Chinese tech firms have fallen out of love with America, and it shows — a growing number of them are looking to drop their listings in New York and head back home.

Many Chinese tech executives are betting on higher share valuations in China, where stock markets have recently caught fire.

They also hope to evade any legal mess when Beijing formally outlaws foreign shareholder control of firms in protected tech sectors.

An exodus of Chinese tech firms would spell the end of a profitable line of business for Wall Street underwriters. Last year, the $25 billion initial public offering of the e-commerce giant Alibaba — the world's largest IPO ever — generated more than $300 million in fees.

The numbers are hard to resist. China's tech-driven ChiNext composite index has gained nearly 180% this year, eclipsing the 30% rise in the Nasdaq OMX China Technology Index that tracks offshore listed mainland firms.

Firms listed on the Nasdaq index get an average share price equal to 11 times their earnings. On ChiNext, they get 133 times. There's a debate over which ratio is more accurate, but Chinese executives blame US ignorance of China.

"American investors don't understand the business model of Chinese gaming companies," said a senior executive of one such firm planning to eject from New York and move back to a Chinese listing, speaking on condition of anonymity.

Earlier this year, the New York-listed Chinese gaming firms Shanda and Perfect World said they would go private, while the online dating service Jianyuan.com and the medical R&D services provider Wuxi Pharmatech said they were thinking about it.

Analysts expect dozens of lesser-known companies to follow if they can, and they see the pipeline of Chinese companies trying to list in New York drying up.

"The possibility of stirring interest among US investors is slim," said Shu Yi, CEO of the Beijing-based advertising technology company Limei Technology, which recently gave up on plans to list in New York and now is hoping to IPO in Shanghai or Shenzhen.

On Thursday, Chinese Premier Li Keqiang encouraged more of such companies to return, particularly those with "special ownership structures," referring to the contractual loopholes employed by many Chinese firms to evade restrictions on foreign ownership.

China is lining up the finances to assist the repatriation. The investment bank China Renaissance has teamed up with Citic Securities to raise funds to help delist and underwrite new listings in China, while Shengjing Management Consulting has launched a fund-of-funds that intends to repatriate about 100 Chinese firms.

Thing of the past

That Chinese internet companies would list in the US might seem strange, analysts say, but it once made sense.

For one thing, Chinese investors' enthusiasm for startup listings is relatively recent, whereas US investors have been rewarding internet startups with high share prices for decades.

But more important was the fact that Chinese regulators wouldn't let such firms list in the first place. The China Securities Regulatory Commission (CSRC) has required any company to be profitable for several years before listing — a rule that ruled out most Chinese internet companies.

But Beijing aims to make Shanghai a global financial center on par with London, Hong Kong, and New York by 2020, and it can't do that without making room for its most innovative companies.

"The obstacle to coming back has been removed," China Renaissance said in an email to Reuters. "The issue is not whatever valuation you can get in China. Hot market themes are fleeting."

Profitability requirements are being eased, and there's also a shortcut: a merger with a Chinese company with a listed shell.

The Chinese display advertising giant Focus Media, which left New York in 2013, said this week it would relist in China via a $7 billion reverse merger with the rubber manufacturer Jiangsu Hongda in what analysts say is a model for returnees to follow.

Bad contract

Even if the stock-market rally cools, the delisting trend is expected to continue as Beijing closes a key legal loophole.

Chinese law bans foreign investment in domestic internet firms. Investors get around the restrictions by buying into variable interest entities (VIEs) set up by the internet companies, including Alibaba. US courts recognize that as equivalent to ownership of the companies.

But now Chinese regulators are revising the foreign-investment law. A draft version of the document published by China's cabinet explicitly forbids "effective control" by foreigners of a Chinese company in a prohibited sector.  

Paul Gillis, professor of accounting at Peking University, said there will most likely be an exception for VIEs such as Alibaba, which are wholly controlled by Chinese management, but that offers scant protection to foreign investors.

"Are you comfortable buying a stock where you really have no say?" 

(Editing by Nachum Kaplan and Ryan Woo)

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The first thing I noticed when I walked through the doors was the man in the velvety maroon suit and a loud green boutonnière getting interviewed by a man holding a TV camera, reality-show style. Other men with other cameras were taking footage of the space — big windows, white walls, big red garage doors to the outside, hardwood floors. 

But this ain't Hollywood. This is Silicon Valley.

The cameras were there to film a new reality show coming to the SyFy Channel, given the working name "The Bazillion Dollar Club." This show will follow Dave McClure, the famed investor behind high-profile startup accelerator 500 Startups, as well as Brady Forrest, the head of hardware startup accelerator Highway1— the man in the maroon suit. 

I was there for Highway1's demo day, where the 11 startups in the latest class would get about ten minutes to show off what they were working on — everything from a wearable sensor to assist couples with conception to a better coffee machine.

In the span of an hour and a half, Silicon Valley, the place where the bad ideas are indistinguishable from the good ones until the checks clear, was laid bare.

Changing the world

Highway1 is an accelerator program for startups that build actual, tangible things. These startups get guidance, support, and $50,000 in seed funding from PCH International, the electronics manufacturer that throws the program. Plus, PCH International is a big company, with 2,800 employees and customers like Apple, can offer startups access to prototyping labs and other stuff that early founders couldn't get access to. 

Highway1 has previously invested in buzzy hardware companies like smart connected scale Drop, medical test kit CUE, and the Ringly wearable rings. The program's name is a pun, too: The acronym PCH is also used as shorthand here in California for the Pacific Coast Highway, which consists of a stretch of — wait for it — Highway 1.

As the cameras rolled on these 11 demoes, it was hard to shake the feeling that this was all a lot of theater.

Ideas that make you go hmm...

Some of the ideas just seemed uncompelling at best, and novelties for the 1 percent at worst.

Chronos, for instance, is a device that clips onto the back of your existing watch, turning your classic timepiece into a smartwatch that can give you Apple Watch-style nudge notifications. After all, a luxury watch is a status symbol.

"You can't drive your Tesla into the boardroom," joked Chronos founder Mark Nichol on stage.

Another, Sereneti Kitchen, is trying to be the "Keurig of food." Add a tray of pre-measured ingredients to a robotic stirring machine (seriously), and it automatically makes you dinner. Sereneti won't be ready for mass consumption until later this year, but Highway1 and 500 Startups, among other startup accelerators, are getting an early version for their kitchens. 

I tried some of a lamb stew that was made by the machine. It was okay.

One startup had probably the single creepiest pitch I've heard in quite some time: Lensbricks, a system of cheap cameras in colorful, flexible housing that makes them look like neon burrowing worms. You're supposed to put them all over your house, where they automatically come to life and start recording when they detect something interesting happening.

Lensbricks says it's to capture the "big little moments" of everyday life without the need to reach for a phone or tablet to take a video. Sure, so long as you're willing to make your home an ubiquitous surveillance state. 

Others seemed silly, but fun. Game of Drones thinks drone fighting and drone racing is going to be "the next great American pastime," as Forrest put it in his introduction to their demonstration. 

Serious

But some of the demoes were genuinely compelling. FarmHub, for instance, is a system of sensors that farmers can use to track the weather and make smart predictions on their land, helping maximize yield.

Shade is a wearable device to help Lupus patients measure their exposure to ultraviolet light, which is critical to maintain their health. Transformair is a better air purifier that can make life easier for those (like me) who suffer extreme allergies.

Ayda is a wearable sensor worn while a woman is asleep to help figure out her fertility cycles — and while their team is predominantly men, as admitted on stage by CEO James Foody, they at least took the step of getting women to serve on its advisory board and get that critical perspective. 

Obviously, there are some really good ideas here.

But after a while, a fatigue sets in.

What's a good idea? What isn't? Who's sincere? Who's after a payday? Who's really trying to change the world? Does it matter? 

Silicon Valley is full of sincere geniuses. But it's also full of charlatans, opportunists, and the chronically out-of-touch. 

As Y Combinator President Sam Altman put it earlier this week: "Intelligence is usually easy to tell in a 10-minute conversation. Determination is harder."

And while Silicon Valley tries to figure out what the world should look like, the cameras keep rolling. The world is watching. 

SEE ALSO: Head of Silicon Valley's most important startup farm says we're in a 'mega bubble' that won't last

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I had drinks with one of the $1 billion "unicorn" CEOs last night, in a trendy Noho bar in London.

He told me he thinks we're in a tech bubble, and it's going to end badly for many companies.

