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The latest news on Startups from Business Insider

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    Every Tuesday, Vanessa and Veronica Merrell spend an hour livestreaming themselves singing covers of their favorite songs or playing charades. But the 18-year-old sisters aren't doing this on Periscope or Meerkat.

    Instead, they're using YouNow, a livestreaming mobile app and website that teens are obsessed with.

    YouNow founder Adi Sideman says 70% of YouNow's users are under the age of 24 and that the platform has 100 million user sessions a month, with about 150,000 broadcasts daily. For comparison, Twitter announced Tuesday that its livestreaming app Periscope hit 1 million users in its first 10 days.

    The Merrell twins found out about YouNow through one of their favorite YouTubers, the Harries Twins.

    "We were absolutely in love with the Harries Twins — they would always do YouNows," Veronica told Business Insider.

    "A lot of our subscribers and viewers wanted a way to talk to us, and they told us to do YouNow so we could interact with them," Veronica said. "And we were just like, 'Why not?' It's a cool way to interact with our subscribers and viewers."

    The interaction between performers and their audiences is what sets YouNow apart from other buzzy livestreaming services such as Periscope or Meerkat. The average mobile session length on YouNow is about six minutes. The average mobile broadcast length is about 18 minutes.

    The average mobile session length on YouNow is about six minutes. The average mobile broadcast length is about 18 minutes.

    Each YouNow broadcast has two main features: a window where the broadcaster livestreams himself or herself, and a chat window, where users interact with broadcasters. YouNow lets its users buy into a currency called Bars. It lets users buy virtual goods — 50 thumbs up, for example — that they can give to their favorite broadcaster to help them trend. They can also pay to send messages to YouNowers that get sent to the top of the chat window, so both the YouNower and the rest of the viewers see it.

    "What makes a great YouNower or a great live broadcaster is the ability to interact in almost a performance setting with the audience live and feeling very comfortable," Sideman said. "It's not trivial to do. And it's not for everyone. But if you are very good with people, and if you are not very inhibited, then chances are you would be pretty good on YouNow."

    Sideman is no stranger to the user-generated media broadcast on YouNow every second of every day — in fact, he basically went to school for it, majoring in filmmaking and then attending graduate school for interactive telecommunications.

    "In my mind, it's always been a holy grail to allow users to create media," Sideman said. "And the more real time the technologies became, the more it became clear that live is going to be really huge."

    Sideman thinks this is the right time for an app like YouNow because people have never been more comfortable around video, and people are trying to make a name for themselves online.

    younowThe collision of these trends led Sideman to start YouNow in 2011.

    If you still can't quite wrap your head around what YouNow is, Sideman put it best:

    "It's a global platform for self-expression," he said. "It's like YouTube, but live. The secret sauce is that it's all about the audience. And the audience feels like even though it's a one-to-many, it feels like a one-to-one interaction."

    When you use YouNow's platform, you can see the top trending broadcasters as well as which of your friends are online and a number of trending tags, including things like #dance, #truthordare, and #advice.

    The theory behind YouNow is that people crave social interaction in every form. Teens, a demographic with a lot of time on their hands, as suggested by the ever-popular #bored hashtag on YouNow, do everything from talk to the camera, eat dinner while they talk to their community of followers, dance, and even livestream themselves sleeping (For a more thorough explainer on YouNow's fascinating #sleepingsquad, I defer to BuzzFeed's Katie Notopolous).

    Last year, Vine star Shawn Mendes released a single on YouNow. Tumblr star and internet personality Tyler Oakley raised half a million dollars on the crowdfunding website Prizeo for The Trevor Project, a charity that raises awareness for LGBT youths at risk of suicide, and linked to his YouNow account in a sort of modern-day telethon.

    Adi Sideman

    Even parents are getting in on the broadcasting aspect. Darrell Tousley, better known by his YouNow name Flippindad, is the parent of YouNower Flippinginja, his son Jared. With two broadcasters and two cameras in the same house, Sideman said it's like watching a reality TV show.

    "We never had imagined half of these use cases," he said. "And by giving governance and control over to the community, we provide a platform upon which they can self express in ways they want."

    YouNow makes money by taking a cut of users' in-app purchases every time someone buys bars to tip their favorite performers.

    "It really enhances the ability to communicate," Sideman said. "It's a classic freemium model."

    YouNow's partner program lets broadcasters make money, and Sideman said many of them report making more on YouNow than on YouTube.

    younowFor the Merrell twins, YouNow has come naturally. After being on the platform for about nine months, the high-schoolers have amassed 76,000 YouNow fans in addition to their 250,000 YouTube subscribers. While they say they do make "a good amount" of money from YouTube and YouNow alike — "the more and more viewers we get on our broadcasts the more money comes in," Vanessa said — they've never been motivated by money. The sisters genuinely love interacting with their community of fans.

    "We don't just read the comments," Vanessa said. "We get to play games with our fans, we get to see where they're from. We always ask, 'Where are you from? Who's watching us right now?' And we get answers from all over the world. It's just amazing to see all these people from around the world come together and chat with each other and just have fun.";

    David Pakman is a partner at the venture-capital firm Venrock, which led YouNow's $7 million Series B round of funding in August. He says what drew him to YouNow is how inherently social it is.

    "What makes YouNow so different from and more valuable than some competing livestreaming apps is that many of those are utilities used ​to broadcast, not media creation platforms rooted in social discovery," he said. "The fact that the camera faces IN as default, not out, suggests how valuable we believe conversation is to the success of this format."

    The Merrells, who are in high school with plans to attend college, say YouNow has become part of their weekly routine.

    It's "like posting a video every Tuesday on YouTube," Vanessa said. "Our fans expect us to be there."

    They livestream every Tuesday, singing covers of songs that fans request, playing games with viewers, answering their questions, and giving advice to people who want it.

    "We play games like Hangman. We'll start humming a song or playing a song on guitar and they guess the song, and whoever guesses the song first gets to pick a letter for Hangman. We also do charades and trivia," Vanessa said. "Every broadcast is different."

    David PakmanIn addition, the twins have been cast in "Jane the Virgin," a sitcom on the CW.

    "We were the evil twin stepsisters, who were very mean," Veronica said. "It was way out of our personalities! It's not who we are."

    While the Merrells got that role through their agent, they say they've also gotten opportunities through YouNow and YouTube.

    At the MTV Video Music Awards last year, they said, YouNow and MTV had a partnership in which YouNowers were livestreaming on the red carpet, singing covers of their favorite artists' songs so the artists could watch.

    "It was a really cool experience," Veronica said. "A lot of people got to perform in front of their favorite artists."

    YouNow, which has raised $11 million from Venrock and Union Square Ventures, is still growing. Sideman said in the past year the company had gone from 15 employees to 40, with plans to continue to expand.

    "We love products heavily adopted by teens, since they predict the future of consumption, and the organic global teen adoption of YouNow is just amazing to watch," Venrock's David Pakman said. "There will be tens of millions of simultaneously broadcasters and viewers on these platforms within months."

    SEE ALSO: Every day, 7 million people check out a nostalgia app run by 19 people

    Join the conversation about this story »

    NOW WATCH: 5 hard-to-find iPhone tricks only power users know about

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    warby parker dave gilboa neil blumenthal

    Warby Parker has raised $100 million to help it expand its brick-and-mortar outlets, the Wall Street Journal reported Thursday.

    This follows previous reports last month that the eyewear company was raising more money at a billion-dollar valuation

    Citing "a person familiar with the company's finances" the Journal reports that the new funding values New York-based Warby Parker at $1.2 billion, doubling its 2013 valuation of $500 million and making it a part of a growing group of private tech companies with billion-dollar valuations known as "unicorns."

