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The latest news on Startups from Business Insider

older | 1 | .... | 67 | 68 | (Page 69) | 70 | 71 | .... | 136 | newer

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    David and Goliath

    There is a new world order coming to Wall Street.

    Startups are taking on the financial sector. Some of the companies look to usurp traditional players, and others step into the gaps they've left behind.

    Business Insider spoke to venture capitalists and banking veterans to put together a list of lesser-known startups, some of which are just a couple of month old.

    The list includes companies offering online payments, loan origination, wealth-management software, cryptocurrency trading, and behavioral analysis for financial clients.

    Some are worth hundreds of millions, while others are bootstrapped.

    Every one is trying to find their place alongside the biggest names on Wall Street.

     

     

    Estimize keeps traders ahead of the tape

    Wall Street traders and banks are always on the lookout for top tools to sharpen their game. That’s where Estimize comes in. Leigh Drogen’s startup crunches data for hundreds of companies to get estimates to traders that might be ahead of the tape. One example is luxury brand Coach, according to Drogen, who told Business Insider: "Our consensus is well below Wall Street and the stock has been correspondingly getting crushed on the lower real expectations.” Estimize closed a new funding round earlier this month, taking the total for money raised to more than $6 million to date. The firm is up against established players like Thomson Reuters’ First Call, among others.  



    Exitround looks to simplify the M&A process

    The M&A process is one of the most secretive parts of the business of Wall Street. Slipping up and leaking details might disrupt a deal or publicly embarrass executives. Exitround’s software allows companies to shop themselves anonymously to potential buyers. Its network includes 30,000 client companies and private-equity firms and other investors, and uses more than 1 billion data points to help pair off companies up for sale with those looking to make an acquisition. 



    WealthFront is taking on money managers

    WealthFront CEO Adam Nash says that method of money management is outdated and inefficient. Wealth-management units at the big banks are often bloated, as there is a limit to the number of accounts money managers can control, which can be as few as six. “It’s a ratio that doesn’t need to exist,” he says of the banks’ personnel-heavy business model. “There’s only a few solutions to that problem.” Customers can sign up to WealthFront with as little as $500, and the startup doesn't charge them for the first $10,000 it manages. As millenials save and inherit more, digital finance-management tools could displace a huge revenue driver at banks.



    See the rest of the story at Business Insider

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    adrien grenier bosco

    Adrian Grenier, the actor and filmmaker best known for his roles in HBO's Entourage and The Devil Wears Prada, thinks that entrepreneurship can change the world.

    It's something he knows a little bit about: In addition to his career in show business, Grenier is a frequent tech investor, the cofounder of startups like a hipster beer company and the sustainability lifestyle media company SHFT.

    And as of this past March, Grenier holds the title of "Social Good Advocate" for Dell. 

    "The most effective way to do well for the planet and people is by creating a business that can scale, so that the good that you do scales," Grenier says.

    It's a concept called "social entrepreneurship."

    In fact, this past weekend in San Francisco, Grenier was a judge for the final round of a startup competition called The Venture, where "social entrepreneurship" startups (tackling issues like affordable food, water conservation, and climate change) competed for seed money and extra mentorship. 

    "We recognize that we all have to get together to solve the world's greatest problems," Grenier says. "That means not just paying lip service, but actually handing off the baton to some youngsters, to some people who are entering the market with some new ideas."

    Michael DellThis concept of "social entrepreneurship" is important for more established businesses, too, Grenier says: His role at Dell has given him access to billionaire CEO and founder Michael Dell, who recently said something that particularly inspired him.

    "You have to recognize this is about my legacy, about our legacy," Grenier recalls Dell telling him. "And we have to recognize that what we put out in the world... we should be responsible for what we put out."

    After all, it's literally Dell's name on every piece of discarded hardware and trashed packaging that makes its way to a landfill or a riverbed, and it's important to take responsibility. 

    But for anybody trying to change the world via a business, "the most important thing" is to set realistic goals, Grenier says.

    "In any business, or any social entrepreneurship, you dream big, you look to the sky, but keep your feet on the ground," he says. "Social goals are the same as business goals, you have to scale slowly."

     It's just a matter of passion. And with The Venture competition, Grenier says that he's looking at the founders themselves with as much scrutiny as the ideas they're presenting. 

    "The people who are in the position to succeed are those most likely to take it to the finish line," Grenier says.

    SEE ALSO: Uber is now mainstream enough that it's used as a punchline in the new Entourage movie

    Join the conversation about this story »

    NOW WATCH: Warren Buffett is in the new trailer for the 'Entourage' movie


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    carlos slimThe ability to generate conclusions about hedge fund managers’ behavior could be the tipping point for whether big investors double down in hard times or call for redemption. 

