT departments don't have access to, for regular enjoyment.
For more on how three first-time founders built a $120 million business and turned one-third of its employees into millionaires, read:
At TechCrunch Disrupt London on Tuesday, three of Europe's biggest names in financial technology discussed why the city of London — particularly compared to places in the US — makes such an attractive prospect for startups that offer financial services.
Damian Kimmelman, CEO of online document look-up service DueDil, said that London has a unique set of factors that mean financial tech startups can thrive. The US is restricted by a complex banking structure, he said, adding that "there's an abundance of data in London."
Jeff Lynn, CEO of online crowdfunding site Seedrs, elaborated on why London is the perfect place for startups dealing with money. "There's now enough digital take-up to build big businesses. And there aren't many locked-in systems like in the US. You don’t have as much institutional opposition in Europe as you do in the US."
The co-founder of money transfer startup TransferWise, Taavet Hinrikus, agreed with Lynn, remarking that "the UK is a very heavy early adopter community."
Seedrs founder Lynn also explained that London is not the only city in Europe that is promising for fintech companies: "There are other places in the world where fintech could be done well. Frankfurt, for example, where tech provides services to banks. But London is uniquely well positioned."
As well as a favorable banking structure, the assembled fintech entrepreneurs also claimed that Europe is very different when it comes to venture capital. "East Coast VCs aren’t invited to deals on the West Coast, so they’re coming to Europe," Kimmelman said. "There are so many attractive companies in Europe, they're cheaper than in the US."
At the end of 2012, the dating startup Hinge was running on fumes. It had only $32,000 left in the bank.
Justin McLeod, Hinge's founder and CEO, raised $100,000 a few months prior, but only a few thousand people were using the service.
"Hinge wasn't a mobile product then," McLeod says. "We made some business assumptions that turned out to be wrong. We were like, 'This thing is running out of money, and we need to do something drastic.'"
McLeod and two of his developers flew to Florida, where they holed themselves up and developed a mobile version of Hinge. They submitted it to the app store on Jan. 15, 2013, to launch the following Feb. 7.
Most of the remaining money — $25,000 — went to a hail-mary pass: a massive 2,000-person launch party in Washington, D.C. McLeod hoped the buzz generated from the event would give the app enough attention to keep it alive.
But two weeks before the party, Apple rejected Hinge's application. McLeod's team scrambled to resubmit the app, but by Feb. 6 it still wasn't live in the App Store.
That's when McLeod began to freak out.
"We were on the verge of launching without an app," he recalls. "It was too late to cancel the party, because most of the money had been committed. I wasn't eating or sleeping. It was all about to come crashing down, and it was the end [for Hinge]."
The morning of the party, McLeod received an email from Apple. Hinge was finally available for download.
That evening, as thousands of guests partied alongside DJs and guzzled drinks, Hinge shattered expectations.
Like Tinder, Hinge lets users see profiles of single people nearby. They can like or nix a profile by tapping a button on the screen. Unlike Tinder, Hinge connects only friends of friends and third-degree connections, adding social credibility to every match. While that may seem like a small pool of people, McLeod says most users have met just 3% of those local connections before.
The day after the party, more matches were made on Hinge than in the entire year prior. Investors agreed to give McLeod's startup a lifeline.
Hinge is now one of New York's hottest startups. Although Tinder is much larger (it makes more matches per day than Hinge has in its entire history), McLeod's company is starting to steal some of the $750 million company's users.
"Hinge cuts through the randomness of Tinder,” one daily user told The New York Times in March. “I can take some comfort that she knows some of the same people I do.” In July, Hinge raised $4.5 million from investors, bringing its total funding to $8.6 million.
Hinge has made more than 8 million matches, up from 1 million in March (Tinder, by comparison, makes 15 million matches per day). It has expanded to 20 cities and is most popular in Los Angeles, San Francisco, New York, and Washington, D.C. It uses a waitlist to assess demand in other cities, then launches when a few thousand people have signed up.
The Man Behind The Hail Mary
McLeod, 30, isn't your typical tech founder. The Kentucky native looks like he walked out of a J.Crew catalog. He is a fan of meditating and recently finished a 300-hour yoga teacher-training program. But the prepster has a rebellious, adventurous side, and he can code.
When McLeod was 15, he was fired from his job working as a bus boy at a restaurant. To make money, he helped local businesses build websites, a job he found far more lucrative. McLeod had gone to "nerd" summer camps at Duke University, where he had taken computer science courses.