    The new round of funding was led by T. Rowe Price. Prior to the new cash infusion, Warby Parker had raised $115.5 million since its 2010 founding. 

    Warby Parker co-CEO and co-founder Dave Gilboa  told the Journal that Warby Parker is not yet profitable, though he said that sales continue to grow. Currently, Warby Parker owns and operates 12 physical storefronts in 9 cities in addition to its online store. 

    Here's what Warby Parker's SoHo store looks like:

    warby parker soho

    And here's a look at Warby Parker's online storefront, where you can buy frames for less than $100:

    warby parker

    The new funding will allow it to expand to 20 brick-and-mortar storefronts. About half of Warby Parker's 500 employees work in its physical stores.

    Right now, you give Warby Parker your prescription and then they take that, along with your choice of glasses frames, to make you a pair of glasses. But soon Warby Parker could be taking the prescription aspect of the process and moving it in-house. Gilboa told the Journal his company is "investing in technology to let customers conduct eye exams using just their mobile phones."

    The company has no immediate plans to exit, Gilboa says, adding: “We have a very healthy balance sheet at this point that gives us a lot of flexibility.”

    SEE ALSO: Teens are going crazy for YouNow, a livestreaming app with 100 million monthly user sessions

    Join the conversation about this story »

    NOW WATCH: 3 cool Google Sheets hacks that will make your charts better

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    Rumors swirled yesterday that Salesforce, the $40B SaaS behemoth, had been approached by an acquirer. Dan Primack speculated this morning that Oracle and Microsoft are the likely candidates.

    If Salesforce were to be acquired, the SaaS ecosystem would change substantially.

    Looking at the market caps and the balance sheets of the major enterprise acquirers, Microsoft could certainly acquire Salesforce outright in cash. Oracle would likely acquire the business in a cash & stock transaction.

    Company Market Cap, $B (2015-04-29) Cash & Eq., $B
    Microsoft 398 95
    Oracle 211 44
    IBM 172 9
    Intel 156 15
    SAP 91 5
    Salesforce 49 1
    VMWare 38 7

    Most importantly, the number of large market cap companies capable of acquiring substantial SaaS startups would decline. In the past ten years, Salesforce has been the second most active acquirer of next-generation enterprise companies at greater than $100M, tied with IBM and second to Oracle.

    Salesforce acquires more frequently than most others, but their median purchase is smaller, about $400k compared to roughly $1B for the others. SAP is an outlier because of their Concur, SuccessFactors and Sybase acquisitions.

    In terms of total transaction value, Salesforce has spent $4.2B in the past five years in acquisitions greater than $100M, tied with Dell and VMWare. Microsoft didn’t make the list because they’ve spent about $1.5B in the last five years on Yammer, Acompli and Sunrise.

    Salesforce is squarely in the middle of the pack when it comes to very large acquisitions, in this case ExactTarget at $2.6B.

    If Salesforce were to sell, the M&A landscape in the startup ecosystem would lose an active acquirer.

    SEE ALSO: Here's the latest Silicon Valley gossip about the rumored acquisition of Salesforce

    Join the conversation about this story »

    NOW WATCH: How to prevent people from stalking you on Facebook

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    Dufl, a startup that launched Thursday, aims to eliminate the pain of packing by removing the traveler from the equation almost entirely.

    Here's how it works:

    • Download the Dufl app and sign up. After you request a special Dufl suitcase, it will arrive at your door ready to pack.
    • Pack the suitcase with anything you think you might need on your forthcoming trips.
    • Mail the packed suitcase to Dufl's central storage facility. Dufl has partnered with FedEx, which will pick up the suitcase. Once it arrives, Dufl will take inventory of all of your clothes and take photographs for your own reference on their app.
    • Request a suitcase when you book your trip. The app lets you pick which clothes you want on a particular trip, which will then be expertly folded and is guaranteed to be waiting for you in whatever city and hotel you're staying.
    • Return the suitcase to Dufl via FedEx. Your clothes will be transported back to Dufl's facility, where they will then be washed or dry cleaned and stored for your next trip.


    Your clothes won't, however, be returned to you. You'll only see them on your next trip. Dufl CEO Bill Rinehart doesn't foresee much separation anxiety between Dufl users and their wardrobe, however.

    It is "soon outweighed by the convenience," Rinehart says. 

    Rinehart notes that Dufl allows a lot of flexibility, letting users to remove or add any piece of clothing to their Dufl wardrobes at any time via a suitcase shipped to their home.

     "A user doesn’t have to be away from his clothing any longer than he wants to be," Rinehart says.

    DUFL 2

    The storage service runs $10 a month, and each bag sent to your destination costs $99 roundtrip – including the cleaning and repacking.

    Rinehart envisions Dufl's users to be people who travel by plane, most often for business. Dufl is a solution for users who already have clothes they only wear on the road. Rhinehart said some customers are actually buying special clothes just for their Dufl wardrobe.

    He notes that when you take into account things like dry cleaning and checked bag fees, that $99 roundtrip fee doesn't look too bad.

    Rinehart is no startup newbie. He's launched several projects. He created Dufl because he was fed up with the demands that packing and dealing with luggage placed on him when he was traveling. The company has already raised $2.5 million in seed funding from private investors and expects to raise more capital this year, according to Rinehart. 

    SEE ALSO: 20 places you should visit before they disappear

    DON'T FORGET: Follow Business Insider's Lifestyle page on Facebook!

    Join the conversation about this story »

    NOW WATCH: How To Pack A Suit So You're Not A Wrinkled Mess When Traveling

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    Daniel Ek Spotify Illustration

    Spotify has raised $350 million, sources tell CNBC. Goldman Sachs participated in the new funding.

    Previously, Spotify has raised $537.8 million from investors including Kleiner Perkins, Fidelity Ventures, and Technology Crossover Ventures.

    Last month, the Wall Street Journal reported Spotify was close to closing a $400 million round of funding from Goldman Sachs and Abu Dhabi's sovereign wealth fund. Spotify was most recently valued at $8.4 billion.

    Spotify has yet to confirm the new funding. 

    The news comes at an interesting time in the music streaming space. On Friday, music streaming site Grooveshark shut down after spending years tangled up in legal battles with music record labels.  

    “We started out nearly ten years ago with the goal of helping fans share and discover music," the company said in a letter to users on its homepage. "But despite [the] best of intentions, we made very serious mistakes. We failed to secure licenses from rights holders for the vast amount of music on the service. That was wrong. We apologize. Without reservation.”

    In addition, Jay Z's music streaming service Tidal has recently faced criticism. The music streaming service, backed by artists like Madonna and Kanye West, plummeted down the App Store charts. It had been ranked within the top 20 free apps in the US Apple App Store, but has since fallen to outside the top 100. Jay Z spoke out against the negative press Tidal has received in a tweetstorm earlier this week.

    We reached out to Spotify for comment and will update this story when we hear back.

    SEE ALSO: Warby Parker just raised $100 million at a $1.2 billion valuation

    Join the conversation about this story »

    NOW WATCH: Why battery technology is still one of the biggest challenges for engineers

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    Don Harrison Headshot   External Events

    Over the years, Google has acquired more than 180 different companies. 

    On its top ten acquisitions alone, it has spent more than $24.5 billion dollars

    That's a lot of money, but Google has learned how to make the most of those purchases. Time Magazine recently wrote that the company had "perfected" the Silicon Valley acquisition, in part because its so good at retaining talent.

    Time found that two-thirds of the 221 start-up founders that accepted jobs at Google between 2006 and 2014 are still with the company today. 

    Business Insider recently got to chat with the man who's been in charge of Google's acquisition process since January 2013: VP of corporate development, Don Harrison. 

    In our interview, Harrison spoke frankly about how Google thinks about mergers and acquisitions and why it thinks that focusing on founders is so important. 