    Picking billion-dollar hedge funds is big business. 

    Especially now, with major investors like CalPERS needing to trim their billion-dollar lineups of Wall Street fund managers.

    There is one startup out to change the pecking order on Wall Street that could dramatically change this process. AltX has been creating in-depth profiles that investors like CalPERS could really use as it is forced to whittle down its massive list of hedge fund pros. Next, it will take its analytics to mutual funds. 

    AltX’s parent company IMatchative has raised about $28 million to date, and from some boldface names. Billionaire Carlos Slim’s investment group Control Empresarial de Capitales backed the product last year.

    He invested in IMatchative's Series B round alongside backers like David Bonderman (one of the heads of private equity firm TPG Capital), Wells Fargo, and Value Act Capital founder Jeff Ubben. There are more than 20 investors behind IMatchative and AltX, many of them hedge fund professionals.

    The company has only been operating live for a few months and has 20,000 people in its database, but IMatchative CEO Sam Hocking says this will grow to include 100,000 fund managers and other investors before the end of the year. 

    It creates proprietary behavioral profiles of top fund managers using everything from divorce records to political donations — but it doesn’t come cheap. For limited partners (like CalPERS, for example) it costs $30,000 for a subscription. For hedge fund managers, it's $15,000. Hedge fund managers can also sign up for a free version of the product that doesn’t have all the info limited partners pay to receive. 

    Financial services firms have long sought to create a product that provides investors with insight into money managers’ mentality. But having a complete behavioral profile of portfolio managers may bring the CalPERSes of the world as well as smaller hedge fund backers peace of mind — and a better shot at dodging a black swan when hard times hit the market.  

    Join the conversation about this story »

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    EDITD founders Geoff Watts and Julia Fowler

    London's startup scene, while smaller than Silicon Valley, is growing fast. And many of the CEOs, cofounders and VCs who work within the London startup scene are part of tech "power couples," marriages and relationships between influential entrepreneurs. 

    We ranked London's tech couples according to how influential they are, how big their companies are, and what impact they've made in the London tech scene.

    13. n0tice COO Adam Baker and Reel cofounder Meera Innes

    Adam Baker is the COO of n0tice, a platform that lets publishers share user-generated content. It's owned by the Guardian Media Group (which also owns The Guardian newspaper). Baker oversaw the company's move from being part of The Guardian to being spun out into its own entity, and the technology is now used by the UK Parliament, CNN and The Boston Globe.

    Baker's partner is Meera Innes, the cofounder of video messaging app Reel. It's aimed at the Indian market, and lets users send 20-second videos to their friends and family. Innes cofounded the app with Baker, and now spends her time between London and Bangalore managing the company's staff.

    Twitter:@meerabel



    12. Sugru cofounders Jane Ní Dhulchaointigh and James Carrigan

    Sugru is a type of self-setting rubber that was invented in 2003. Stick it onto something, then wait overnight, and you have a ready-made fix that can repair holes, change grips, and work as a kind of superglue. Unlike other products, Sugru can be shaped by hand and sets within minutes. 

    Dhulchaointigh, from Ireland, used government grants to develop the material. In 2012 the company had over $2 million in annual sales. She started the company with her partner James Carrigan, who also went on to launch Fixperts, an online knowledge-sharing platform.

    Twitter: @janeonbike



    11. Lulu CEO Alexandra Chong and photographer Jack Brockway

    Alexandra Chong is the CEO of Lulu, the app which lets women rate men and discuss relationships. Chong originally founded the company in London, but moved Luluvise (as it used to be called) to New York. Once in the US, the app took off, and Lulu says that it's on the smartphones of one in four female university undergraduates in the US. The app launched in the UK earlier this year, and Chong will now spend much more time in the country.

    Chong married her partner Jack Brockway in June. It was a lavish wedding that took place in Jamaica, and guests included Google cofounder Sergey Brin, Kate Winslett, and Brockway's uncle, entrepreneur Richard Branson. Brockway is a professional photographer who has photographed musicians, sports stars, and his entrepreneur uncle.

    Twitter:@alexandracchong, @hijack



    See the rest of the story at Business Insider

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    monster truck

    The messaging product that's out to claim market share from Bloomberg is raising new money, The Wall Street Journal reports. 

    Symphony Communication Services is raising an unspecified amount of cash at a valuation of up to $1 billion, according to the report.  

    Symphony is currently testing out its chat network with investment banks and other clients. The company expects to fully launch its chat system later this year. 