Although McLeod was captain of his high school tennis team and president of his student council, he preferred partying over studying and didn't have many college options. McLeod went to Colgate in upstate New York, and he nearly found himself expelled on more than one occasion. On his first night, he smoked indoors and set off the fire alarm — his entire dorm was evacuated. He also confessed to drunkenly throwing snowballs at his RA's window.
By the end of college, McLeod says, he cleaned up his act. After graduation, he worked in consulting, and later in healthcare. He traveled to places like India and Thailand, where he says he spent a few months trying to find himself. Then he went to Harvard business school, where he landed a job at McKinsey, but he never showed up for his first day of work.
McLeod comes from a family of entrepreneurs (his father and uncle both have building supply companies), and he wanted to be one, too.
"Halfway through my second year, the idea for Hinge clicked," he says. Harvard was throwing a "Last Chance Dance," at which students could confess their feelings to crushes before the program ended. A Facebook page for the dance was set up allowing attendees to declare their affections.
"I'd never join OK Cupid or Match, but there was something really lightweight about that [event] and its Facebook page, which sounded cool."
McLeod spent 2011 on his own, raising a small seed round from a loose family connection who worked in venture capital. He went to San Francisco and linked up with a friend who worked for Google, crashing on her floor while they built the first version of Hinge. The friend decided to stay at Google, and McLeod moved back to the east coast to see Hinge through.
Now Hinge is finally paying off, although McLeod knows many founders have tried to build similar startups and failed. And Facebook, which Hinge heavily relies on for friends-of-friends matchmaking, could pull the data plug any time.
"There is no shortage of companies that have tried to build what we've built," McLeod says. "But we're using the organic, city-by-city method, which I think is the biggest thing ... We're a utility to help users meet great people in the flesh as effectively as possible ...We want to be a house party that has a really good host."
You're probably patting your financially responsible self on the back for opening and contributing to your 401(k).
According to Chris Costello, however, that might not be enough.
Costello is the cofounder and CEO of blooom (yes, three o's), a 401(k) management service that won best of show at the 2014 Finovate fall conference, a trade show that unveils and highlights the latest innovations in banking and tech.
"In the 19 years I've been in this business, helping people my parents' age, I've been keenly aware that people my age have been largely shut out of the quality investment advice space for lack of a big enough account," 41-year-old Costello explains.
He says that since he left Wall Street in 2004 and started his own financial services firm, The Retirement Planning Group, the most common question he gets is, "Hey Chris, I have this 10-k-4 thing at work and I don't know what I'm supposed to be doing with it. Could you take a look and tell me what I'm supposed to do?"
"80% of the time when I'd look at their statement," Costello recalls, "I'd see that it was significantly screwed up. It would be a 29-year-old with his entire 401(k) in bond funds, or a 33-year-old with her entire account in company stock. I'd see every shape and size, but almost never an appropriate balanced, diversified allocation."
Costello isn't the only one who's detected an issue with how Americans approach their 401(k)s. CNBC reports that only 10% of account holders make a change in their investments over the course of the year, according to data from Fidelity. And an ING Direct USA survey found that 50% of American adults who have participated in employer-sponsored retirement plans abandoned them when changing jobs, contributing to the 15 million "orphaned" accounts that made up over $1 trillion in 2010.
Between the investors ignoring and abandoning accounts, it seems that many Americans could use some help getting the most from their 401(k)s.
That's why Costello and his partners started blooom, which manages your 401(k) or other employer-sponsored retirement account.
Once users sign up, blooom first uses an algorithm to determine the most advantageous mix of available investments for the individual user. It then checks the account every 90 days.
At that 90-day mark, the user receives an email that either says the equivalent of "all good," or "we had to make some tweaks." Every few years, blooom rebalances the accounts according to the client's time horizon. As Costello points out in his Finovate presentation, a blooom client can choose not to look at his 401(k) for the next 20 years.
"We're 401(k) custodians, and employer agnostic," Costello says. "It doesn't matter where you work. All you need to have is an account and an online login."
Currently, blooom is very much a startup. The service has about 100 users and has established itself using $400,000 of the founders' own cash. They're now looking to expand and secure additional funding, and in early 2015, they plan to release iOS and Android apps to accompany the web platform.