    Here are some highlights of what we learned:

    • Google thinks about acquisitions very broadly. If a technology company does something that improves people's lives, will be used daily, and can scale, it's fair game — whether it makes robots, satellites, or ad products. 
    • That's what makes Harrison's job so rewarding: He is constantly pushed outside of his comfort zone to learn about new technologies. 
    • One of things that's unique about Google's M&A process is the big emphasis it puts on a company's founding team and whether or not those people are a good fit for Google. The company wants entrepreneurs who are intellectually curious, who are willing to start from the bedrock of an idea and "reason up from there."
    • That means that teams go through a pretty rigorous vetting process. Founders of companies that Google might want to acquire always sit down with CEO Larry Page and product VP Sundar Pichai before any decision is made.
    • Although the company first looks at whether an acquisition could help it achieve its overall product strategy, it has rejected potential deals because of a company's team.
    • The time to talk to Page and Pichai is important the founders as well as to Google. Because valuations in Silicon Valley are so high these days and public marketing is hot for tech startups, Google also lures companies that are otherwise very successful independently into joining it by offering resources, autonomy, and the promise that Google is a very patient company. Its $3.2 billion acquisition of Nest is the perfect example. 
    • The company does regular, 90-day follow-ups on all of its deals, big or small, to ask questions like, "How are we doing against our original goals? How we are doing on metrics of retention? How we are doing on getting you the resources you need to succeed?"
    • Overall, Google is proud of its employee retention, and has a bunch of people who came in through an acquisition that are still with the company, in new roles. 
    • Although Harrison wouldn't say exactly what areas Google is looking to acquire in, he said the company is focused on mobile and that he's excited about artificial intelligence.
    • Are you a startup that wants to get on Harrison's radar? Focus on your product first, but ultimately get an intro through a mutual connection.

    Here's a transcript of the interview, lightly edited for clarity and length:

    BI: Tell me a little bit about how you got into your current role.

    Don Harrison: I’ve been in this role for what’s approaching three years and I’ve been at Google now more than 10 years. My experience in M&A goes back right to the very beginning, when I joined as a lawyer in 2005, but I’ve represented Google all the way back to 2003, as outside council. I had done all of our early M&A deals — applied semantics, blogger, urchin, all the ones that were sort of pre-IPO — and in the process of all that, including doing the initial public offering itself, [role] David Drummond asked me to join, and now it’s ten years later. And I’m wondering how so much time has flown by.

    waze ceo noam bardinBI: How does Google find possible acquisition targets?

    DH: Google is a networked company and it’s definitely a networked process. Our best acquisitions come in through a clarity-of-product focus.

    Normally, we have a team working internally on a project, and they have a pretty clear insight on the kind of products that they want to build, and the kind of adjacencies that would help make that product or platform a success. Those people understand the technology, have a clear product vision, and are starting to understand the marketplace, mainly by looking at what other competitors do.

    And so a dialogue starts to happen. Either we will surface ideas to them, or they will come to us, and say, ‘Hey, we’re really interested in this space, can you guys do a bit more work identifying key companies.’

    Then often it’s strategic, right? A specific company will come into play, we’ll hear rumors that X or Y are talking to a company, and that piques our interest in that company as well.

    BI: Once you’ve found a company that you think would be a good fit, what are the next steps?

    DH: My team, the deal sponsors, and Google’s senior executives sit around the room to really decide whether or not this is something we should do. The first thing we always wrestle with is product strategy. Once we’ve really established our product strategy, we ask ‘Does this company fit this product strategy?’ Does it exemplify the best aspects of what we think is the best product strategy?

    And then the third thing we get to immediately is, let’s talk about the team. Let’s talk about the entrepreneur, the leaders of the team, their bench. We’re very careful about looking deeply into the company and knowing the software engineers that work for them, the key talent that works for them.

    nest larry pageHow do you think Google’s M&A process is different from that of other companies?

    DH: The first thing I’d say — and it’s kind of our idiosyncrasy — is how much we focus on leadership and the team.

    We interview deeply into the company — we try to create as many interconnections as we can during the discussion process, between senior leaders at Google and senior leaders at the company we’re trying to acquire. Nearly every deal of size that I can think of, Larry had spent time, Sergey had spent time, Sundar Pichai had spent time with the leaders that we’re bringing in to make sure that it’s a good fit.

    I think about Waze … Noam Bardin was a great leader at Waze and has always proved to be a great leader at Google. But before the acquisition it was essential to find time for he and Larry to sit down, and he and Sundar to sit down, and make sure they were on the same page.

    BI: What qualities does Google look for in an entrepreneur?

    DH: One of the first things I look for is whether they reason from first principles. Sometimes you talk to people, especially industry veterans, and they talk like, ‘This is the way we’ve always done it. This is the way we keep doing it.’

    And then sometimes you meet entrepreneurs who, when you ask them a question, they really do think about it from the bedrock. Like, ‘Okay, we need to build a connected home experience: What should a good connected home experience be?’ And then they reason up from there.

    Larry thinks that way, Sergey things that way. We like entrepreneurs who think from first principles and are intellectually curious.

    BI: Would you reject a deal because of a founder that’s not a good fit?

    DH: When you get to a point where that part of the discussion isn’t good — we’re saying this isn’t the right person, or this isn’t a leader that we think fits within Google — that’s not a great moment. It hurts my ability to advocate for a deal. And often, I won’t advocate for a deal in that situation.

    However, sometimes you can be convinced by how the company fits Google’s product strategy. And then our job is to find a leader to step into those shoes. Maybe the chief product officer of the company, or maybe on of the senior engineers that we’ve identified, go through a diligence process, or maybe we have someone internally we can bring in.

    dropcam ceo greg duffyBI: How do you appeal to entrepreneurs when you’ve found a company you want to acquire?

    DH: Right now, Silicon Valley is awash in extremely high valuations. There’s a ton of capital available and I think that the public markets are also rewarding technology companies.

    So, how do I compete not only with the private and public markets rewarding companies with high valuations, but also a whole bunch of other motivated companies willing to pay high prices, or higher valuations?

    We compete in our ability to sit down with a founder or an entrepreneur, like Tony Fadell from Nest, and say, ‘Look, we can offer you our resources so you can initiate your product vision faster, we can offer you autonomy, and we’re patient. We’re willing to make big bets. We’re willing to put capital behind what it is you’re trying to do and then we’re willing to just leave you alone for a little while and let you do your thing.’

    And I find, especially when talking to companies that are succeeding as a stand-alone companies, that that has appeal. Generally they like that vision. A lot.

    Of course, that doesn’t make sense for all deals. We bought a company called Adometry which was meant by design to fit in with our analytics team. We bought Dropcam which was intended by design to fit in with Nest’s product portfolio.

    larry page toothbrushBI: Talk about the “Toothbrush Test” Larry Page and Google use to think about acquisitions.

    DH: We think about M&A very broadly. I think there are other companies that have a much narrower focus than we do. We bought a satellite company, an AI company, and a core ad product company in the same year.

    If we find technology — at least we narrow ourselves to technology! — that we think improves people’s live, will be used daily, and can operate at scale, we’re pretty interested in it, regardless of whether it’s med-tech, satellites, machine learning, or robotics. We really do take the Toothbrush Test seriously.

    BI: That’s a lot of possibility! Do you have to know something about everything?

    I definitely get stretched!

    Advice I always give people is, ‘Have a job that puts you outside your comfort zone.’ And I definitely get put outside my comfort zone every single day. You know, luckily I am curious and I love technology.