    Investors in Symphony include Goldman Sachs, JPMorgan, Bank of America, Citigroup, Credit Suisse, Deutsche Bank, Wells Fargo and other financial services firms. Symphony was developed after the network of financial services firms led by Goldman acquired and rebranded another messaging platform named Perzo in 2014. 

    The news of the fundraising effort comes less than a week after The New York Department of Financial Services' Anthony Albanese sent a letter to the company's leadership requesting more information on Symphony's privacy settings. 

    Symphony's rapid development comes as investors are pouring more money into the fintech sector, pitting digital startups against big banks and other companies in the financial services sector. Funding for fintech is currently at a post-crisis high.  

    The messaging space is also heating up. Slack took on about $160 million at a valuation of about $2.8 billion earlier this year. 

     

     

    Join the conversation about this story »

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    Deliveroo CEO William Shu

    Deliveroo, the London meal delivery startup that works with restaurants across Europe, has announced that it has raised $70 million in new funding.

    The Series C funding round was led by Greenoaks Capital and Index Ventures, and Deliveroo's existing investors Accel Partners and Hoxton Ventures also participated.

    Deliveroo lets customers order food from participating restaurants, and the food is brought to their door. Even if a restaurant doesn't do takeaway food, it can easily partner with Deliveroo to start an online takeaway business.

    The company gives restaurants a tablet and bluetooth printer, and that's all they need to start taking online orders. Deliveroo handles the packaging, deliveries, booking, and works with venues to establish their online menu.

    Customers aren't limited to a small selection of restaurants on Deliveroo, either. The platform works with over 2,000 different locations including Gourmet Burger Kitchen, MEATLiquor and Wagamama. It even works with a Michelin-starred restaurant: Trishna in London. It specialises in coastal food from south-west India.

    Deliveroo already raised money this year, bringing in £16 million back in January. Deliveroo says that daily orders have increased by 500% since it raised money in January, and it has now launched in France, Germany and Ireland. The company declined to reveal its revenues.

    CEO William Shu told us back in January that the company has three key areas where it's spending its funding. First of all: it's focusing on geographic growth. Deliveroo is expanding to European cities, the Middle East and Asia. It's also planning on investing in marketing and technical development for the platform.

    As part of the deal, Greenoaks Capital managing partner Benny Peretz will join the board of Deliveroo. He previously founded mobile gaming company PennyPop.

    Another London restaurant app raised a stack of money earlier this money. Flypay brought in $10.7 million in funding in a round led by media group Time Out. The app lets customers order food through the app, and then pay for it too. It's so simple that you never have to talk to a waiter again.

    Join the conversation about this story »

    NOW WATCH: There is a secret US government airline that flies out of commercial airports


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    Radius_Darian_Shirazi

    Darian Shirazi started his career at 15 years old, when he made his name reselling computer components on eBay. His sales were so impressive that eBay ended up offering him an internship for the next two summers.

    Soon, Shirazi was able to build some strong connections in the Valley, and got himself hired as Facebook’s first-ever intern when there were just about 12 total employees. He worked directly under Facebook CEO Mark Zuckerberg for nearly two years before pulling himself out to go to college.

    His time at Facebook landed him more money than most 20-somethings could ever imagine, but Shirazi didn’t stop there. He went on to launch a startup called Fwix, a hyperlocal news aggregator that crawled the web for local news and related content, building up a database that media companies could use to generate leads.

    The company saw good traction early on, and in 2011, even got a $35 million acquisition offer from Google. Most 24-year olds would have taken the money in a beat, but Shirazi saw a bigger opportunity there.

    “I felt as though if [Fwix] was good enough for Google, it’s probably good enough to build something independent,” Shirazi told Business Insider. “Of course, I was afraid [to decline the offer] but it was worth the risk. The juice was worth the squeeze.”

    After turning down Google, Shirazi pivoted his company to target all kinds of businesses instead of just media companies, turning it into a predictive marketing software company called Radius. Its software looks at millions of data signals to identify potential customers, while helping run marketing campaigns to acquire them and analyze their performance.

    In the three years since its pivot, Radius has grown into one of the more popular marketing software companies, drawing top Valley investors. And on Wednesday, it announced a fresh $50 million round led by Peter Thiel’s Founders Fund, joined by Jerry Yang’s AME Cloud Ventures, Formation 8, and Salesforce Ventures.

    Shirazi declined to disclose the valuation of his company, only saying it’s between $500 million and $1 billion. He did say Radius’s revenue has grown 400% in the past 12 months, doubling its valuation, which explains why the company was able to raise again just 10 months after its $54 million Series C round in September. Radius has raised a total of $125 million to date.