Unicorn companies were so-named a few years ago because it was exceedingly rare for a tech startup in private hands to be worth as much as $1 billion.

But now there are 102 "unicorn" companies. So finding a unicorn CEO to have drinks with isn't as hard as it used to be.

This fact wasn't lost on my unicorn CEO. He was very sure that all these unicorns lying around means we're in a bubble.

I was somewhat shocked to hear this because, normally, when tech founders take vast sums of money from investors, they have a lengthy and convincing explanation of why their company is fundamentally different from everyone else's and won't fail when / if the economy runs into trouble.

But my guy thinks it's all coming to an end sooner rather than later.

Here is the context. In order to believe there is not a bubble, you have to believe the following narrative: Although tech stocks are at an all-time high, and private tech startup valuations are hitting astonishing highs (Uber is valued at $41 billion!), this is not a bubble. It's a boom, for sure, and these companies may be temporarily overvalued. But these companies have real revenues, and the economy is shifting in their direction regardless of the underlying economic cycle. i.e., money is moving out of TV and newspapers and into apps regardless of whether there is a recession or growth.

When the recession comes, the "no bubble" people say, some companies will get hurt, just like in a regular recession. But we won't see the kind of full-scale bonkers collapse that we saw in 2000 and 2008. Back in 2000, the tech sector deflated because companies had gone public with no revenue whatsoever. In 2008, the economy tanked because banks had loaned mortgage money to millions of people who couldn't pay it back.

This time it's different, because these new tech companies are real businesses, the "no bubble" people say.

My unicorn, however, has been worrying that it is a bubble for months.

Here are the things he's really worrying about:

• People have no memory of 2000 or 2008: The dotcom crash was 15 years ago. The mortgage crisis was eight years ago. An entire generation of entrepreneurs under age 30 has no clue what it's like when everyone runs out of money at once because they were children when it happened last time.
• Interest rates: Central banks currently have interest rates set at zero percent. That means any investment that returns more than zero looks good right now. When central banks raise those rates, all the marginal business ideas that return just a few percent in profits will be wiped off the map — because no one will fund them.
• Valuations: Look at Uber, the unicorn says. Its market cap is now bigger than Delta Air Lines, Charles Schwab, Salesforce.com and Kraft Foods. It's allegedly bigger than the value of the entire global taxi market is is trying to replace. Sure, he says, Uber is a great business and a great company. But $41 billion? Now? Maybe in a few years time.
• Private valuations not matching public ones: Some private tech startups are now valued greater than those on the public markets, post IPO. This seems ... unusual.
• Tech startups offering stock at a discount in order to juice their valuations. Box offered stock at a discount to late investors, a factor that required its valuation to be written higher. About one in six tech startups increases its valuation not because the underlying business is believed to be capable of generating more value but in order to accommodate protections given to preferred investors, The New York Times reported.
• Burn rates: Some tech founders are walking around telling investors not to worry about the fact that they haven't yet worked out their revenue models. They have a long runway ahead of them while they perfect their products. These founders are banking on the notion that after their current round of funding there will be another round of funding coming along. When your current business model is to raise more funding ... that's bubble talk.
• Too many business models are dependent on "one thing not happening": In an economy on the upswing, everyone can survive. A rising tide lifts all boats. But some companies seem to be dependent on a certain single factor not happening, such as being unable to raise a new round, being unable to become cash flow positive in the near-term, or being unable to stop competitors raiding your workforce in a downturn (when there is no money to persuade them to stay).
• "Margin compression": A lot of tech businesses sell things, and because the market is good there isn't much price competition. My unicorn sees a lot of companies that appear to be dependent on customers paying what they're told to pay. These companies have yet to experience, or survive, a price war with their rivals.

Of course, like all unicorn CEOs, my unicorn was pretty confident that he's going to do just fine in a recession, or when the Fed and the ECB start raising interest rates. In fact, he's looking forward to it, in part because it will wipe away a lot of not-great, second-rung companies who only exist because so many VCs are diversifying their portfolios across so many tech sectors.

But it won't be pretty, he says. Bubbles burst, and we're in one.

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There have never been companies like Airbnb and Twitter before. The bad news is that no company has ever had the problems of Airbnb and Twitter, either.

When you install a new app on your iPhone, for instance, you don't really think about it. You download it, you open it, it just works. 

But when you're dealing with the huge and constantly changing computers that run giant web services, rolling out new software can be crazy difficult, and hard to run efficiently.

Some estimates place average data center utilization as low as just 5%. That's a lot of waste.

Imagine how much harder it would be to get anything done on your iPhone if you had to choose which of its two processor cores you had to run each and every app on. That's what installing software at the data center level can be like.

Which takes us to Mesosphere. This startup, founded by two ex-engineers from Airbnb and Twitter, wants to make it just as easy to install software in the data center as it is to put an app on your phone, helping any company get up to size.

Mesosphere obviously scratches an itch for many in the tech sector: An early preview edition of the Mesosphere product got 3,800 enterprise signups, and it raised its first two funding rounds within six months of each other to the tune of $47.5 million, with investments from big name VCs like Andreessen Horowitz.

The promise

Mesosphere calls its product the Data Center Operating System (DCOS), because it wants to do for the data center what the Windows operating system did for the PC — make it easy for anybody to use, without needing to be a computer scientist. 

It says DCOS can increase data center utilization by two to three times right when you install it. Big marketing startup Hubspot, one of Mesosphere's earliest customers, is using it to save 65% off of its monthly Amazon cloud hosting bills. After all, Amazon's, Microsoft's, and Google's clouds are just big data centers. 

"From our experience as engineers, it's just a better way to do this," says ex-Airbnb tech lead and Mesosphere co-founder/CTO Tobias Knaup.

Today, Mesosphere announces the launch of its core business model: A subscription service based on how many processor "nodes" you use DCOS to manage. So long as you pay, you get the updates to DCOS, Windows Update-style. 

Back to the beginning

Mesosphere has its origins in the Apache Mesos project, a popular piece free software for managing large "clusters" of servers.

A diverse set of large tech companies like Apple and Yelp use Apache Mesos behind the scenes to deal with an ever-growing collection of servers. 

Mesos was created by Benjamin Hindman, then a PhD student at UC Berkeley. Once Mesos started to get some attention and grow its fanbase, Hindman took his talents to Twitter, where he put Mesos to work behind the scenes at the social network to help them grow.

In 2013, Hindman connected with Knaup, who had been struggling with similar growth issues in his role as tech lead at Airbnb. The two decided that Mesos would be the underlying core to a new kind of operating system — DCOS. 

It just (doesn't) work

The potential here is to turn an entire data center into one big computer that's easy to run and manage. Knaup goes so far as to say that if he quit Mesosphere and founded another startup today, he'd make sure it was an application that runs on top of Mesosphere DCOS. 

There have been plenty of companies that try to streamline things with data center automation, including recent Cisco acquisition Piston.

But it's never been easy: Deploying hot technologies like data processing software Hadoop or Google-made container management platform Kubernetes in the data center can take days and cause lots of headaches. That's a problem if you're a growing company that needs to scale up quickly, but they're easy to deploy with DCOS, Knaup says.

With DCOS, "a lot of these hard problems are already solved," Knaup says. "A minute and a half later, you have Kubernetes." 

Plus, if you're into that kind of thing, Mesosphere DCOS lets you launch applications inside Docker containers, which can make them even easier to manage still.

And a final benefit, Knaup says, is that a data center running Mesosphere DCOS is more stable, and that it can keep apps running even if a single server fails.

The future

The public cloud, including services from vendors like Amazon and Microsoft, is also a major focus for Mesosphere.

Mesosphere DCOS, the software, doesn't care whether the servers are in your own data center or hosted with Amazon Web Services. Which makes it ideal for those who want to take advantage of the high scale of the cloud, without giving up the control of (or the cash investment in) their own data center.

The industry term for that kind of "both-and" approach is called hybrid cloud, and it's going to be something you hear lot more about soon.

"Close to 100% of the companies [we talk to] are looking at hybrid," Knaup says. 

SEE ALSO: Here's the news that got the loudest cheers at Apple's big event

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There's a war brewing over what to call the Uber and Lyft drivers in this world, and "employee" might not be the answer. 

"I think it's not 1099 versus W-2. I think the right answer is a third class of worker," said Simon Rothman, a partner at Greylock and an investor in Sprig, which uses 1099 employees. "People are now becoming one-person companies, and they're not even working for one entity."