Right now, the service costs $10 a month if you have more than $5,000 in your account and $1 if you have less. Before the end of the year, the pricing will change to $1 a month if you have less than $20,000 in your account, and $15 if you have more. This is more expensive than other similar services like Wealthfront, which charges $25 a year to manage $20,000.
It's worth noting that although blooom falls squarely in the robo-adviser space with algorithm-based online investment platforms like Betterment and Wealthfront, other services generally don't touch 401(k)s. Investment adviser Financial Engines is the exception — the publicly traded company offers retirement account management as an employee benefit with contracted employers.
Costello explains that the dearth of 401(k)-centric services is because 401(k)s are spread among employer-selected brokerages like Fidelity and Vanguard and are therefore harder to consolidate and manage. "There's an additional layer of challenge involved in scaling up a business when you have all these institutions to work with," he says. "That's why the market hasn't been as exploited as with other models."
Although blooom is in its nascent stages, there's a pretty obvious way to figure out whether it's a service worth trying: If you don't already have professional advice, are you completely confident in your 401(k) investments? If so, nice work. If not, it might be worth $15 or less a month to be so.
Maverick Capital is launching a $50 million venture-capital fund, joining a growing number of Wall Street firms that are cashing in on Silicon Valley.
The Wall Street Journal's Juliet Chung reports that Maverick's fund will focus on companies in the software, healthcare and consumer industries.
It launches on January 1.
Maverick Capital is helmed by Lee Ainslie. The fund has returned 12% since its founding in 1995. The S&P 500 has returned 9.4% over the same period.
This will not be the first time Maverick is investing in the startup space. With some large investment banks, it bought a stake in Perzo, the instant messaging startup that will rival the Bloomberg terminal's chat function.
Maverick has returned about 12% on average every year since 1995, compared to 9.4% for the S&P 500.
But some experts are warning that Wall Street's rush to Silicon valley may be making some startups overvalued.
According to the Journal:
"A similar dynamic played out in the dot-com boom, when money managers flocked to venture-capital investing after years of eye-popping valuations. Many of those managers got in just before the Internet bubble burst."
David York, managing director of the San Francisco-based Top Tier Capital Partners LLC, which invests client money in venture funds, sounded a similar worry.
“We are far more cautious today than we were two years ago because of the money flowing into the late-stage space both from hedge funds as well as from mutual-fund companies,” he said in an interview."
There's certainly value to studying the insight of some of the world's greatest CEOs like Elon Musk and the late Steve Jobs, but sometimes their massive success seems far out of reach for the entrepreneur who's just starting out.
That's why marketing consultant, writer, and speaker Brian Honigman gathered advice from entrepreneurs like Levo League's Caroline Ghosn and Buffer's Leo Widrich. They're still involved in the nitty-gritty of building successful companies, and they have plenty of wisdom to offer from persevering through hard times.
Honigman first published these lessons on the Huffington Post as "33 Entrepreneurs Share Their Biggest Lessons Learned from Failure." Marketing software company Referral Candy took the lessons and packed them into a presentation with additional context.
We've published the presentation, illustrated by Jon Tan, here with both Referral Candy's and Honigman's permission.
See the rest of the story at Business Insider
Peter Boyce II, an associate with General Catalyst Partners, and co-founder of Rough Draft Ventures, was recently interviewed by OneWire CEO Skiddy von Stade.
In the interview, he explained how he got into the startup business by founding Rough Draft, a company that seeds student startups.
When he was studying applied math and computer science at Harvard, he noticed his friends struggled to find funding for their great startups.
They basically had two options. One was to enter a small business competition to win whatever was offered, even as little as $500. The other was to try and raise so much money that it made sense to drop out and run the business full-time.
There was nothing in-between these two.
That's why he co-founded Rough Draft, to scout for students running potentially game-changing startups from their dorm rooms, and expose them to the resources they need to grow.
"There’s the $500 business plan competitions that you can enter into and win, then there’s the 'raise a million dollars and drop out of school,' but there’s really nothing in between and there’s really no network of students that were able to empower other students to pursue creating startups. That’s really what we created with Rough Draft Ventures. We have a team of students that basically helps identify and empower entrepreneurs at the university level, something that we’re insanely excited to do, something that we’re increasingly seeing - folks are going to continue to build amazing companies in their dorm room.