    Shirazi said most of the money will be spent on ramping up his sales team, as he plans to make a stronger push towards more Fortune 500 companies to use his product. Shirazi hopes these efforts will lead to a wider deployment, and ultimately a bigger company.

    “We want to become the de facto marketing platform for CMOs,” he said. “I want to build a company that’s going to be here forever.”

    SEE ALSO: A new app lets anyone with a startup idea instantly chat with investors at VC firm Kleiner Perkins

    Join the conversation about this story »

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    Catawiki cofounders René Schoenmakers and Marco Jansen

    Dutch startup Catawiki has raised a huge Series C round of funding: $82 million in investment from Lead Edge Capital, as well as existing investors Accel and Project A Ventures.

    Catawiki isn't a normal auction website like eBay. Instead, it's geared towards collectors who are looking to sell unique or collectible items online.

    The company was started in 2008 by comic collector René Schoenmakers and developer Marco Jansen. The site was originally a Wikipedia-style listing of auction catalogues, but in 2011 it started to host the actual auctions on its site.

    Log onto Catawiki and you'll see listing for diamonds, Rolex watches, fossils and even classic cars. It's like a high-end eBay for specialist collectors.

    Catawiki

    Here are some of the rare items that were recently sold on the site:

    • A strand of Napoleon’s hair
    • A Tyrannosaurus rex jaw
    • The first Tintin comic
    • AJaguar E-Type convertible
    • A bottle of 1975 Romanée-Conti Grand Cru

    Catawiki announced, along with its funding, that it has seen revenue increase by 300% in the last year, and that it is now selling 15,000 lots every week. It declined to share information about its valuation or revenue. Lead Edge Capital operating partner Lorrie Norrington will become an advisor to the business as part of the deal. The company previously raised a €10 million Series B round in September 2014.

    The new funding makes Catawiki one of the best-known startups in Holland. Other successful tech companies in the country include Blendle, which lets readers pay per magazine article, and Silk, which lets users create visualisations of data.

    Join the conversation about this story »

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    There is a funny dynamic going on in the San Francisco office market. Landlords are thrilled. The strength of the startup economy and the migration of startups from the Peninsula to San Francisco have led to the lowest vacancy rates ever and tremendous increases in price per square foot. The 42Floors research team contacted Garrick Brown, Vice President of Research at commercial real estate brokerage DTZ.   Check out the crazy rise in prices and corresponding drop in vacancy rates.

     

    SF office space

    Because of this incredible demand for office space and the resulting low vacancy rates, landlords have been able to push rents higher and higher, which has allowed them to take tremendous amounts of money off the table as well as continue to invest in their assets. So why do you still hear of startups struggling to get their offers accepted by a landlord? To the casual observer you may just believe that it is a tight market and the competition is fierce, but actually there is more going on.

    Many landlords (though certainly not all) are trying as hard as they can to get non-startup tenants right now. We at 42Floors recently experienced this firsthand when we were searching for our new office space.

    So our 42floors research team started digging and we found that there are actually a whole bunch of reasons landlords are avoiding startups right now, even though they’re grateful for having them as current tenants in their buildings.  Here’s what we learned:

    Why Landlords Don’t Want to Lease to Any More Startups

    foosThey want a balanced portfolio.

    This is the most common response we’ve heard from landlords. Landlords look at their tenants as a portfolio of revenue streams and risks. Diversifying that portfolio across their buildings means that they want leases that end at different dates so that a building never goes a hundred percent empty. And they want varied credit risks that are uncorrelated from each other. This is where it hits startups really hard.

    When a landlord already has a large percentage of their lease revenue coming from startups, they look to diversify it with non-startup leases under the assumption that if the startup economy goes south, it will take many of the startups with it. Many of the landlords remember back to the dot com bust. Back then, it was law firms, architecture firms and other slower growth, but profitable companies that kept the dollars flowing when the startup offices went vacant.

    If you’re a startup putting an offer for a space in which a non-startup is competing on even remotely similar terms, the landlord that is over-weighted with startup leases will likely choose what is not necessarily a safer bet, but is certainly a different bet.

    Landlords have almost no tools to evaluate a startup’s credit risk.

    Here in San Francisco, the startup capital of the world, even a full decade after the startups moved from Silicon Valley to San Francisco, landlords are still struggling to evaluate the credit risk of a startup. The standard tool of choice for all landlords is to read a potential tenant’s financial statements. When you read the financial statement of the average startup, it’s not pretty. Even a relatively low burning startup still looks downright scary to a landlord – costs exceeding revenue, balance sheet dwindling down, etc.