The new economic model championed by the on-demand economy relies on a steady stream of 1099 contract workers. They are called 1099 workers because of the IRS tax form "1099 MISC" that they fill out when hired, compared to the traditional W2 that full-time employees complete.

It's a business model that's being contested in court after Boston labor rights attorney Shannon Liss-Riordan sued Uber and Lyft.

While Rothman acknowledged that it is likely going to be the W-2 that wins out, it is still "fundamentally wrong," he said on a panel at the grand opening of Shift's new offices.

Rothman's argument centered around the fact that many of the 1099 contractors don't have loyalty to a singular company and are instead becoming one-person companies by working for several platforms.

The 2015 1099 Economy Workforce Report found that 38 percent of the on-demand workers are signed on to multiple companies at once while 13 percent said they switched companies to try to leverage the sign-up bonuses. 

If you unbundle benefits from companies or substitute them on a pro-rata basis, that's when you can create a new flexible labor class that matches how the delivery drivers or house cleaners of the on-demand economy see their jobs, Rothman said. He would love to see companies start personalized healthcare that travels with you and not dependent on your employer. 

"I think this new class of worker has to reflect this new type of work that's being done," Rothman said. "If you decouple the benefits, if you decouple the pension so it's not tied with you, think about the control you can have, going out of the networks as you wish, controlling the what and when of your job."

Rothman is not the only person thinking about the third labor class either. In Germany, as Shift's founder George Arison noted on the panel, there is already a third class of "dependent contractors". 

Even in the Lyft case, U.S. District Judge Vince Chhabria said in a March decision that he's not sure if Lyft drivers fit in either category of California's "outdated" employment codes.

“The jury in this case will be handed a square peg and asked to choose between two round holes,” he wrote. “The test the California courts have developed over the 20th Century for classifying workers isn’t very helpful in addressing this 21st Century problem.”

Rothman also saw it as an evolution of the labor system.

"What's happened over the last generation is that you no longer have one career with one employer, but you expect to have one employer at a time," Rothman said. "Why can't you work for 5 platforms, or 50 platforms at a time?"

SEE ALSO: This lawyer fought for FedEx drivers and strippers. Now she's standing up for Uber drivers

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Sprinklr, a social media management company with a $1 billion valuation, has hired former Andreessen Horowitz consultant Tom Butta as its CMO.

Sprinklr, an enterprise social media management company that competes with companies like Hootsuite, was founded five years ago. 

Social media management has become way too much work for the biggest of Fortune 500 companies to simply delegate the responsibility to an intern or a sole social media manager. That's where Sprinklr comes in, helping large companies like Virgin America and McDonald's manage their social media channels. 

In his new role, Butta will lead Sprinklr’s global marketing organization as the company continues to grow. And the company is growing quickly: Sprinklr nearly doubled its valuation in a year. When the company closed a $40 million Series D round in April 2014, its valuation was $520 million. In April 2015, the New York-based marketing startup raised $46 million, bringing its valuation up to $1.17 billion.

"Today’s marketers face a new paradigm for engaging with their customers, but they don’t yet have the tools to truly know, understand, or communicate with them one-on-one  — let alone on a global scale," Butta said in a press release. "Sprinklr is changing that."

Sprinklr is among the newest member of a growing number of  companies called "unicorns"— privately held companies with valuations of $1 billion or more. They're called unicorns because they used to be rare, but today there's more than 100 of them. Sprinklr was the first social media management company to become a unicorn.

Prior to coming to Sprinklr, Butta was a consultant for Silicon Valley venture capital firm Andreessen Horowitz, and served as CMO for tech companies including Red Hat and AppNexus.

 "Tom has served as CMO for some of the world’s most pioneering private and public enterprise software companies, including those that fundamentally transformed their industries and inspired entire marketplaces," Ragy Thomas, Sprinklr's CEO and founder, said in the press release. "We have similar ambitions for Sprinklr, and Tom’s leadership will help put the company and our customers in a position to capitalize on that opportunity."

SEE ALSO: Blue Apron, a startup that's a godsend for lazy cooks, is now valued at $2 billion

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­

Duolingo is a language-learning startup that teaches you how to speak a bunch of languages — Spanish, French, English, German, Portuguese, Italian, Dutch, Danish and Swedish — through game-like lessons.

Top Silicon Valley executives like Pinterest CEO Ben Silbermann love Duolingo's app.

On Wednesday, Duolingo announced it has raised $45 million led by Google Capital, Google's growth-phase investment branch. The new funding values Duolingo at $470 million.

"Duolingo’s original goal was to offer free language education for the world," Luis von Ahn, Duolingo’s cofounder and CEO told Business Insider.

"Now we’re focused on offering the best possible education to the maximum number of people in the world. In order to accomplish this, we are working to optimize the rate at which people acquire information, making the experience as entertaining as possible to help students persist, and we’re using machine learning to offer personalized learning experiences to each of our users. This was impossible with traditional education and has been mostly unexplored by other educational technologies."

Human tutors are expensive, so Duolingo's goal is to offer a cheaper version of a foreign-language tutor, personalized for each of its users, of which it has more than 100 million. 

Duolingo is the most downloaded app in the Education category on both Google Play and iTunes, and the company says its Duolingo for Schools platform — which lets traditional educators use Duolingo in their own classrooms — has registered more than 100,000 teachers.

Previously, Duolingo raised a $3.3 million Series A round led by Union Square Ventures, a $15 million Series B led by NEA, and a $20 million Series C led by Kleiner Perkins. Ashton Kutcher has also invested in Duolingo.

"Duolingo’s mobile-­first, adaptive, and gamified platform is changing the way people are learning languages across the globe,” Laela Sturdy, a partner at Google Capital said in the company's announcement Wednesday morning. “We were blown away by Duolingo's growth and engagement numbers, and we're thrilled to partner with them as they shape the future of education."

SEE ALSO: Google Capital led a $60 million investment in a startup that solves every business owner's biggest headache

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Product Hunt has become a must-read for startup founders and investors looking to see what the next big thing will be.

The popular website and app curates a daily list of new tech products that the community can upvote, and the goal is to surface the most interesting new arrivals for those in the tech industry to discover and discuss.

Now, Product Hunt wants to become a hot destination for discovering new games, too.

On Thursday, the company announced that it will be expanding its coverage for the first time to include a new games category, and it's hired Russ Frushtick, co-founder of the Vox-owned video game publication Polygon, to helm its games coverage.

Product Hunt founder and CEO Ryan Hoover told Business Insider that the new section of the site will feature "everything from indies to mobile games to board games and competitive card games, as curated by the community."

Just like the tech category, users will be able to upvote and downvote submitted games — similar to Reddit —or they can dive into the comments for a chance to talk with the game's founder or discover special offers that are exclusive to Product Hunters.

A large part of what has made Product Hunt so popular is its engaged community of startup founders, tech enthusiasts, and investors, which even include celebrities like Snoop Dogg. A firm believer of "building in public," Hoover says he involved the community in the design of Product Hunt Games, sharing early design mockups and ideas so the community could give feedback.

Hoover says Product Hunt Games is still considered an open beta, but those with Product Hunt account will be able to sign in and browse the new games category starting today.

If you already have a Product Hunt account, you can take a look at Product Hunt Games by clicking here.

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Chris Sacca has invested in companies like Twitter and Uber through his venture capital firm Lowercase Capital. 

But there's one thing, Sacca says, that would keep him from investing in a company.

In an interview with Bloomberg TV's Emily Chang, Sacca talked about how he brings founders to his home near Lake Tahoe.

He and his wife make founders dinner and take them hot-tubbing in an attempt to evaluate potential founders for his firm's portfolio.

He also assesses founders based on whether they clean up after themselves after dinner.

According to Bloomberg, Sacca “would see people who wouldn’t actually get up to put their dishes in the sink, and immediately be like, ‘No way. Like, there’s no way we’re getting in and doing business with them.’”

Sacca also talked about the hot tub at his California home near Lake Tahoe, which he calls the Jam Tub. Sacca told Bloomberg's Emily Chang that Uber CEO Travis Kalanick used to spend "eight to ten hours" there at a time. "I've never seen a human with that kind of staying power in a hot tub," he said.