    But no, I’m not an expert in all these areas. I manage both an integration team and a corporate development team. The most senior people on my corporate development team are all assigned to each of the main spaces. So, for example, there’s Dave Sobota who knows the ad-tech space inwards and out. Or Maria Shim on my team, who focuses on the conscious home experience, so she’s the expert on technologies that would work together and compliment what Nest is trying to do. And that repeats itself across the organization.

    skybox imagingI do tend to get dragged into the ‘Larry Things.’ Larry will ping me and say, ‘Hey, I’m really interested in something — like satellites — and then I get stretched. But I love that part of the job.

    My team has great people on it that can get up to speed. And I work a group of technical evaluators both throughout Google and Google X but also outside the company. So when I need to get up to date in a space, I can always reach out there. I’m always shocked, by the way, about how amazing Google’s bench strength is. If I put out feelers, I will quickly find someone.

    One of my favorite examples is James Kuffner, who helped us out with a lot of our automation acquisitions that we were doing for Andy Rubin. James Kuffner was actually working for our Android team, but I started to dig through some resumes and realized that he was a ten-year expert at a Carnegie Mellon robotics. That sort of repeats itself across the organization.

    BI: What areas are really exciting to Google right now?

    DH: It’s always difficult to answer this question. I can’t tell you exactly what I’m looking at, but obviously we’re focused on the mobile ecosystem.

    Another thing I’m interested in which is just starting to take off, is this sort of ‘intelligence layer’ that’s across everything. I think we’re still a long way from artificial intelligence and machine learning delivering on the science-fiction value proposition that we all think of, but I think you see Google Now or Siri or Cortana as evidencing the beginnings of turning your devices into really smart assistants that you can communicate with. So I’m really excited about that.

    And obviously I’m sort of excited to learn about the next thing that we’ll do that I don’t expect. Like satellites or what Larry’s going to think of and I’m going to be completely unprepared for and have to stretch in order to learn all about it.

    andy rubin google androidBI: How does Google evaluate whether an acquisition has been successful?

    DH: Acquisitions succeed or fail based on integration, particularly when we are trying to do something tricky, like making sure the team stays autonomous — syncing to get the advantage of Google’s resources and yet being kept separate. That’s a complicated process …

    We do regular, 90-day follow-ups on all of our deals, big or small, where we can have a dialogue about ‘How are we doing against our original goals? How we are doing on metrics of retention? How we are doing on getting you the resources you need to succeed?’

    And it actually isn’t for the purpose of score-carding — tracking data is always interesting and we will track data — but it’s not like we’re trying to give ourselves credit or beat ourselves up over a deal that may not match.

    We literally sit down and figure out how are we getting the best value from this team and technology that we’ve invested so much to bring into the company. And those meetings have been fantastic and are a huge part of — I think — why we’re succeeding.

    BI: Do founders stick around?

    DH: You win some, you lose some.

    We’re bringing in entrepreneurs that by their very nature are very independent, but we’ve done a very great job of making sure they have a good home here. We have a lot of people who have come in and then their mission has come to an end, and they move on within Google to do something completely different.

    Andy Rubin came in to start up Android, and he stayed for about 10 years, a lot longer than any of us expected him. Another that pops to mind also is a guy named Mike Cassidy. We brought him in through an acquisition [of his company, Ruba], and now he’s leading Project Loon. Victoria Ransom came in [through the acquisition of Wildfire] and she’s on leave but then will transition over to something new. We always look for ways to plug these entrepreneurs into different projects.

    BI: Have you found that there are things that surprise people who are coming in from an acquisition about working at Google?

    DH: I think there’s always a dislocation when you go from being a CEO of a small company to coming into something larger, but we work really hard to make sure that the process goes as seamlessly as possible.

    I do think our culture fairly unique. It’s a pretty open — even at this point in our development, we’re pretty unhierarchical, with well-distributed information. I think entrepreneurs hope it will be like that when they get here, and then they find out it is like that.

    [Nest CEO] Tony Fadell always says that his biggest surprise was that we delivered on everything that we said, when myself, Sundar, Larry described how we would operate when he came in.

    And a little part of him thought, ‘Ok, look, we all hope it will work out this way, but the truth will be somewhat closer to a typical big company experience,’ and I think we were successful in delivering what we promised.

    And that actually takes a lot of work. You think of autonomy that’s something that is easy, but it’s not — it’s hard. It’s not like you’re buying them and leaving them separate, you’re trying to give them all of the advantages that Google has to offer, and connecting our systems is difficult.

    BI: Is there anything that startups can do to get on your radar?

    DH: Founders should focus on their product first. They should get their company running. There is no need for them to have discussions with people like me or even to raise their heads up from the needs of their own company until they get to the point where they’re starting to be able to realize on whatever product vision led them to do whatever crazy thing they’re doing.

    But once they start to get that traction, the chance to have a dialogue, the chance for me to get excited about something, I think that’s a good thing for people to start thinking about. Not to distract themselves with too much of that, but starting to think about the broader community and how to start having conversations with the broader community.

    They need to take advantage of networks. It is much better to have your sponsoring VC or someone you know at Google introduce you than try to cold call. So use your network. When you’re ready to have that conversation, figure out the best way to get in contact. Because we all have filters to allow us to deal with the massive amount of information out there.

    BI: Google is known for snapping up a lot of companies. Is there any sort of internal expectation of that now? Like, ‘Oh, we only acquired X companies this year? We must not be looking far enough, or big enough.’

    DH: I worry about this kind of stuff, of course, but no.

    If it so happens that everyone of our product people were completely happy with their internal development efforts and how their products were evolving and succeeding and we went a year without doing any deals, no one would think positively or negatively about that.

    Whenever we get asked a question about buy, we always run three scenarios — buy, build, invest — side by side. Often, even if I’m asked to look very closely at a company, just by virtue of that I’m also being asked to think about whether a partnership or internal investment would make more sense to the acquisition.

    So, we’re always talking about outside companies. Sometimes, we’re persuading people about, ‘Look, it’s actually better for us to think about doing this internally.’ And Larry and Sundar completely welcome that dialogue.

    I would be in trouble if I wasn’t bringing ideas forward. I won’t be in trouble based on the number of given deals in an year.

    BI: After Twitter's last earnings, people were saying that Google should acquire it. Thoughts?

    I can’t comment on that. But I appreciate the question.

    SEE ALSO: How a quirky 28-year-old plowed through $150 million and almost destroyed his start-up

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    fred wilson

    Legendary venture capitalists Ron Conway and Fred Wilson kicked off TechCrunch Disrupt NY on Monday morning.

    In a talk moderated by TechCrunch's Kim-Mai Cutler, the two venture capitalists talked about government regulation of tech companies like Airbnb, and how tech can have an impact on philanthropy and local community.

    In San Francisco, a group called Share Better SF — composed of residents, housing activists, and neighborhood organizations — is trying to get a measure on the ballot in November to put a cap on vacation rentals at 75 nights per year. Hosts would receive steep fines for not complying with the rules, should they be made law. 

    Perhaps unsurprisingly, both Wilson and Conway seem to view the measure as anti-innovation.  “The notion that Airbnb is part of the problem is false. It’s just a part of the argument from people who don’t understand the sharing economy," Conway said. "Why should the government be involved in that?"

    The new measure, were it to be passed, would potentially be a threat to Airbnb's business model.  In the face of government regulation, Conway and Wilson had different opinions on whether a company like Airbnb should hand over anonymized data about users to try assuaging governments.

    “Private companies should not be forced to hand over data about their users,” Conway said.

    But Wilson disagreed, saying that there's a limit to what companies can do without violating the trust they have with their users, but the more that companies like Airbnb can be up front with anonymized data without outing any specific user, the better.

    "If they did hand over the data they could resolve a lot of concerns. Companies could use data to make clear that the fears are unfounded," he said. "I would encourage companies to share data as much as possible.” 