    I recently had a landlord ask me about one of the highest profile unicorn startups in the city, wanting to know if it was a reasonable credit risk for one of his buildings. As I tried to explain that their costs were so high because of their tremendous growth rate, this landlord’s eyes just glazed over. He eventually declined the lease offer and picked a slower growing (but traditionally profitable) energy company.

    Landlords don’t want to get in the startup evaluation business. While they do like the prestige of a famous startup and what it may bring to the environment of their building, they’re mostly just afraid of the company failing in the next 5 years.

    OfficeMost lease terms are longer than the current financial runway of a startup.

    Scan our list of office leases. You’ll see that most are pushing five years on anything over 2,500 square feet right now. Landlords are simply taking advantage of the fact that it’s a tight market and they can push for longer terms even if it’s not what the tenant wants. Even the best funded startup almost never has a five-year runway.

    While a more established profitable companies may have a much smaller balance sheet than a well funded startup, they can show an infinite runway.

    They’re fatigued with sub-sub-subleases.

    Startups that do well may have to lease a space for 5 years, only to move out after only nine months because of their growth. To the startup this is fantastic news, but to the landlord it’s the beginning of an annoying sublease process as they are constantly spending money on their lawyers to approve each sublease.

    Our last office was leased to MoPub, which then had the lease taken over by Twitter following their acquisition, who then subleased it to us. We then sub-subleased half the space to Big Commerce, who grew out of it in 6 months and sub-sub-subleased it to another company, which split with it with one other startup.

    At one point, we needed to change something. It required coordination of 5 signatories of 5 different companies, each counseled by their own broker and lawyer.

    forrentLandlords believe the economic apocalypse is coming.

    I’m actually stunned how similar landlord opinions are in this regard. This little insight has spread through the landlords and brokerage market with incredible consistency: Most economic cycles are 7 to 10 years long.  In 2018, it will have been 10 years since the last big economic dip. So simply by the law of averages, they’re planning their office terms assuming there will be some big downturn in 2018 and they don’t want to have startups that are dependent on future fundraising in their spaces when it hits.

    Even Large Security Deposits Don’t Matter.

    In response to landlords being squeamish about startups’ risk, some startups are using their venture capital backed balance sheets to offer large security deposits. They are basically saying, “Look, I know you don’t trust my long term credit, but you’ll have so much of my money in your bank account that even if I do default you’ve got plenty of money to cover any vacancy period.”

    But, while a very large security deposit seems like it should calm those fears, most landlords, especially those who are professional asset managers, are trying to avoid problematic tenant situations, not just decrease the financial risk of the problem.

    They know from experience that when a tenant starts to struggle to pay their rent, they begin negotiating with their landlord to give back some or all of their square footage early. If, as a landlord, you believe that the market will continue to go up then this is not such a bad thing because you may be getting space back that you can then re-lease at a higher price point. Landlords in this case can even double-dip by charging the outgoing tenant a penalty while simultaneously bringing in a new tenant at a higher price.

    However, as a landlord, if you believe that we’re near the top of the market (as most landlords in San Francisco do) then your expectation is that in 2, 3 or 4 years, when tenants want to do a renegotiation, you’ll have to fill that space with a tenant at a lower price. And if that tenant signs on for a long term lease, then the landlord just locked in that lower price.

    All of this hand wringing is the type of issue that the landlords are trying their hardest to avoid. What they want is to lock in these high prices that startups created and then pick non-startup tenants who can pay them. It’s actually quite brilliant.

    *** 

    So what’s a startup to do? The reality is the high price of commercial real estate is the inevitable flip side of the low cost of capital. If you want to be a San Francisco startup, you’re going to pay up for office space. You’re going to be in a competitive market with space going usually in days, but often before it even hits the market. And you’re going to be stuck accepting longer term leases; and that’s if you can successfully win the tenant selection process.

    We’re starting to see more startups fill-in in the ancillary areas outside of SoMA like the Mission, Mid Market and North of Market. We’re starting to see a few make the jump to Oakland where space requirements doubled last year. And we’re seeing a large rise in the sublease market as there are more and more startups with five-year leases that only stay for a-year-and-a-half.

    SEE ALSO: A startup celebrated being acquired by eBay by leaving trash in a park, only to return to clean it up

    Join the conversation about this story »

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    hackers computer laptop working

    For startups trying to hire engineers in Silicon Valley, it's not just about affording high salaries.

    Recruiter fees are also a big deal, according to a discussion on Twitter among founders on Thursday.