Watch the full video below:

SEE ALSO: Uber investor Chris Sacca thinks Carl Icahn made a 'big mistake' backing Lyft

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Startups aren’t just different in the ways they run their businesses. Take employee dress codes: They're hardly what you’ll find at investment banks, law firms, or really, any other office job. Facebook's Mark Zuckerberg is a perfect example of this. The founder and CEO's laid-back style, which subsists on basic gray tees, hoodies, and jeans, is totally kosher for work (he is the boss, after all). You'll find it's the same at a host of other young tech ventures and up-and-coming organizations.

If you're thinking about trading in your corporate lifestyle for a startup culture, then you're in luck. Below, we're sharing nine essentials every startup employee should have in his closet for summer. If your current place of business is strictly suit-and-tie, there's always casual Friday. 

The Zip-Up Sweatshirt 

Basics — like a solid zip-up hoodie — are A-okay every day of the week. Just ask Mark. 

1. Banana Republic Piped Hooded Zip Cardigan, $80, available at Banana Republic.

2. UNCL French Terry Knit Zip Sweatshirt, $72.49, available at Nordstrom.  

3. John Varvatos Raglan Sleeve Zip Hoodie, $168, available at Amazon. 

The Crew-Neck Tee

Stand alone, layered under a sweater, dressed up with a sports jacket — the sky is the limit with classic tees. 

1. Buck Mason Slate Crew Slub Tee, $24, available at Buck Mason. 

2. Dana Lee Double-Needle Tee, $62, available at Need Supply. 

3. U.S. Polo Assn Men's V-Neck T-Shirt, $10.50, available at Amazon. 

The Low-Top Sneaker

No oxfords or loafers necessary at the office, unless you decide to wear them. 

1. Vans Old Skool, $55, available at Amazon.

2. Nike Free Flyknit 4.0 Running Shoes, $77.45, available at Amazon. 

3. New Balance ML574 Pique Polo Pack Classic Running Shoe, $79.95, available at Amazon.

The Dark-Wash Denim

The secret to looking put-together in jeans is all in the rinse. 

1. Levi's 511 Slim Fit Jean, $39.99, available at Amazon. 

2. Hudson Byron Five-Pocket Straight-Leg Jean, $123, available at Amazon.  

3. AG Adriano Godchmied The Matchbox Slim-Straight Jean, $169.95, available at Amazon.

The Throw-On-&-Go Backpack 

Backpacks are by far the easiest means for transporting your stuff from point A to point B. You'll look cool wearing the ones below, too. 

1. Poler Drifter Pakc, $64.95, available at Amazon. 

2. Herschel Supply Co. Little America, $66.99, available at Amazon. 

3. RVCA Barlow Backpack, $44, available at East Dane.

The Quirky Socks 

We'll see your Hanes 6-pack and raise you the funkier, graphic pairs listed here. 

1. Barney's New York Palm Tree Mid-Calf Socks, $40, available at Barney's New York. 

2. Paul Smith Striped Cotton-Blend Socks, $30, available at Mr Porter. 

3. Happy Socks Men's 1 Pack, $9.79, available at Amazon.

The Casual Button-Down 

Subtle prints and short sleeves are ideal for the warm weather; they look polished, too. 

1. Reiss Sebastian Short Sleeve Printed Shirt, $145, available at Reiss.

2. Steven Alan Men's Short Sleeve Single Needle Shirt, $94.80, available at Amazon.  

3. Obey Journey Woven, $64, available at Need Supply. 

The Leather-Less Watch 

Ditch leather bands for a cool canvas.   

1. Mondaine Evo Big Date Stainless Steel Watch, $245, available at Mr Porter. 

2. Daniel Wellington Classic Glasgow Analog Two Tone Watch, $110.72, available at Amazon.  

3. Nixon The Mod Patterend Canvas Strap Watch, $80, available at Nordstrom. 

The Knee-Length Short 

Shorts at work? Don't mind if we do... 

1. RVCA Marrow Short, $16.03, available at Amazon. 

2. Volcom Frickin Static Plaid Hybrid Short, $15.99, available at Amazon.

3. Kenneth Cole Men's Cargo Short, $59, available at Amazon.  

READ THIS: 9 sneakers you can wear at the office

SEE ALSO: Why a new men’s clothing label turned down an offer from 'Shark Tank'

Join the conversation about this story »

In only three and a half years, Brit Morin went from a Google employee to a bona fide Silicon Valley “it” girl.

Last week, she announced that her startup, Brit & Co, raised $20 million in funding.

Her home/fashion/crafts site, which combines a blog with ecommerce and online learning, is now serving 12 million people a month. And on Friday, she launched the #IAMCREATIVE foundation, which will offer grants of $2,500 to $15,000 to people with worthy creative project ideas. The foundation expects to give away between 15 and 20 grants annually.

Morin is also an A-list in the Valley social set. She's married to Dave Morin, an early Facebook employee and former Apple employee and founder of Path, a messaging app that was just bought by Kakao Talk for an undisclosed sum.

She’s also friendly enough with her old boss, Yahoo CEO Marissa Mayer (whom she worked with at Google) that Mayer became an angel investor in her company, a couple of times over.

Morin will tell you that all this began when she was a little kid who loved to make stuff. She says that she got sidetracked with tech when she was a teenager and later had the idea of marrying the two together ... and Brit & Co was born.

But the truth is her success is a combination of hard work, serendipity, and a gut feeling that led her to "break up" with former friend and another startup.

Serendipity: Apple recruits on Craigslist?

Morin's stellar career really started when she answered what she thought was a phony ad from Apple on Craigslist, she told us.

"I started at Apple with an internship. I saw an ad on Craigslist. I didn’t think Apple would ever advertise on Craigslist; so I didn’t even think it was real," she tells us.

But she answered it anyway. And it was real. She got the interview, and then the internship and then went on to work for Apple in the iTunes unit in 2006.

(By the way, we just checked and didn't see any more ads for interns for Apple on Craigslist.)

She wasn't at Apple long, not even a year, before she was hired away by Google to work on Google Maps and Google Search. That's where she met and worked with Mayer. She was recruited internally to join the YouTube unit and, later, worked on Google TV.

All of that made her realize: "This generation of millennials really looks up to people more than it looks up to brands. That was evident by all the YouTube celebrities during my time at Google, as it was on Twitter and blogger platforms and so on," she said.

This insight would become a big deal a few months later.

'Obsessed' with TechShop

During her nearly four years at Google, a few things happened to Morin that would change the course of her life.

She caught the entrepreneur bug and decided she wanted to start her own company. She got married and took a few months off from Google to plan an elaborate wedding, have the ceremony, and go on a honeymoon.

And she became "obsessed with" a new workshop club called TechShop.

Before her wedding, "I was actually close to starting a company in the health and fitness space. I even had a cofounder," she told us.

"After I got married and came back from my honeymoon, we were going to start fund-raising. We had built an alpha version of the app and everything at that point," Morin says.

"While I was working on my new health and fitness company and I was preparing for my wedding, and it just so happened that the first-ever TechShop opened in San Francisco. It’s like a gym for making things. You pay $100 a month, and you have access to all these types of machines ranging from wafer cutters to 3D printers," she describes.

"It opened in 2011 and I was one of the first members. I think I literally spent every day there. I thought it was like a hobby of mine, like, 'Oh this is cool. I have this new hobby; I can just like make things.' Then I became obsessed with it," she describes.

She says she didn't know how to use all the tools in the shop, but her background in tech — albeit software — made it fairly easy for her learn.

She was making decorations her wedding, as well as a bunch of other stuff.

"So I got married and at the wedding, the women were coming up to me and raving about how cool all of my decorations were. They kept telling me they wished they were creative, that they weren’t creative. I started getting that more and more, after I would show more people the stuff I made outside of my wedding," she says.

"I came back from my honeymoon thinking how wrong this was. What happened from that time when we were all three-year-olds who loved to color and build LEGOs, to the time when we’re 25 or 30 years and we’re really insecure about our creative skills?" she adds.

Breaking up is hard to do

Something in her gut told her that the company she really wanted to build would be all about helping people find their lost creativity.

"I ended up breaking up with my cofounder of the health company. I told her it wasn’t her, it was me," Morin tells us.

It was a painful time.

"We were friends. It was hard. We could have gone out and raised a good seed round and I could be a CEO of a health company at this point. But following my intuition and my gut was the lesson I learned," she says.

In the meantime, "I also had to start from scratch. I didn’t even know what this thing was I wanted to go do, I just knew it was a problem and I wanted to go figure it out."