Boyce also runs the New York office of General Catalyst Partners and is expanding its footprint here. He's convinced that he's in the right city too. In the raging debate on the better coast for tech startups, he's Silicon Alley all the way.
"We’ve staked our careers here in New York, voted with our feet in a way. But I think from a diversity perspective of just being able to interface with so many different industries, whether that's banking, marketing, fintech, I think there’s a lot of really great industries and a lot of great entrepreneurs that are going to build companies that [are] technology, that's going to empower and change these existing industries. And New York has been the epicenter for a lot of these industries for a long time ... I’m personally very biased towards this eco-system here in New York."
Watch the full interview above and subscribe to the Open Door series to receive upcoming interviews.
The last thing you want to do as an entrepreneur is pour through long dull documents written by lawyers for lawyers. But there's a reason it's called work and not fun. Miss taking care of this aspect of your business and you might find yourself being investigated by the federal government, on the hook for thousands in otherwise unnecessary costs, in a never-ending fight with others involved in the company, or stuck at the exact time you need to be moving.
I was speaking with David Reiss, a professor of law at the Brooklyn Law School and research director of its Center for Urban Business Entrepreneurship (CUBE). Entrepreneurs often lack the broad business experience that would help them avoid a number of traps on the way to growing a business, he said. Here are some of the most common.
Real estate contract snags
"You have a great idea but know nothing about the basics of being a small business person, so you sign the first lease [you're offered]," he said. But a commercial property lease is a complex document that makes an apartment lease look like nothing in comparison. It typically is something to be negotiated, and getting help to understand the ramifications of various clauses is crucial. "Often there are pretty complicated rent increase provisions that entrepreneurs don't get," he said. The document as written might assign you a portion of the building's increased operating expenses in addition to rent increases. Overly strong restrictions on the ability or reassign or sublease the lease's obligations could mean an inability to move to a larger space when the business grows. "What are the use restrictions?" Reiss asked "What if the business morphs into something else? Does that violate the use limitations on the space? "
Pick the right corporate structure
You'll likely have many choices of how to legally and financially structure the company. Some are an LLC, sole proprietorship, partnership, S-corp., or C-corp. "They have different tax implications, different implications as you increase in size and revenues," Reiss said. If you have the wrong structure in place, you might find yourself having to unwind it as the business expands. Not only might that be unnecessarily expensive, but you've potentially opened yourself to renegotiating some basic arrangements that could be troublesome.
Get a fitting partner agreement
If you need a reminder of how badly partnerships can go, look at Snapchat or Square. One day everything is fine. The next, former best friends are at each other's throat. You have to consider how to allocate both profits and losses (some investors might like more of the latter). "Some people are putting in time, some are putting in intellectual property, and some are putting in cash," Reiss said. "People have different expectations for each of those contributions." A thorough and well-constructed partner agreement provides a framework for addressing the important issues before everyone is at an impasse.
Have appropriate protection for intellectual property
All businesses have intellectual property. Getting protection on every aspect can burn through cash. For example, patents are great, but if you can't lock down broad enough protection, competitors might be able to easily work around the walls you built, in which case you may have wasted money. Perhaps trade secrets might be more appropriate. Do you really need to trademark every single name and phrase? Maybe yes, maybe no. Talk to a professional to devise a useful strategy, keeping an eye on what you can afford and how much effort you might need to divert from getting business done.
You'll need commercial general liability insurance and might also need property insurance. Might directors and officers liability insurance, also known as D&O, be advisable to protect principals in the company? Does your lease or contracts with clients demand particular levels of coverage?
On one hand, anyone who says that regulations make it impossible to open a business is someone to be questioned. On the other, you can get badly tripped up in some common areas like taxes, handling inventory, or labor laws. "A little bit of planning can save you lots of headaches, money, and bandwidth," Reiss said. "If you're working 16 hours a day, you don't want to be thinking about an investigation by the Department of Labor. You need someone to run through a checklist with you of the regulatory overlays on small businesses."
Bringing lawyers, accountants, insurance brokers, and others in for reviews and discussions isn't cheap, but it's a lot less expensive than trying to solve problems after they've snared and tripped you.
In a misguided marketing and fundraising stunt, the founder of a car rental app hacked into the voice mail of angel investor Jason Calacanis and changed the message to promote his company.
“My whole life has been focused around using new and experimental methods to promote ideas,” he wrote. “Therefore, when we decided to raise a new round for our startup, I knew we had to something unique if we wanted to get attention.”