    One Silicon Valley founder spent $500,000 in recruiter fees in 12 months to hire 15 engineers, tweeted startup founder Sten Tamkivi, CEO of Teleport, a startup building software to help people re-locate for new jobs or work remotely.

    So that startup paid out over $30,000 per head to the recruiter. And that's typical. Headhunters often charge 20-30% the entire package: salary, stock, and any signing bonus.

    The average salary for a software engineer in Palo Alto, heart of Silicon Valley, is $108,000, according to Glassdoor. But the big companies in that area tend to toss in cash bonuses (often another $15,000) and stock (another $50,000+).

    So call that $150,000 per engineer + $30,000 to the recruiter, and you can start to see how startups can burn through some cash.

     

    SEE ALSO: 'He was literally a rocket scientist. And even he couldn't figure out Windows.'

    Join the conversation about this story »

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    Sole's OFW bike

    The leisure bike market is leaving high-speed bikes in the dust.

    Total U.S. sales of leisure bikes shot up nearly 20 percent during the 12 months ending March 31, 2014, while racing bike sales fell 3 percent during the same period, according to data from market research firm NPD Group. With U.S. cities adding more bike lanes and consumers shifting to more environmentally-friendly transportation, the growing popularity of recreational bikes is expected to continue. Cashing in on this trend are companies selling simple, stylish and affordable bikes, primarily online. 

    So who is leading the pack in the bicycle market? Here are three fast-growing startupsproving that the e-commerce model is gaining traction with bike-lovers.

    1. Solé Bicycles. Founded in 2009 by a group of college students, Venice, California-based Solé Bicycles sells fixed-gear and single-speed bikes for $399. Annual sales have grown from $650,000 in 2012 to $2.1 million in 2014, according to the company. Solé co-founder Brian Ruben says he was fortunate to launch the startup right when fixed-gear bikes started growing in popularity, but that Solé was among the first startups to offer the bikes for less than $1,000.

    How does the company turn a profit at such a reduced price point? Solé's direct-to-consumer model allows it to cut out retailers that act as middlemen and mark up the price. The company has a retail location in Venice but generates about 85 percent of its sales through online orders. Solé's bikes are 90 percent assembled upon arriving at consumers' front doors. Aside from a $15,000 small business grant from the University of Southern California and a $10,000 loan from the founders' parents, Solé has yet to take outside investment.

    2. Priority Bicycles.The winner of Inc.'s most recent Best in Class Design award in the personal transport category, Priority Bicycles was founded in July 2014 by Dave Weiner, a former software consulting firm CEO. Weiner launched the New York-based company via a Kickstarter campaign that raised more than $550,000 on just a $30,000 target. What's his marketing secret?

    Weiner focused on creating a low-maintenance bike by using puncture-resistant tires that almost never go flat and a chainless belt that doesn't rust. A lightweight aluminum frame also makes the bikes easy to carry up stairs. Assembly takes about five minutes, according to the company, and like like Solé, Priority sells its bikes online for $399. The company generated half a million dollars in sales during its first six months in business. 

    3. Villy Custom. Former fashion designer Fleetwood Hicks founded Dallas-based custom bicycle company Villy Customs in 2009. Three years later, with $250,000 in annual sales, Hicks pitched his business on ABC's Shark Tank and landed a $500,000 investment from Mark Cuban and Barbara Corcoran. Sales reached roughly half a million dollars in 2014 and are projected to hit $2 million in 2015.

    Villy Custom makes classic "cruiser" bikes that only come in one speed. The company lets consumers pick either a men's or women's bike frame online, and then choose custom colors for everything from tires and wheels to pedals and grips. Orders typically take between two and three weeks to ship, and the bikes cost between $500 and $600. Villy's corporate program has made bikes for brands including Pepsi and energy drink Monster, and the company has celebrity customers in Aerosmith's Steven Tyler and British pop group One Direction. 

    SEE ALSO: Ford just announced one of the most high tech bikes ever

    Join the conversation about this story »

    NOW WATCH: For $7,000 this bike will get you to work in half the time and keep you from breaking a sweat


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    eden

    No more waiting in line at the Apple Genius Bar only to find out you needed an appointment for that kind of repair.

    A new on-demand startup wants to take the headache out of getting your phone, or anything tech-related, fixed. And to do that, they're willing to visit you at your house or take care of it while you're shopping in the mall.

    Joe Du Bey first thought of Eden when he visited his parents in Seattle for Thanksgiving last fall. He was greeted not only with a large meal, but also an equally large to-do list of technical problems his parents needed fixed.