    Airbnb initially fought a  subpoena issued by the New York attorney general last May. The company ended up anonymizing and submitting data about its New York City rentals. In October, New York Attorney General Eric T. Schneiderman released a report called "Airbnb in the city." In it, he concluded that 72%, or more than 25,000 of short-term rentals through Airbnb seem to violate New York zoning regulations and other laws. 

    Other big-name tech companies, like Slack, have released transparency reports without prompting. In a blog post Sunday, Slack's vice president of people, policy and compliance, Anne Toth said: "Hard as it is to believe, to date Slack has not received a single request for user data or a single content removal request."

    SEE ALSO: New York Attorney General: Nearly 3 Out Of 4 NYC Airbnb Rentals Are Illegal

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    Alex Polvi

    It's so predictable, you can set your watch by it. 

    First, a company releases a product so popular that it changes the industry (like the iPhone). Then, there's a backlash, which results in a competing product billed as being more open than the original product (like Android). If that competing product finds its market, the two often find some kind of competitive equilibrium.

    Ultimately, users have more choices, which is a good thing.

    That's what's going on right now in the world of software containers, which sounds about as much fun as watching paint dry, but is growing fast and has the potential to be a huge market. It's all about helping companies get tremendous cost savings by running their IT infrastructure more efficiently. Even Microsoft has gotten in on the fun with its own container technology.

    Docker, the company that essentially invented the market, recently raised a monster $95 million round of financing and is maneuvering to corner the market by selling not only the core container technology, but also all the other stuff you need to make it work at large scales.  

    In our metaphor, Docker is the iPhone. 

    The competition comes in the form of CoreOS, which used to be friends with Docker before the two companies had a public falling-out last year. CoreOS thought that Docker was exerting too much control over the container market, and so launched "appc," a competing standard that CoreOS promises will be driven less by any one company and more by the community of developers who use it. 

    In our metaphor, appc is Android. 

    When last we heard from CoreOS, it had raised its own round of funding with participation from Google Ventures.

    At today's CoreOS Fest event in San Francisco, the company announced that Google, VMware, Red Hat, and Apcera have all signed on to support appc in their own software. That means developers can use either Docker or appc at their own preference in any of those clouds. 

    CoreOS CEO and co-founder Alex Polvi says that his company is selling the idea of "GIFEE," or "Google's infrastructure for everybody else." Google has long been using containers to maximize its own efficiency behind the scenes, and Polvi says the time has come for everybody else to do the same. 

    Appc supports both Docker containers as well as its own, which means that developers don't have to choose. They can just use either. It means there's no reason for vendors not to adopt the standard. 

    Docker's momentum will be hard to stop. But a bunch of big technology companies getting together to provide a viable alternative should give the red-hot startup pause. 

    SEE ALSO: Google just bet big on this little tech startup

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    bill maris google ventures

    Bill Maris, a managing partner and the president of Google's investment fund Google Ventures, has backed a number of companies, ranging from science and oncology startups like Flatiron Health to more consumer-facing services like Nest and Uber.

    Perhaps unsurprisingly, he seems to think Uber CEO Travis Kalanick gets a bad rep in the press. 

    "How we judge startups should be how they respond to challenges," Maris said. "It's impossible not to have issues in growth." 

    Onstage at TechCrunch Disrupt on Tuesday, Maris also told his favorite story about Travis Kalanick. 

    When Google Ventures was thinking about investing in Uber's first round of funding, Maris went to go meet with Kalanick to kick the tires and see if it would be a good fit for Google Ventures to invest in his company. 

    "I said, we really think we can help and want to be part of this," Maris recalled onstage. "We asked, what does it take to take it off the table? We don’t want to get into an auction."

    Kalanick told Maris and his colleagues: Here’s the price we're looking for. Here’s what I want this round to look like.

    "We shook on it. Travis was good for his word and that's what we look for in entrepreneurs," Maris said. "He did not come back to the table and say, 'we have an offer for 15% more, 20% more,' and he absolutely could have. It really speaks to the way he runs the company."

    Google Ventures invested in Uber's $258 million Series C round of funding in August 2013 and its $1.2 billion Series D round of funding in June 2014.

    SEE ALSO: Google executive says it's possible to live to be 500

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    Chris DixonChris Dixon, a venture capitalist at Andreessen Horowitz, is optimistic about New York's tech scene.

    Onstage at TechCrunch Disrupt on Tuesday, Dixon predicted that 10 Silicon Alley companies will be worth $1 billion or more in the coming three to five years.

    On the heels of Etsy's successful IPO, this statement doesn't come as much of a surprise. And there already are a few New York tech companies that have reached billion-dollar valuations, like coworking startup WeWork and MongoDB. 

    But it's still some positive words for a tech market that's often criticized for being smaller than Silicon Valley.

    In New York, "There's a certain minimum critical mass you need, and I think we’re getting there," Dixon said. "It just takes time. I think of it as, Silicon Valley has had over 50 years of developing, and the other cities that are most relevant right now are New York, Los Angeles, and Seattle." 

    Besides talking about the potential of New York's tech scene, Dixon also talked about his investment thesis.

    He says that the best way to figure out what the new trends in tech are is to look at what hobbyists and developers are excited about. "What the smartest people do on the weekends is what the rest of people will do in 10 years for work," he said, referring to things like bitcoin, virtual reality, drones, and 3D printing. "They’re smart and gravitate toward interesting things. That has historically been a very good indicator of where the future’s going."

    SEE ALSO: Which billion-dollar 'unicorn' startups are at most risk of dying? Here's what some data suggests ...

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    Maybe I was a bit overzealous, suggesting a company could reach $1B in value without any full-time employees… but startup value per person (whether measured in users, or dollars, or some other way) is rising fast. Why?

    Another way to look at the question: why do companies of more than one person exist at all? Why did we need firms with many employees to produce valuable things?

    In the 1930s, the economist Ronald Coase theorized that companies exist because the cost of doing business inside a firm is less than the cost of doing business with parties outside of the firm. Trust, shared culture, more information, and other factors made it so you were more likely to trust an accountant who worked for your company than one who worked for someone else.

    So, if the cost of doing business with outsiders falls, firm sizes might shrink – dramatically. As the quality of outside services goes up, and their way of doing business becomes more transparent to customers, and many companies who work together share a common culture (including communication tools, norms of behavior, and other patterns), companies might use outside partners for functions they’d have previously run themselves.

     Those companies can focus on what they do best – and that advantage might be delivered (as it was in the cases of Instagram and WhatsApp) by a tiny team. Maybe, one day, by a single person.

    This trend is not new. Bloomberg, in its earliest days, outsourced its legal and accounting functions entirely. That practice – of focusing a company’s resources where they can do the most good – is clearly a winner.*

    Ideally, a company might want to outsource all the functions where they think “we need to do this, but we won’t win by doing it well.” In the past, that was hard. If you wanted your website to stay up, you had to have a data center operations team, buying boxes, racking and stacking, operating and troubleshooting and wearing the company t-shirst. Today, AWS, Digital Ocean, and other cloud providers do all that until you’re ready to claim some unique advantage by owning it yourself.

    Several successful startups have emerged in traditional “back office” areas – ZenPayroll, Zenefits, Xero, etc. – where the job needs to be done right, at a minimum of distraction to a startup, but where success in these areas is unlikely to make a startup succeed.

    unicornAs this trend continues, the platforms that serve startups can go up the stack to ever more valuable functions, like payments (Stripe) or maps (Mapbox). 

    That’s why our fund, Bloomberg Beta, invested in Layer, which provides a platform for communications – a service essential to a startup’s success. The stakes are high for Layer; errors in communications with customers can be costly for a customer. By the same token, having thousands of companies all build near-identical messaging stacks seems like an enormous waste of effort.