Having quit her job at Google, she set up shop in her dining room and launched a website that catered to women with do-it-yourself projects.

"I was by myself for a month or two, pretending I was a big media company, trying to create a lot of content. Ultimately my next hires were an engineer and another editor, an artist to help create content," she recalls.

That first year was a struggle, "as every startup kind of struggles through that first year of what are we going to be? How are we going to hire people that want to take a risk on a three person startup?"

So how did she convince people? "Being very convincing ... and equity packages," she jokes.

But having gone through her own creative rebirth, she truly believed the whole "maker" trend was about to take off.

She didn't recruit through Craigslist, but "we recruited a lot of engineers through AngelList and sold them on the long-term opportunity," she says.

She explained this was a tech company that would sit between an ad-supported media company and the $34 billion crafts market dominated by stores like Michael's, Joanne’s, and Hobby Lobby.

The unique thing she was bringing to the table: Online education to teach "maker wannabes" how to make stuff, complete with "kits" that included everything they needed to take the class. Eventually, she wanted to help them sell the stuff they made, too.

"I was convincing VCs and employees: This is a real thing that’s happening. Please trust me. Get on the board when the wave is coming, I promise you it's going to hit," she says.

Raised eyebrows

"The challenge for me in the early days was getting people to believe me. A lot of people would totally raise their eyebrows when I said I wanted to start a company that was a hybrid of DYI and tech. No one understood how those things go together. Now it’s really clear."

Today, the "maker" thing is a bona fide trend, complete with an annual Maker Faire at the White House, which launched last year.

And Morin is considered one of the female leaders of the trend.

The 2015 Faire is taking place this week, starting Friday. As part of that launch Morin did fireside chat with White House CTO Megan Smith.

$20 million more and an acquisition

Morin is frequently called the "next Martha Stewart" or "Martha Stewart 2.0," and the two do know each other. Morin has appeared on Stewart's radio show; they see each other at social events, and their companies generally run in the same circles.

In fact, Morin just added Susan Lyne to the Brit & Co board. Lyne was previously a CEO at Martha Stewart's company and was later CEO at Gilt Groupe. Today she runs AOL's BBG Ventures, a fund focused on women-led tech startups.

With the new $20 million investment, Morin made also her first acquisition for an undisclosed amount: SnapGuide, a free iOS app and web service that allows users to create and share step-by-step "how-to guides."

SnapGuide has amassed 100,000 of these guides, everything from recipes to make-up tips to techie projects to automotive hacks.

Brit & Co has raised $27.6 million to date. Beyond Marissa Meyer, her investors include Jim Fielding, head of Consumer Products and Retail at DreamWorks Animation; Intel Capital; DMGT (the corporate arm of the Daily Mail media company); VC Fred Harman at Oak Investment Partners (Demand Media, Huffington Post, aQuantive); and other big names.

Morin has achieved fast success

In under four years, Brit & Co has become a phenom. She's become a personality, regularly appearing on the Today Show. 

Her site now hosts about 15 classes with plans to host between 60 and 70 by year's end. Classes include kits of all the materials you need, and so far, Brit & Co has sold a combined 15,000 classes and kits.

Brit & Co has 12 million visitors a month, between its website, email lists and social media channels. It has about 100 advertisers, with a 74% retention rate, Morin tells us.

Although she wouldn't share a revenue number, we're told that the "company is doing millions in revenue annually," and, in the first half of 2015, its revenue grew two times over what it was in the first half of 2014.

Brit + Co currently now has 50 employees, 70% of which are women, including much of the company's leadership team.

SEE ALSO: How this 28-year-old turned a website he built when he was 12 into a media empire

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NOW WATCH: How Elon Musk can tell if job applicants are lying about their experience

Not many companies can convince investors to give them $100 million before their first birthday.

But Jeff Raider and Andy Katz-Mayfield, the cofounders of shaving startup Harry's did just that — and then they used the money to buy a 93-year-old German factory.

Raider and Katz-Mayfield became friends more than a decade ago, when the two were interns together during college. Raider then went on to help found glasses company Warby Parker with three of his classmates at UPenn. (Today, Raider is still on Warby Parker's board of directors.)

It all began with an annoying trip to the drug store

A frustrating visit to a pharmacy in October 2011 would eventually lead the two to start their own company together.

"I went into the drug store. I'd run out of razor blades and just had a really frustrating purchase experience," Katz-Mayfield recalls. "They were locked in a case, which I found to be a little bit absurd. I was buying razor blades — not diamond jewelry. And I wound up spending over $20 for four razor blades and some shaving cream, and I didn't have a good feeling as a consumer. I knew I was getting taken advantage of, and I didn't really have any choice in the matter."

He left but returned to the store, frustrated. Katz-Mayfield looked at the branding and design of the razor blades on display, and he didn't like what he saw. "It didn't really speak to me as a consumer. It's really deeply rooted in this kind of futuristic technology. There's literally a package with a razor blade flying over the moon," he recalls. "And I understand what they're trying to convey, but to me it almost felt like I was being treated like a child and being sold children's toys."

The next day, Katz-Mayfield called up Raider, who immediately empathized with his friend's experience. The two started thinking about a company that could take the pain out of buying quality razor blades and shaving cream.

"The question that Andy posed that was really exciting was, can we do this better? Can we create a better experience around incredibly high-quality products at really reasonable prices delivered to people in a way that they actually want to buy it, and in doing so, make the whole process of shaving better for guys?" Raider says.

Then reality set in: making good razor blades is actually really hard

The first thing the cofounders learned: Great razor blades are important but they're not easy to make. They started out by trying to shave with every single razor blade out there. "It was a physically and emotionally scarring experience to shave with the lower-end products on the market," Raider told Business Insider.

After trying every razor blade out there, Raider and Katz-Mayfield discovered a 93-year-old German razor blade manufacturer called Feintechnik. The company is "steeped in the tradition of making, literally grinding steel into exceptionally sharp and stable razor blades that then give you a really clean shave," Raider says. "We got to know the folks there, and we created a product with them that was a custom product for Harry's. At that point we were like, 'Okay, we have a product that we're really proud to sell.'"

The two cofounders launched Harry's in March 2013 and were "blown away by the initial response. It far exceeded our expectations, which were pretty high," Katz-Mayfield says. "The brand resonated with consumers. People really loved the product."

Harry’s sells shaving kits, individual razors, and bottles of shaving cream. For $15, you can get a shaving kit complete with a five-blade razor, three replacement blades, and shaving cream. When you consider that just a razor and a couple replacement blades from Gillette will run you anywhere from $10 to $15, Harry's kits look like a pretty good deal.

Harry's isn't the only player in the startup razor game. Michael Dubin founded Dollar Shave Club in early 2012 with the promise of sending men one razor per month for a buck. It has raised just over $70 million from investors. Early Foursquare employee Tristan Walker founded another razor competitor in April 2013, Walker & Co, which actually uses the same German factory as Harry's to produce its product, Bevel.

How a 10-month-old startup was able to buy a 93-year-old company

In January 2014, 10-month-old Harry's announced it had raised a $122.5 million investment round from Tiger Global, Thrive Capital, Highland Capital, and SV Angel. At the same time, Harry’s announced it would be shelling out $100 million to purchase Feintechnik — both the company and its 93-year-old factory — in the sleepy German town of Eisfeld.

Purchasing Feintechnik was a strategic move — it let Harry's become a vertically integrated company and to control manufacturing. "It is incredibly difficult to manufacture razor blades. There's very few places in the world that can do it," Katz-Mayfield said. "And so it was kind of serendipitous timing where the guys that owned the factory were thinking about potentially selling it, and we had just launched and we were young, but we were fortunate that we had some investors who believed in the vision and understood the importance of controlling manufacturing. They agreed to back us to go buy it."

Vertical integration is an increasingly common strategy: Startups like Harry's, Bonobos and Warby Parker work with manufacturers to make eyeglasses and clothes, which are then sold online directly to customers. This lets companies have more control over the quality of their products and manufacture items for less. Harry's sells most of its wares online, but it also sells some in its own branded barbershop in New York City.

But why would a 93-year-old company, which fondly refers to the Harry's founders as the "American internet boys," agree to sell itself to such a young, inexperienced startup?

In order to buy Feintechnik, Harry's had to earn the respect and trust of the German company. "We always did what we said we would do — like order and pay for a large order (one million razor blades) ahead of our launch," Raider told Business Insider. "So when we approached them with the idea, they believed we would follow through."