    As Du Bey describes it, his parents are "tech-forward but not tech-savvy" and installing things like Nest Thermostats or configuring wireless networks doesn't come naturally. 

    To fix both his parents' problems and the technical frustrations many Americans face, du Bey and his co-founders launched Eden, an on-demand tech support company. Eden will dispatch a "wizard" to your house to fix any problem for you, whether it's setting up a printer or configuring an Apple TV.

    The company is named Eden, after all, because "it's a suggestive place where everything works," Du Bey said. 

    That means they'll even be the ones to call Comcast for you when you need it.

    Eden, though, isn't sticking with only an on-demand model. Du Bey told Business Insider that the startup is opening a kiosk Monday —aptly called the Wizard bar — in San Francisco's Westfield Mall.

    Movie-goers and shoppers can drop off their phones with cracked screens or their computer that needs repairs and the Eden team will take care of it on-site. If you can't stick around, the team can set up an appointment to dispatch one of its wizards to your house at your convenience.

    Eden's repairs cost $69 hour, billed in 15-minute chunks, although the first hour is free for first-time customers. Repairs for cracked phone screens are billed at different rates because of the cost of the glass.

    SEE ALSO: Another on-demand startup just turned its workers from contractors to full-timers

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    luxe

    When on-demand cleaning service Homejoy shuttered its doors last month, it pointed the finger at the lawsuits the company faced over its decision to classify workers as independent contractors instead of employees.

    However, many of the on-demand companies who have recently re-classified their independent contractors as employees — or who began doing business by only hiring so-called W2 employees — say blaming legal reasons is just a sideshow.

    The real reason companies are switching is that it just makes a better business.

    "There's a lot of noise around legal," said Joe Du Bey, CEO and co-founder of Eden, an on-demand startup that sends out "wizards" to fix technology.

    Eden is the latest startup to make the decision to transition Eden's workers over from contractors to employees. It's been a summer of change as Instacart, Shyp and Luxe all flipped their labor force to employees.

    The distinction between worker classifications, once the province of labor and employment attorneys, has become a lightning rod in the booming technology industry. New on-demand services, from ride-hailing company Uber to home-delivery service Instacart, all rely on armies of workers to run errands, park cars and handle other jobs.

    A bevvy of recent lawsuits assert that some companies have improperly classified workers in order to keep their costs down. The lawsuits have raised fears that the entire business model that underpins some of today's most richly-valued start-up companies could be at risk. 

    According to some start-ups though, putting employees on the payroll is not incompatible with providing an on-demand service. 

    Eden's Du Bey said the company needed to ramp up employee training on the technical and customer service side if it hoped to continue to receive five-star reviews and to garner repeat business. Too much training would violate independent contractor status, so it's a mutually beneficial arrangement to switch. Eden ends up paying its "wizards" $30 an hour.

    "A lot of companies look for the easy way out," Du Bey said. "To be a company that has the potential to wow someone, there is no other way."

    Full-time can mean flexible

    The difference between the 1099 workers and W-2 employees, according to the IRS, is that for common-law employees, employers "must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid." The same is not necessarily true for an independent contractor.

    In addition, benefits are often extended to employees but not independent contractors, and employers have the right to control how a worker behaves — how to dress, for example, or specific customer interaction protocol — when they're an employee and not an independent contractor.

    Luxe Valet originally had its workers as W-2 employees, but switched early on to independent contractors or "1099s" as they are referred to in the industry because of the flexibility it offered the workers. Switching back to W2 won't necessarily curtail the freedom of its valets, but it will give Luxe the sizable boost in control that it craved as a business and the end result changes the consumers experience.

    "We knew that we could have better services if we could tell them what to do and to give them more training," said Curtis Lee, co-founder and CEO of Luxe Valet.

    Curtis Lee, luxe valletSo far, the company hasn't had a single valet leave during the transition, Lee said.

    Now, Luxe has the ability to assign valets to certain areas to ensure coverage throughout the city like in Noe Valley and Glen Park. Otherwise, they would all go to San Francisco hot spots like SOMA and the Financial District.

    Munchery, an on-demand meal delivery service, opted for W2 employees because of the level of personalization it can add to the business as well. 

    Drivers get to know repeat customers and the locations they live, so they know to drop food off at the back door or the easiest place to park on the block, said its CEO and co-founder Tri Tran in an interview with Business Insider in June.

    The cost versus benefit

    Switching to W2 employees can mean a significant increase in costs. 

    Munchery says that hiring its drivers as employees adds an estimated 20%-30% to cost per hour.