The voicemail can still be heard in a SoundCloud file here:
“Hey guys, we temporarily borrowed Jason Calacanis’ voicemail,” he says on the message.
Well, attention he got.
Zolty posted a link to the Medium post on Hacker News which apparently was also removed by administrators. Hacker News readers were not amused.
“Ethical quandaries aside (of which there are several) for a moment, I think this strategy speaks poorly of the startup,” said one comment. “What type of signal does it send to prospective investors that you feel it’s necessary to pull illegal stunts in order to gain attention for your round?”
Initially, Calacanis was surprised.
After an email exchange with Zolty, Calacanis offered forgiveness and a bit of advice.
Zolty was part of the Winter 2013 Y Combinator batch for another startup, BeatDeck. Finding himself on the wrong end of a backlash, Zolty also apologized to Calacanis.
Men are occasionally idiots.
And despite there being many smart men in the technology industry, men in the technology industry are also occasionally idiots.
For instance, they have sent texts to women asking for sex at technology conferences. They have dated women then attempted to push them out of startups. And in the latest sometimes-men-are-stupid saga, a man allegedly sent a female technology reporter a basket full of sex toys— as schwag for a startup that has nothing to do with sex.
San Francisco Chronicle's Kristen Brown says she was startled to find a startup founder in her office lobby, handing her a vibrator. His "gift" also included K-Y jelly, raw oysters, and tequila. As she stood there, mouth agape, he pitched her his Q&A startup.
Brown says when she asked the founder, Blake Francis, what was up with his gift, Francis seemed almost wounded.
"At first he was defensive," Brown writes. "He said he was sorry I felt uncomfortable with his choice of swag, but also appeared genuinely surprised at my discomfort. He didn’t want to offend me, but also didn’t understand why I would be offended in the first place. Francis didn’t seem to grasp that sex — or a woman’s sexuality — isn’t a topic appropriate for a professional setting."
Francis explained that each sexual gift had been an answer to some sort of question asked on his startup's website. But as Brown pointed out, his startup answers a lot of questions that have nothing to do with sex at all. Francis also told Brown that he had given the same gift to other men and women, although it's hard to imagine that men received vibrators.
"In retrospect, we did not use good judgment," Francis later told Brown.
Two male founders decided it was a good idea to send tech reporters a basket full of sex toys to promote their startup, Need.
Need is an anonymous Q&A app that answers all sorts of questions — sexual or otherwise.
One female tech reporter was insulted by the gift, wondering why a non-sex-related startup would hand her a basket full of oysters, tequila, K-Y Jelly, and a vibrator in her office lobby, then proceed to pitch her.
She says she felt her sexuality was being put on display. Being handed a vibrator in public by a stranger is obviously uncomfortable, and moronic. So she wrote about the experience.
The founders of Need say they "feel extremely misunderstood" by the reporter, Kristen Brown, and social media's response to their PR gaffe.
The founders say every reporter they pitched — man or woman — received the same basket, vibrator and all.
They admitted to Brown that the gifts were chosen based on shock value, but they also say they are representative of Need's brand. In an attempt to explain themselves on Medium, one of the founders writes:
One Need was for “the best day date activity in the Bay Area”, and the responses included a trip to Hog Island Oyster Company to shuck oysters…thus the oysters, lemon, cocktail sauce, and oyster shucker. Another Need was for “the best margarita recipe”, and so we included the recipe along with tequila, agave nectar, limes, cocktail shaker, margarita glass and a juicer. Yet another Need was from a user stating they were married with children asking for advice on how to “spice things up in the bedroom”, and the massager and lubricant were highly recommended by the community.
Here's a photo of the gifts, and the actual gift basket, which was delivered to Brown in early August. The founders say the baskets and their contents were devised by Need's marketing team, which is composed largely of women:
The founders claim all gifts, including the vibrator, were gender neutral.
"We feel extremely misunderstood," one of Need's founders writes on Medium. "It was never our intention that the items be taken personally, or that they cause discomfort or offense. Clearly, we vastly underestimated the sensitive nature of these topics, and regrettably made Ms. Brown feel uncomfortable."
Finally, in the last line, the apology comes.
"I would like to extend my heartfelt apologies to you, Ms. Brown, and to anyone else that we have offended or otherwise upset."