    Unsurprisingly, Layer has had enormous developer interest, which it has begun to serve. 

    Another platform that’s begun delivering mission-critical value to startups is AngelList – delivering capital from a network of investors. Even a one-person billion-dollar startup will likely need (at least a little) capital. It might make sense for that capital to come bundled with one or more of the services a startup uses…

    So today, Layer is taking the next logical step, putting together a fund to back companies that use its services. Our fund focuses on making the business world work better, so we backed Layer Fund I, to support companies that understand how to focus only on what they do best. (The fund is a Syndicate on AngelList – it’s only natural for one platform to support another, and this was also the easiest way to administer this new fund.)

    These are still early days in figuring out how to help founders stand on the shoulders of giants to get things done. The idea that communication with your customers might also deliver some of the capital you need to grow, at just the right time, could be a powerful one. We’re enthusiastic to see where this fund, and Layer, go. If you’re building a service on Layer, apply!

    Professors I respect explained to me that the data suggest the reverse – on average more people are working for big companies, and that the average firm size is getting bigger not smaller. I’m struggling to reconcile that with my observation that valuable startups are getting smaller and smaller. Maybe what we see here is a barbell: either you need enormous scale (in people, users, etc.) or you need to be nimble and make something valuable. The folks in the middle are the ones who falter. To deliver AWS, Amazon did need to become pretty big…

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    greg brockman stripe

    Stripe's fourth employee, CTO Greg Brockman, announced today that he will be leaving the payments processor Friday.

    Stripe is one of San Francisco's hottest startups, with a valuation of $3.5 billion as of last December. The company makes it super-easy for web site owners and app developers to accept payments via credit card and other systems, including Apple Pay.

    "About six months ago, I found myself in a strangely luxurious place: I’d successfully removed myself as a critical lynchpin for the company and could craft literally any role I wanted," Brockman said in his blog post detailing his departure

    "But the more that I explored, the more I realized: I was yearning to create something of my own."

    Brockman joined Stripe when it was still called "/dev/payments" and left school at MIT to join Stripe's founders Patrick and John Collison and their third mate Darragh Buckley. 

    While at Stripe, Brockman officially took on the role of CTO in early 2013, but it took him about a year and a half to define what that role was. Brockman returned to writing code to get a better perspective on the organization. 

    Brockman publicly backed Stripe's investment in cryptocurrency nonprofit, Stellar, last July, although Stellar has yet to gain the same momentum or growth as other cryptocurrencies like Bitcoin or money transfer protocols like Ripple.

    Six months ago, though, Brockman said he'd successfully removed himself from any critical decision-making so now he sees it as time to move on. Brockman told Business Insider that he has nothing to share about his plans just yet.

    "Right now I’m in a rare window. I haven’t yet placed myself in a new critical role, and I’m confident that Stripe is being left in great hands," Brockman said in his note. "If I don’t take advantage of this opportunity, I’ll always wonder what could have been."

    SEE ALSO: Soon, a 1-person startup will be worth $1 billion

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    Payal Kadakia Class PassClassPass is a monthly membership program that lets users pay a flat fee to take fitness classes at different gyms and studios.

    It's wildly popular in cities across the country, including New York City, where it was founded. Users seem to love it — and investors keep buzzing about it too.

    During ClassPass' Series B round of funding in January, investors gave the company a valuation north of $200 million. Onstage Wednesday at TechCrunch Disrupt, ClassPass Chief Executive Payal Kadakia was asked about whether the $200 million figure was still accurate.

    "That was earlier this year, and we've doubled since then," Kadakia told TechCrunch's Darrell Etherington. "You guys can do the math."

    The company has raised $54 million in venture capital funding since its launch nearly two years ago, but its valuation alone is just one metric for evaluating the company's growth.

    When asked about ClassPass's $60 million revenue run rate — a previously public number that elicited murmurs of surprise from the audience — Kadakia said ClassPass is seeing 20% month-over-month growth, and implied that the $60 million figure may be a little low.

    In addition to discussing her company's hockey-stick growth, including ClassPass's expansion to more than 20 cities in three countries, Kadakia also discussed the company that pivoted to become ClassPass.

    Before ClassPass existed, Kadakia, a world-class dancer, founded a company called Classtivity, a SaaS solution for gym studios to use for registration. But Classtivity never caught on with studios. Kadakia said onstage that she heard "crickets" when pitching Classtivity. 

    "Failure is an amazing data point that tells you which direction not to go," Kadakia said onstage Wednesday.

    Since pivoting, Kadakia says, ClassPass has paid out $30 million to gyms and studios so far, and in 2015 alone, it will pay out $100 million to its partners. ClassPass has booked 4.5 million gym studio reservations since its June 2013 launch and has 95% retention with its studio partners.

    SEE ALSO: How getting mugged and maced helped a world-class dancer save her struggling startup

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  • 05/06/15--13:10: Valuation as a scorecard
  • travis kalanick, ceo uber

    When you set out to build a great company, it’s hard to know how you are doing along the way. There does come a time when you know you’ve done it. Apple, Google, Facebook, Amazon, Salesforce, Tesla, etc got there. We know that. And the founders of those companies know that too.

    But two years in, three years in, four years in, it’s hard to know how you are doing. The market moves quickly. Customers are fickle. Competition emerges. Trusted team members leave. Your investors flake out on you. And so on and so forth.

    So entrepreneurs want something they can hang on to. They wants a scorecard. A number. Validation that they are getting there.

    And that thing is often valuation. If the “market” says you are now worth $1bn versus $500mm a year ago and $200mm two years ago and $50mm three years ago, then you are making good progress. The numbers tell you so. And it feels good.

    Valuation can also be used to compare how you are doing against your friends. Your YC classmate got $100mm and you got $200mm. You are doing twice as well as she is. That feels good, at least it feels good to you.

    Valuation is an entrepreneur’s scorecard. It has always been this way in startup land, but it is even more so these days when financings and the valuations are reported every day as the most important news items in the tech blogs. Tech blogs are the stock ticker of startup land. And entrepreneurs and everyone else around them watch the ticker waiting for the next “unicorn” to be printed.

    I hate the word unicorn. It’s using fantasy to describe something very much reality. But I don’t want to digress from the larger point I’m making to go down the unicorn rat hole. Just please don’t use that word around me. I will likely throw up and that won’t be pleasant.

    This obsession with valuation as the thing that tells you and the world how you are doing has a dark side. And that is because valuation is just a number. Unless you sell your business for cash at that price, valuation is just a theoretical value on your company. And it can change. Or you can get stuck there trying to justify it year after year all the while doing massive surgery to your cap table to sustain it.

    And the markets can move on you and one day you are worth $2bn and the next day your are worth $500mm. Did you just mess up by 75%? No. The market moved on you.

    The message of this post is don’t let yourself get sucked into a world where a number is your measure of self worth. Because you don’t control that number. The market does. And some days the market is your friend and other days it is most decidedly not your friend.

    Measure yourself on whether your employees are happy. Measure yourself on whether your customers are happy. Measure yourself on how much free cash flow your business is generating. Measure yourself on how your brand is known and appreciated around the world. Measure yourself on how your spouse and children feel about you when you come home from work each day. You control all of those things, at least to some degree.

    But please don’t measure yourself on valuation. It might make you feel good today. But it won’t make you feel good every day.

    SEE ALSO: Soon, a 1-person startup will be worth $1 billion

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    Robinhood cofounders Bhatt and Tenev

    Inspired by the 2011 Occupy Wall Street movement, Vladimir Tenev and Baiju Bhatt founded a no-fee trading app called Robinhood. They wanted to "democratize access to the financial markets."

    Robinhood launched in December as an iPhone and Apple Watch app. It lets people — primarily first-time investors — buy and sell stocks without being charged commission fees, which usually run between $7 and $10.