From start to finish, the deal took about eight months of negotiation. "We started the process when we were just two months old as a company and ended when we were 11-months-old," Raider says. "It was an exciting time. At the end, we were incredibly excited to have created HF, the combination of Harry's and Feintechnik, and the only fully vertically integrated grooming brand in the world."

It's not easy to acquire a Germany factory into an American startup. Before the acquisition, the Harry's founders secured its financing — the $122.5 million round from Tiger Global, Thrive Capital, Highland Capital, and SV Angel — by telling investors about the model they wanted to create.

"We then convinced a German bank that they should believe in our vision and lend to the company," Raider says. "We were able to do so with the help of the existing management at Feintechnik and were fortunate to find incredible partners in Germany who were excited about lending to us to help us grow."

Raider and Katz-Mayfield wanted Feintechnik's senior management to stay with the company. To that end, the founders and their investors spent a lot of time talking about their global vision. Raider says they learned about the 93-year-old company's history and planned to take over the German company in a way that was fair to the factory's seasoned employees, who stayed on as part of the deal.

At the time Harry's purchased Feintechnik, the company had 30 people on its team in New York and 420 on its new team in Germany. The average Feintechnik employee has worked at the company for 13 years and knows the ins and outs of making high-quality razor blades by hand.

"We spent a lot of time in Germany speaking with the team there, making them feel like they were part of one company," Raider told Business Insider. "I remember the first time, right after we bought it; we stood up on some wood crates on the factory floor, and we spoke to the entire production staff. And this factory's in a very small town in Germany; it felt like half the town was there. We looked at each other, and we were like, 'wow, this is a lot of responsibility.'"

Today, the Harry's founders say they're growing both businesses — the Harry's brand and Feintechnik — rapidly. The founders say Harry's revenue grew five times in 2014, and they're growing faster than they could have anticipated.

Now Harry's employs 80 people in its NYC office and 450 in Germany, though the company will continue growing its German operations. In total, the company has raised $211 million in venture capital funding. "We're investing a ton right now in growth there, basically doubling the capacity of the factory over the next couple years, which is no small feat," Katz-Mayfield says. "It's a large investment — we need to hire over 100 people in the next couple of years there."

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

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NOW WATCH: The Secret To Grooming The 10-Day Beard That Women Find Sexiest

The leaders of the most successful tech companies need a lot of skills. One of them is leadership. They must inspire teams of employees to carry out their daring visions against incredible odds.

That means they offer some great advice.

We've compiled quotes from 19 of the biggest names in tech. Some are investors; others are founders, CEOs, or executives at the most renowned tech companies in the world. Their words will inspire you to achieve more in work and in life.

IBM Chairwoman and CEO Ginni Rometty: "Be first and be lonely."

Source.

Uber CEO Travis Kalanick: "Stand by your principles and be comfortable with confrontation. So few people are, so when the people with the red tape come, it becomes a negotiation."

Source.

Facebook CEO Mark Zuckerberg: "Move fast and break things. Unless you are breaking stuff, you are not moving fast enough."

Source.

I had drinks with one of the $1 billion "unicorn" CEOs last night, in a trendy Noho bar in London.

He told me he thinks we're in a tech bubble, and it's going to end badly for many companies.

Unicorn companies were so-named a few years ago because it was exceedingly rare for a tech startup in private hands to be worth as much as $1 billion.

But now there are 102 "unicorn" companies. So finding a unicorn CEO to have drinks with isn't as hard as it used to be.

This fact wasn't lost on my unicorn CEO. He was very sure that all these unicorns lying around means we're in a bubble.

I was somewhat shocked to hear this because, normally, when tech founders take vast sums of money from investors, they have a lengthy and convincing explanation of why their company is fundamentally different from everyone else's and won't fail when / if the economy runs into trouble.

But my guy thinks it's all coming to an end sooner rather than later.

Here is the context. In order to believe there is not a bubble, you have to believe the following narrative: Although tech stocks are at an all-time high, and private tech startup valuations are hitting astonishing highs (Uber is valued at $41 billion!), this is not a bubble. It's a boom, for sure, and these companies may be temporarily overvalued. But these companies have real revenues, and the economy is shifting in their direction regardless of the underlying economic cycle. i.e., money is moving out of TV and newspapers and into apps regardless of whether there is a recession or growth.

When the recession comes, the "no bubble" people say, some companies will get hurt, just like in a regular recession. But we won't see the kind of full-scale bonkers collapse that we saw in 2000 and 2008. Back in 2000, the tech sector deflated because companies had gone public with no revenue whatsoever. In 2008, the economy tanked because banks had loaned mortgage money to millions of people who couldn't pay it back.

This time it's different, because these new tech companies are real businesses, the "no bubble" people say.

My unicorn, however, has been worrying that it is a bubble for months.

Here are the things he's really worrying about:

• People have no memory of 2000 or 2008: The dotcom crash was 15 years ago. The mortgage crisis was eight years ago. An entire generation of entrepreneurs under age 30 has no clue what it's like when everyone runs out of money at once because they were children when it happened last time.
• Interest rates: Central banks currently have interest rates set at zero percent. That means any investment that returns more than zero looks good right now. When central banks raise those rates, all the marginal business ideas that return just a few percent in profits will be wiped off the map — because no one will fund them.
• Valuations: Look at Uber, the unicorn says. Its market cap is now bigger than Delta Air Lines, Charles Schwab, Salesforce.com and Kraft Foods. It's allegedly bigger than the value of the entire global taxi market is is trying to replace. Sure, he says, Uber is a great business and a great company. But $41 billion? Now? Maybe in a few years time.
• Private valuations not matching public ones: Some private tech startups are now valued greater than those on the public markets, post IPO. This seems ... unusual.
• Tech startups offering stock at a discount in order to juice their valuations. Box offered stock at a discount to late investors, a factor that required its valuation to be written higher. About one in six tech startups increases its valuation not because the underlying business is believed to be capable of generating more value but in order to accommodate protections given to preferred investors, The New York Times reported.
• Burn rates: Some tech founders are walking around telling investors not to worry about the fact that they haven't yet worked out their revenue models. They have a long runway ahead of them while they perfect their products. These founders are banking on the notion that after their current round of funding there will be another round of funding coming along. When your current business model is to raise more funding ... that's bubble talk.
• Too many business models are dependent on "one thing not happening": In an economy on the upswing, everyone can survive. A rising tide lifts all boats. But some companies seem to be dependent on a certain single factor not happening, such as being unable to raise a new round, being unable to become cash flow positive in the near-term, or being unable to stop competitors raiding your workforce in a downturn (when there is no money to persuade them to stay).
• "Margin compression": A lot of tech businesses sell things, and because the market is good there isn't much price competition. My unicorn sees a lot of companies that appear to be dependent on customers paying what they're told to pay. These companies have yet to experience, or survive, a price war with their rivals.

Of course, like all unicorn CEOs, my unicorn was pretty confident that he's going to do just fine in a recession, or when the Fed and the ECB start raising interest rates. In fact, he's looking forward to it, in part because it will wipe away a lot of not-great, second-rung companies who only exist because so many VCs are diversifying their portfolios across so many tech sectors.

But it won't be pretty, he says. Bubbles burst, and we're in one.

Join the conversation about this story »

NOW WATCH: Here's what 'Game of Thrones' stars look like in real life

The UK tech scene is considerably more diverse than its US counterpart, with those working at startups in Britain five times more likely to be female than in America, according to a new study.

The research was conducted by startup accelerator Wayra, and found that the UK outpaces the US on diversity issues on a number of metrics. Entrepreneurs in London are three times more likely to be female than in Silicon Valley, for example, and individuals in the capital are also twice as likely to come from a black or minority ethnic background than in New York.

The data drew on respondents at 222 startups from around Britain, and shows the UK is leading the pack, Wayra claims, and is "more diverse than other major startup ecosystems, including the US, Silicon Valley, NYC and Tel Aviv." Overall, however, it suggests there is still some way to go.

Just 30.3% of the individuals in the "startup ecosystem" are women — and when it comes to funding, men are 86% more likely than women to receive venture capital funding.

Over the last few years, diversity has become an increasingly important issue within the technology industry. Under pressure from campaigners to expand upon their traditionally white male workforces, big companies including Apple, Facebook, and Twitter have begun publishing yearly diversity reports.