    Unlike regular trading, Robinhood is mobile-first. This cuts out the cost of paying human traders.

    On Thursday, Robinhood announced the company had raised a $50 million round led by NEA. Vaizra Investments joined the round with existing investors Index Ventures, Social Leverage, and Ribbit Capital, bringing Robinhood's total funding to date to $66 million. Previous investors in the company include Snoop Dogg and Marc Andreessen.

    The company will use the new funding to grow its team. The founders hope to double Robinhood's Palo Alto headcount of 30 employees by the end of the year. In addition, they'll be launching an Android app later in 2015.

    Robinhood will also begin expanding to international markets, beginning with Australia. Australians will be able to access US listed stocks and ETFs. A representative for Robinhood says the company is seeing "huge demand" from the country already.

    Robinhood users don't pay traditional brokerage commission fees, which Robinhood's founders see as prohibitive to new investors. The app's users also don't have to put down a minimum deposit.

    robinhood brokerage app 3

    "Imagine you're a first-time investor in your early 20s. You have a few hundred dollars — maybe a thousand dollars — to put in the market. You want to learn how it works. Seven to 10 dollars eats into that quite a bit," Tenev told us back in December.

    Robinhood follows a freemium model — it allows customers to buy and sell US stocks and ETFs, customize watch lists, place market orders, and track data in real time. Those looking for premium services like margin lending, however, will have to pay a fee.

    The company says that since December, it has seen over $500 million transacted through the Robinhood platform. It also says it has had "hundreds of thousands" of customers since its launch five months ago. One-fourth of Robinhood customers are first-time investors, and the average age of a Robinhood customer is 26.

    SEE ALSO: Acorns is an 8-month-old app that makes investing spare change dead simple, and it just raised $23 million

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    After selling his digital scrapbooking company ScrapHD to Michael's in 2010, Ross Petersen moved from his hometown of Chicago to Dallas to work for the huge arts and crafts company.

    But two years into his new job as Director of Digital Infrastructure at Michael's, Petersen started feeling a bit disenfranchised.

    "I was struggling to get Michael's to consider launching their crafts supplies online for sale," he recalls. "During my entire two year stint there they were doing $4.6B annually and they were selling zero dollars online." 

    So in early 2012, he packed up his things and left Dallas, moving back to Chicago with his sister, Katy Weade. Along with their brother Ryan Petersen and their former business partner Ab Fadel, Ross started working on a new company: Blitsy.

    Blitsy is an arts-and-crafts retailer that's a digital rival to longstanding brick-and-mortar companies like Michael's, Ross' former employer, and Hobby Lobby. For the first 14 months, the four cofounders bootstrapped Blitsy. "We were able to generate over 7 figures in revenue in under a 12 month period profitably," Ross says.

    We were able to generate over 7 figures in revenue in under a 12 month period profitably.

    From there, Blitsy pitched Chicago Ventures and received a $1 million seed round of financing  in February 2013. 

    On Thursday, Blitsy announced a new $3.6 million Series A round of financing led by Greycroft Partners, with support from Data Point Capital. Existing investors including Chicago Ventures, FireStarter Fund, Lakewest Venture Partners, Incisent Labs, and angel investor Brian Spaly of Trunk Club.

    Since launching in March 2012, Blitsy has grown from 4 to 30 employees. The company has launched over 600 brands on the website and categorically expanded from paper crafts, like scrapbooking, into every art category. For customers, Blitsy offers discounts on craft supplies, as well as a growing "inspiration" section. Blitsy also allows users to upload their own projects and content to share with other crafters. DIY videos sit next to items for purchase, which Ross says encourages sales.


    Blitsy's audience is 99% female, and though they see all ages on their website — "everyone from teens up through women in their 60s and 70s," Ross says. The average customer is between 35 and 55 years old. Both casual crafters and people who sell their wares on websites like Etsy use Blitsy to buy the materials they need to put together crafts. Ross says Blitsy sees lots of organic traffic from Pinterest, where people find a finished project and then use Blitsy to buy the raw materials to get that project done.

    Ross says Blitsy's central, Chicago location is strategic. "What's really special about us is we're not taking on inventory risk. We're able to basically work in real time with our suppliers," he says. "Once customers place an order with Blitsy, we file an order with our suppliers. Being centrally located in Chicago, all the customer orders come to us here in Chicago and then we consolidate that order into a single shipment, which brings additional savings to the consumer." 

    Blitsy is averaging 120% year-over-year growth so far. Once Blitsy gets a customer to buy once, they're "about 53% likely to buy from us again. And if they buy from us twice, they're more than 70% likely to come back," he says. "What we've been able to do is calculate the lifetime value of a customer, which far exceeds the acquisition costs of a customer." 

    And though he cites Michael's, AC Moore, and Hobby Lobby as Blitsy's main competitors, Ross doesn't see any of them as a clear leader in the arts-and-crafts ecommerce space right now.

    "Our vision is to become the new category leader and attack it from an online perspective," he says.

    SEE ALSO: Robinhood, an app backed by Snoop Dogg and Marc Andreessen that lets you buy and sell stocks without a fee, just raised $50 million

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    the league amanda bradford

    The League, a dating app that launched in San Francisco in January, is now available in New York City — but not everyone can download and use it.

    Founded by Stanford graduate Amanda Bradford, The League raised $2.1 million from Silicon Valley investors for a controversial take on dating. The app's goal is to make a more selective Tinder that is only for the most interesting and motivated single people in cities around the world. It is now available in two cities, San Francisco and New York.

    The company has come up with a secret algorithm that invites select users to access the app based primarily on LinkedIn résumés and friend networks. Ambition, Bradford says, is the biggest trait The League looks for within its community.

    Since The League's launch, the app has gathered about 100,000 names on its wait-list; 16,000 of those people live in the New York City area.

    Most of the New York waitlist consists of single professionals in finance and advertising.

    League_NYC_Demographics_FinalwZipSan Franciscans have been matched more than 150,000 times on The League, and Bradford says the app is growing 50% month-over-month. Users are also responding to 70% of the messages sent on The League. That may be because The League promises its users they will not find any "fixer-uppers" or dating duds in their feeds.

    "The girls and guys on The League could all be presented to the 'rents without flinching, we promise," the startup says. "Our concierges have no qualms kicking bad-behaving people out (there's other apps for them)."

    Today, only 2,500 New Yorkers are allowed to use The League. Each user receives two VIP passes that can be given to friends, who will be able to skip the wait-list and join the app, regardless of The League's picky algorithm.

    Here's how to join The League, and who's using it >>

    The League held a prelaunch party on April 28 at The Jane hotel in Manhattan. Here are some of the single people who and can be found on the app — if you're worthy enough to get in:

    the leaguethe leaguethe leaguethe leaguethe league

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    the league party

    The League— a selective dating app for elite, successful individuals — launched in San Francisco earlier this year, and it just launched in New York City.

    Stanford graduate Amanda Bradford founded The League and raised $2.1 million to match up highly motivated and interesting single professionals.

    On April 28, The League held a prelaunch party at The Jane hotel exclusively for its selective group of New York users.  

    Not everyone who attended is on the app though. Some attended as wingmen and wingwomen to support their League-worthy single friends.

    If you want to join The League, founder Amanda Bradford says, the most important trait you need is ambition.

    The League's users often have advanced degrees from prestigious universities.

    They tend to be in their late 20s.

    See the rest of the story at Business Insider

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    First, I tweeted some wrong numbers and it got Grubered. I’d edit them, but can’t. Thanks, Twitter.

    Now that that’s out of the way, some quick thoughts…

    1) The Secret founders built an amazing app. They are talented designers and failed the way all social apps fail, by not randomly working (more on that another day). I loved the app. I used it a bunch. From a UX perspective, it was best in class.