Executives have also upped their rhetoric on the issue. Apple CEO Tim Cook, for example, said diversity issues were"central to the future of our company," and that "diversity leads to better products." However, 70% of Apple's global workforce is male, and of its 15 top-tier executives, just 3 are women.

In a 2014 Guardian poll, 73% of respondents (who worked in the industry) said they thought the tech industry was sexist, and 52% said women are paid less for the same job than men.

Join the conversation about this story »

NOW WATCH: This animated map shows how European languages evolved

Yo, the simple app that rocketed to the top of the App Store charts in June 2014, is attempting to make a comeback with the launch of Yo 2.0.

The concept behind Yo is simple: You send the word "Yo" to people. It was that bare-bones simplicity that made it a hit.

Financial Times writer Tim Bradshaw called Yo "ridiculous" in an article that kickstarted a press frenzy over the app.

Now, Yo is hoping to recapture some of the magic that made it popular with the launch of Yo 2.0. The app is adding an interface for Yo'ing someone your location, Yo'ing them a photo, or just sending the word "Yo."

Yo Photos lets users send simple photos to each other. There are no filters, text comments, or options to retake the shot — it's a simple approach that plays off Yo's bare bones messaging functionality.

Another new feature in Yo 2.0 is the launch of Yo Groups: group chats for Yo. Now Yo users can Yo all their friends with a Yo sent to multiple people.

Yo is hoping the new update will see it return to the top of the App Store charts. The app went viral in June 2014 as technology journalists mocked how simple it was. But users enjoyed the app, and it became the fourth most-popular free app in the US. 

"It was pretty crazy. There was a lot of stuff to do,"Yo CEO Or Arbel told Business Insider in December. "What was it like? Sleepless nights. It was just hard keeping the service up, all the interviews, and everything together. Then we got hacked."

A gang of hackers figured out how to gain access to the mobile phone numbers of Yo users. But instead of causing havoc, the hackers texted Arbel and explained the security flaw. Yo later went on to work with the hackers to fix security issues in the app. 

But the app's success didn't last, and Yo plummeted down the App Store rankings:

Arbel told Business Insider in December that Yo was planning to introduce monetisation by partnering with brands to enable them to send Yo's to their customers. The launch of Yo 2.0 will allow companies to send photos and locations as well as links through the app, leaving the door open for the app to start making money.

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NOW WATCH: 5 cool tricks your iPhone can do with the latest iOS update

Don't invest in African-American led companies because of diversity, but because they're a good business, argued African-American founders and venture capitalists at the PreMoney conference. 

"The more people think this is an obligation, a social obligation, that's probably not a good thing," said Hamet Watt, a venture partner at Upfront Ventures.

"There's so much research that speaks to the importance of diversity and inclusion in the innovation process. The notion that people aren't prioritizing it is a little bit surprising to me, but also an opportunity."

Many investors are missing out on the market opportunity because they're just not doing the work, said Diishan Imira, CEO of Mayvenn, which uses stylists to sell hair extensions. Imira explained during the panel how he had to basically "start from zero" to get venture capitalists to understand what a hair weave is and why there is even a market around it.

"We don't need support. You guys are investors, you want to make money," Imira said. "What I'm saying, if you want to get some of this money, you should do the work and the research that there's not going to be ten million other investors competing with you to go get."

Of course, the ideas have to be viable in the first place, and it can be hard to know what's a good idea for venture capital versus what's a good idea for a small business unless you're already in Silicon Valley. 

Charles Hudson, a partner at SoftTech VC and one of the most visible African-American venture capitalists in Silicon Valley, said he feels like he has to make himself accessible to African-American entrepreneurs.

"I also feel a certain pressure to try to help African entrepreneurs who I think are talented not work on terrible ideas," Hudson said. "It's not that they're terrible ideas in general, it's just that they're not appropriate for venture. To me, that's not unique to African Americans."

He also admitted to feeling "an enormous amount of pressure backing an African American entrepreneur."

"Pursuing an African American business, for whatever reason if that investment that doesn't work, the buck stops with me," Hudson said. "You realize that for whatever reason that investment's failure is likely to be scrutinized to a greater degree than that SaaS company that didn't work out. And I think about that. I wish I didn't have to think about that."

Here's the "Black is the new Black" panel in full, which also included Shauntel Poulson of Reach Capital and Marlon Nichols of Intel Capital:

SEE ALSO: This conversation about black people in Silicon Valley tech was really awkward

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NOW WATCH: There Are Only 3 African-American Players In The World Series — Here's One Theory Why

Benedict Evans, the respected tech analyst at the big Silicon Valley venture capital firm Andreessen Horowitz, just published a fascinating dissection of the current state of tech investing which concludes that tech is not in a bubble because "it's different this time."

Basically, Evans says, while some measures of tech investing clearly show a boom, a whole bunch of important indicators are nowhere near their 1999 dot com bubble peaks. You can read his slideshow here.

The in-joke in Evans' presentation is that one of the most infamous anecdotal indicators that you're in a bubble is when people start rationalising the bubble by saying "it's different this time" or "this time it's different." Evans isn't literally saying "it's different this time." Rather, as his deck says, "it's always different!" 

Nonetheless, for those of us on tech bubble watch, you can argue that Evan's presentation provides as much evidence for the bubble as it does against. I have three issues with the deck:

• Whenever someone says "it's different this time" during a massive boom, it's scary (even if they're doing it in a sly, knowing way).
• Evans' data shows that the run-up in tech valuations is concentrated in a much smaller number of hands than it was in 1999. Back then, it was IPOs on the public markets, and anyone could buy the stock. Now, it is privately traded equity — which is much less liquid than regular stock, and concentrated in the hands of VC firms and their bank partners. So we're looking at huge valuations in a largely illiquid market, where the underlying assets are companies that haven't quite figured out whether they can actually turn a profit. What could possibly go wrong?
• Evans doesn't address the low interest rate environment, which most people agree is the underlying cause of the tech boom. Those rates are about to get reversed when central banks start raising rates to stave off inflation.

First, as a note from Credit Suisse said last week, one of the signs of a bubble is when serious people start arguing that there has been some sort of paradigm shift that makes it different this time. The Barron's contra-indicator is flashing the same way, too.

At a facile level, that is literally what Evans' presentation says: Tech IPOs are at a much smaller level than they were in the 1999 bubble because companies are staying private, taking longer, later rounds of investment, and the returns on those investments are staying private, too. (Uber is the ur-example of this — it has a $41 billion valuation after taking 10 rounds of investment totalling $5.9 billion.) This is the new funding paradigm for tech startups, although Evans does not use that term.

To be clear, this is not Evans' argument. It is my interpretation of his argument, and I suspect he will disagree with the way I have restated it. But still, a cynic can now say that we have a noted analyst in the field saying there is no bubble because the economics of tech are in a new paradigm and "this time it's different."

Those are mere optics, but not they're not good optics.

The interest rate question is much more serious. Central banks currently have interest rates set at zero percent. That means any investment that returns more than zero looks good right now. For investors, cash in the bank at 0% interest has been a waste of money. So money has poured into tech startups via venture capital firms like Andreessen Horowitz. Any startup that can return greater than zero looks valuable in this environment. When the US Federal reserve, the ECB and the Bank of England raise those rates, all the marginal business ideas that return just a few percent in profits will be wiped off the map — because no one will fund them.

That big incoming tidal wave of tech investment money, which started in 2002, may suddenly disappear. It looks like this, according to PwC:

After all, why take risks in tech if the bank suddenly starts paying interest on cash, and governments and corporations start offering even more interest on bonds as a result?

The corollary of this is what happens to tech valuations if the funding environment moderates downward. This is what Evans says the funding environment looks like now:

Clearly, a funding peak was reached in 2014 that was bigger than the 2000 dot com crash. But, Evans argues, that money has simply shifted from IPOs to private equity investments:

Again, note the 2014 peak is bigger than the one before the 2000 crash.

The thing with private equity is that it is difficult to sell. You can't just call up a broker like Fidelity or Hargreaves Lansdown and yell "sell!" down the phone. You have to know someone else who wants to buy it from you in a private transaction. It involves lawyers. It is usually easier to sell a house than to sell private equity privately.

So that big wave of money, that big runup since 2000, has gone into a largely illiquid set of investments.

As the world found out in 2007, when mortgage-backed securities suddenly became illiquid because no one wanted to buy them, that is a pretty good way to structure a market so that it will be more likely to crash.