    Their big issue was that they were Silicon Valley famous before product-market fit, which meant the failure was public and the hype cycle inescapable. That may have been their fault, may not have been. Journalists can sort that out. Other founders: don’t ever do this.

    2) We’re discussing who got screwed in a VC deal. I think the thing you have to start with here is that all VC firms do is VC deals. Many have been in business for decades. They are experts. Founders have at most done a few deals. It’s fair to say that one side of every term sheet is an expert and one side is a novice.  So, if a deal becomes acrimonious it’s either because the VC used their savvy to screw the founders (founders get angry), the founders operated in bad faith/were deceptive (VCs get angry), or the VCs did something imprudent (buyer’s remorse). This seems to be the latter. It’s hard to argue the founders have any fault in all this.

    3) An $8M A round (~$10M total) for a pre-product market fit social startup is probably overkill, but I get it. These were talented product people in an emerging category that promised to be huge. On a risk-adjusted basis this wasn’t all that crazy.

    4) The “bad” part of Secret’s financing was the B round, which from the outside looked like over-eager investors trying to cram money into a category they perceived to be hot and founders they saw were talented. They did this by over-financing and by paying the founders to let them do it. No innocents were harmed in the financing of Secret’s Ferrari(s).

    5) Google Ventures is a good firm. They put a small amount of money (for fund size) into the seed and A rounds of an early company, then sat out the imprudent B. Solid work, guys. Carry on.

    6) If I were the Secret founders, I wouldn’t feel bad about keeping the money VCs paid me to cram money into my company, but I might consider giving it to the Kapor Center.

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    WattageThe vision for Wattage was a future where anyone could manipulate matter.

    Where we needn’t settle for the generic, mass-produced things that currently line store shelves. A future where we can easily upgrade our old devices instead of throwing them away. Or reprogramming them to do entirely new and useful things.

    We wanted to make it so creating and selling hardware was as easy as writing and publishing a blog post.

    You shouldn’t need to be an electrical engineer or an industrial designer to create electronic devices. Nor should you have to worry about supply chain or distribution if you wanted to sell them.

    We believed it was possible to eliminate all of that complexity, so the average person could easily create highly customized hardware without any electronics know-how, all within their browser.

    Of course, things didn’t exactly play out that way. But why? 

    An absence of traction

    I suppose our failure can be summed up quite easily: An inability to show traction. We were attempting to create an entirely new market for mass-customized electronics, which we originally viewed as something positive (as we felt we could create and own this new market). But from a fundraising standpoint, it was the opposite. Why would investors put large sums of money into a company going after an unproven market? (Hint: they don’t.)

    Being a hardware company, we focused on building prototypes to validate that our vision was technically feasible. In retrospect, this was a mistake.Instead, we should have released something far more lightweight, and as quickly as possible. Our efforts should have been focused on validating interest in our product and generating traction. We did realize this, and we were moving to launch a beta as a means of validating interest. The problem is we realized too late, and ultimately didn’t want to launch a beta that we couldn’t afford to support.

    Not enough focus

    We had grand plans for the platform and we were only working on a small subset of features. But we should have been working on even fewer. We had decided to build the initial platform around just hardware creation. We wouldn’t offer the marketplace, or anyway to program devices, and customers would need to assemble their creations themselves. But that was still too broad a focus. Instead of trying to build a platform for hardware creation, we should have focused on selling a single but highly-customizable product. Doing so would have allowed us to prove that we could actually ship product to paying customers.

    We eventually decided to focus just on the radio, but it was too late.

    Poorly playing the VC game

    While there are obviously a number of options for raising money, we chose the venture capital route. I knew this would be a difficult endeavour, but reading things like Venture Deals or all of Paul Graham’s essays do little to actually prepare you for how challenging it really is.

    Having previously raised $250,000 from friends & family, we had set out to raise a $2M seed round. I spent the better part of 6 months meeting with VCs in San Fransisco, Silicon Valley, New York, and Toronto. In the Valley, I was told we were raising too little. In Canada, we were raising too much. In retrospect, it looks like we attempted to raise too much, too soon. Instead of raising a large pre-launch seed round, we should have raised a smaller amount from angel investors. Raise a smaller amount, and release a smaller product. If we started generating traction, we could have then raised more.

    To that end, I wish I would have taken better advantage of AngelList. There’s so much potential there. We created a profile and regularly updated it, but we never successfully used it as a fundraising platform.

    What about crowdfunding?

    We got very close to launching a crowdfunding campaign, but ultimately decided against it because I felt it was premature for us. We didn’t have enough confidence in our product costs, so even if the campaign was successful, there was a good chance that we’d ultimately lose money on each sale. We’d always planned on crowdfunding, but I felt we needed to be further along before doing so.

    How does this scale?

    Our business model was about selling hardware. By reducing the complexity of creating hardware, our bet was that more people would create and buy. We would then wrap these creation tools in a marketplace, so creators could also sell their inventions to the masses.

    In the earlier versions of our pitch deck, we focused a lot on empowerment. We were targeting software developers, as we believed we could offer them an entirely new outlet for their creative efforts. But this narrative wasn’t big enough. Investors want to hear a story about changing the world. Large ambitions, with a meaningful impact on the market, resulting in massive sales. We just didn’t tell a big enough story.

    I also don’t think I properly emphasized the marketplace potential, as most investors got hung up on the number of potential creators. We looked at ourself as a diverse marketplace of mass-customized goods, but that potential (or at least as we articulate it) didn’t seem to resonate with investors.

    We also heard concerns about the viability of scaling a bespoke hardware business. The manufacturing world is geared for mass-production, with profits coming from economies of scale. But we felt we could overcome this with standardized design & manufacturing tools, in distributed factories, using modular electronics. We saw huge potential in the long tail of things. But this was obviously unproven and we clearly didn’t do enough to reduce investor fear in our ability to pull this off.

    We were too early

    1,600 people signup for our email newsletters, and each of them received a personal message from me. I gave them my email address and phone number, and invited them to chat if they had any questions. I heard from 100's of them, and many shared “the thing” they wanted to create. The problem is many of them simply weren’t feasible with the current technology. I suspect we could have eventually delivered on most of them, but not in the foreseeable future.

    Furthermore, when I looked at the various prototypes we’d created, the quality simply wasn’t there yet. We were heavily using laser cutting as our means of fabrication, and while it allowed us to produce something close to our vision, it wasn’t good enough. What we really needed was a hybrid of laser cutting and 3D printing, but unfortunately 3D printing is still far too slow and expensive to be realistic. I have no doubts that 3D printing will play a huge role in the future of manufacturing, but it simply isn’t there yet.

    So that’s it.

    It’s been a fun ride to say the least. We’re still deciding what to do with everything we produced this past year. There’s a high likelihood Wattage will be reborn in another form sometime in the future, but we just don’t know yet.

    I wanted to say thank you to those that supported us during this adventure:

    Hot Pop for helping us design & create all of our physical prototypes
    Cossette Lab for the office space, staff, and bagel Monday’s
    Chris Tanner for the design help
    Sam Dallyn for designing our logo
    Jonas Naimark for creating this awesome animation
    Heist for the design help
    MakeWorks & Teehan+Lax for the office space in the early days

    But the most thanks goes to our supporting wives, who consistently provided encouragement through all of the up’s & down’s. I wish this had turned out better than it did, but at least we’ll have actual paying jobs again!<cough>inquires welcome</cough>

    So that’s it for now. If you’d like to reach us, you can find us on Twitter:

    Andy MacDonald (@andymacd)
    Brett Hagman (@BrettHagman)
    Peter Nitsch (@peter_nitsch)
    Jeremy Bell (@jeremybell)


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