And that's why I worry that the insiders who think tech is in a bubble are actually the ones who are right. 

There is a big caveat to all this: The 2000 crash was caused by companies going public when they had no revenues whatsoever — it was a literal bubble, like Dutch tulips or South Sea Company shares. Today, we're looking at companies that do have revenue or ways to turn on their revenues, so that factor suggests it's a strong boom not a bubble. But those same companies are often not-so-great at creating the profits that are supposed to ultimately deliver value to their shareholders. Seventy-one percent of companies that IPO-ed in 2014 had negative earnings — a level we last saw back in 2000.

One final note. Just to give Evans the proper level of credit — and to demonstrate that his analysis isn't unreasonable — here is that PwC data on tech funding deals with a longer timeframe than the one I showed above. You can see that, in fact, we aren't yet at the height we reached in 2000. But we're getting there ...

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Y Combinator is raising money to create a new VC fund according to forms filed with the SEC. 

It's called the Y Combinator Continuity Fund I. The company declined to disclose the amount raised, and the filing indicated that the first sale has yet to occur. 

Business Insider's Jon Marino first reported that Y Combinator was looking to raise several billion dollars for a fund in March.

According to sources, that fund would allegedly be used to support some of the incubator's largest investments, although it has told potential investors it would still be looking to continue its investments on the seed level.

This appears to be the company's first filing of this particular type, known as an SEC Form D. Y Combinator listed the Continuity Fund both as a 3(c)(1), which means the fund may not be owned by more than 100 shareholders, and a 3(c)(7), which narrows the investor pool down to 499 or fewer "qualified purchasers". 

Business Insider tried calling the phone number on the form for comment, but it was disconnected. Y Combinator did not initially respond to a request for comment.

The Continuity Fund could be Y Combinator's way of doubling down on some of the startup its backed in its early years, like Dropbox, Airbnb and Stripe. With tech IPOs drying up, more companies are staying private longer so Y Combinator may be looking to do some late-stage deals at higher valuations.

SEE ALSO: Y Combinator is raising billions, and it could be making a big change to its funding strategy

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After five months of toiling 14-hour days, making a hardware IoT product from scratch, and spending thousands of dollars of other people’s money, my two co-founders and I woke up with a jolt.

It suddenly dawned on us that our product would not sell. And unless we did something about it, the startup was doomed. This was December 2014.

Dreamy eyed noobs that we were, we made tons of mistakes. I hope this post helps you avoid some of those mistakes because as much as we glorify failure in the startup world, it does hurt. A lot.

July 2014

Let me back-track a few months to give you some background. In July, we started building smart internet connected switches that learn from user behavior and automate all the electronic appliances in a home.

We felt that it’s a pity that our search results and news feed are personalized to us but our homes, where we spend most of our time, are not. We had a vision that our switches will learn and personalize the electronic appliances in a home to its owner. We decided to name the company Lumos. (Yes, I am a big Harry Potter Fan!)

We took some pre-seed investment from an angel investor and headed off to our alma mater IIT Gandhinagar to get incubated. We converted a lab into our office space and the Lumos saga started!

We built like crazy. That’s the thing about us engineers; if you give us something interesting to build, we will forget everything else and just build. Our first prototype, which automated lights, was ready in 45 days.

The second prototype, which could automate lights, fans, ACs and water heaters was out in another month. This is really fast according to hardware standards.

November 2014

In mid-November, we got a product designer on board to design the final product. In December, we were already in talks with investors to raise the next round of funding.

We were on track to have a market-ready hardware product in less than one year. We were pleased with ourselves. The investors were pleased with us. Life was a bed of roses.

December 2014

Until it was not. We had underestimated the work that goes into making a market-ready hardware product. We had overestimated the demand and utility of our product.

We were wildly wrong about the price at which we thought our product would sell. And when all this realization came together, s--- got real.

January 2015-April 2015

We were forced into a deathly spiral of pivots that almost killed the company. We made bigger mistakes. We left IoT as a sector. We lost a cofounder on the way. The pivots are a long story. I’ll save it for another day.

Now that you have some background, here are the top 5 mistakes we made in Lumos and what we learned from them.

Mistake 1: We were neither experts nor target users of the product that we were building.

We had never used the existing home automation products in our homes. We were not experts in the IoT sector. When you have new at something, you give yourself the famous Dunning Kruger Pass on your decisions.

“The Dunning–Kruger effect is a cognitive bias wherein unskilled individuals suffer from illusory superiority, mistakenly assessing their ability to be much higher than is accurate.”

And we did give ourselves the Dunning Kruger pass. Had we been users of existing smart switches, we would have known that the incremental value that our product was offering was quite low. Had we been experts in IoT, we would have known how to price hardware and the difficulties in building it.

By avoiding this mistake, you can avoid a lot of other mistakes which happen as a result of this one.

Learning: Work on something where you are either an expert or a top user. If not, become an expert/top user.

Homejoy founder Adora Cheung herself worked as a professional cleaner to understand the business.

Mistake 2: We did not do the due diligence on the idea before we started building the product.

We did not understand the market and competition well enough. We also did not figure out the persona of our customer. And whether that customer was looking for the value that we were providing.

We did not question whether we would be able to provide that value in that first place.(Machine Learning cannot read the human mind. Not yet!).

It is always possible to validate or disvalidate a lot of assumptions about the product, market and competition without building the full-fledged product.

One way we could have done it was by selling existing products to our potential customers.

Learning: I learned this very useful method in an accelerator. Make a thorough list of hinge-breaking assumptions for your market, product and competition. Hinge breaking assumptions are those that can make or break your company.

Rank them according to probability of the assumption being wrong and subsequent risk to company. Start validating from the top while building as less as possible.

Mistake 3: We let sunk cost bias affect our decisions about pivoting.

It was not that we were clueless about the problems in our product. We had doubts in our minds. In a startup, you almost always have doubts. But we had built so much. We were in love with our product. And we were not ready to ask the difficult questions.

Is it okay to be doubtful about your product? Is it okay to voice your doubts and bring the team morale down?

Or make your cofounders feel that you are not as committed to the idea and the vision as they are?

It would have saved us a couple of months and some money.

Learning: It is absolutely necessary for founders to be committed to the vision of the company. However, there are multiple ways to achieve a vision. Don’t fall in love with one way. Accept the possibility that you might have to start things over from scratch.

Build a culture of transparency in your company. Encourage dissent among cofounders and deal with it objectively.

Mistake 4: We were trying to do everything for everybody.

We were making switches that could automate your lights, fans, ACs and water heaters. We would have tried to automate your TV, Fridge, Oven and Car as well had it been feasible to do so.

We were pitching power savings as well as luxury. This made the product and the pitch very complicated.

Learning: As a startup, you are constrained in resources. So it is always better to identify and solve one problem very well instead of solving n problems in a so-so way.

Nest solved the heating problem. Dropcam and Canary solved the security problem. Try to be a drug for your customer instead of being a vitamin.

Mistake 5: We underestimated hardware. 

Building a successful startup is hard. Building a hardware startup is 10 times harder.

Pebble, with all its Kickstarter success, is still in troubled waters.

Building a prototype is the easiest part of building a hardware startup. The real challenge comes in product design, production engineering, manufacturing, distribution and marketing/sales. And you need to have friends in China.

Also, hardware product validation and iteration cycles are much longer than software ones. Getting funding is relatively difficult; VCs ask for traction(~$1M on Kickstarter/Indiegogo last I heard) because of the inherent risk in a hardware startup.

Managing cash flows is hard because you have to pay your vendors months before you get paid from your customers.

Considering all this, we were not the right team to build a hardware company.

Learning: Understand what you are getting into if you are starting a hardware company and plan accordingly. Get experienced people on your team or get into a hardware accelerator like HAXLR8R.

Today.

Eventually, we ended up leaving hardware and IoT and decided to build something that solves a problem that we had experienced.

Since Gandhinagar (where Lumos was located) does not have many startups, interacting and sharing experiences with other entrepreneurs was always a big problem for us.

Also, we had to subscribe to a lot of blogs (crowded inbox) just to stay updated with top content on Entrepreneurship.

We decided to build FundaMine to solve this problem.

FundaMine is a community for professionals to stay updated and interact with others in their profession.

Currently, FundaMine has communities(mines) on Entrepreneurship, Product Management, Android Dev and IoT. Do check it out!

SEE ALSO: 22 entrepreneurs share the advice that made them successful

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