    "However, the aggregate increase in labor cost is lower because classifying team members as employees improves retention and enables us to train them, increasing their efficiency," Munchery's VP of operations, Kris Fredrickson told Business Insider in July. "The primary additional costs a company that issues W-2s must bear are payroll taxes, workers' compensation premiums, and employee benefits for qualifying employees."

    Lee said that Luxe's costs to switch are lower though because its valets don't need cars or have to be reimbursed for mileage — the customer is the one that's providing that. Luxe instead supplies the jackets and phones its valets need, but not the ubiquitous blue Razor scooter that's also become associated with the brand, Lee said.

    Despite the increased costs, Lee is hopeful that the costs of mistakes will go down and customer satisfaction in a consistent experience will go up to balance the effects of the switch.

    The company make a conscious decision to place people in certain locations rather than having to react to where its valets were before.

    "Now we can push them," Lee said. "Whereas pull was the model before."

    SEE ALSO: Another on-demand startup just turned its workers from contractors to full-timers

    Join the conversation about this story »

    NOW WATCH: This CEO raised his company's minimum wage to $70,000 a year — and his two best employees quit


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    PlayBuzz Tom Pachys

    About 18 months ago, an Israeli startup called PlayBuzz launched its first product, a tool that lets bloggers and news sites create quizzes and photo lists.

    And it's been a runaway hit.

    The startup was already on the radar because of the company's CEO co-founder, Shaul Olmert. He's the son of disgraced former Israeli Prime Minister Eh ud Olmert. (Olmert is heading to jail, convicted on bribery charges, the first Israeli premier to be sentenced to time behind bars.)

    Despite that notoriety (or ma bye because of it), PlayBuzz has not only thrived but has grown shockingly fast, to the delight of its CTO co-founder TomPachys.

    This growth is because a few weeks after PlayBuzz launched, someone created a quiz using its platform that went viral on Facebook. This caused people to flock to PlayBuzz and start creating and sharing their own quizzes.

    That post, called "Who Were You In Your Past Life?" was read by 17.5 million people and shared 5.8 million times.

    "I still remember the date. February 24, 2014," co-founder Tom Pachys told us. Until then, the quizzes people created had gotten a "few hundred users daily," he recalls. This one hit 100,000 in an instant.

    That also meant that the site went down, repeatedly, buckling under the traffic. Pachys and his small team spent the next two weeks at the office, coming up with creative emergency fixes as they experienced phenomenal traffic spikes that even their wildest predictions hadn't prepared them for.

    In numbers: PlayBuzz went from:

    • 3,000 users in December 2013 to 
    • 13,000 users in January, 2014 to
    • 3 million in February to 
    • 12 million in March 
    • ... and today counts 94 million people as users.

    PlayBuzzPachys, 30, couldn't be more delighted. He told us he was destined to be a tech kingpin, teaching himself to code in grade-school kid and earning money in high school by building websites.

    In fact, it was in high school that he met Olmert, more than a decade older than him. Olmert was doing a short stint as a high-school computer programming teacher and Pachys was one of his students. Shortly after that, Olmert moved to New York and got work in the media industry, working for Oberon Media and then for Nickelodeon.

    Olmert never forgot his coding wunderkind and even lined up a month-long internship for Pachys at age 15, across the ocean from Israel in New YorkPachys told us. (His mom reluctantly letting him to the US for the job.)

    So when Olmert decided to launch a company to help publishers mimic Buzzfeed's success, he called Pachys to join him. Pachys in turn, called his army buddy Yaron Buznach, and the three founders got to work.

    No revenue? No problem!

    Today, PlayBuzz has raised about about $21 million in venture funds (a decent amount by Israeli standards), has 80 PlayBuzz employeesemployees, mostly in Tel Aviv but also in offices in New York, London, and Germany. Its quizzes and photo lists appear on thousands of websites, from AOL to HuffPo to Yahoo to tiny blogs.

    True, it has no revenue although that doesn't worry Pachys much yet. He says the company has no plans to charge for PlayBuzz. It does plan to run ads with a revenue-sharing model.

    So what is the secret to PlayBuzz's viral success? Trying stuff and collecting data, Pachys tells us.

    "I'm obsessed with analytics. I have a personal fetish for data. It tells you how to build good products," he tells us.

    Here is the quiz that turned PlayBuzz into a viral sensation:

     

    Join the conversation about this story »

    NOW WATCH: People doing backflips on a two-inch wide strap is a real sport called slacklining


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    josh tetrick mayo

    Something's rotten at Hampton Creek.

    More than a half-dozen former employees who spoke to Business Insider say that the company used shoddy science, or ignored science completely, stretched the truth when labeling samples, and created an uncomfortable and unsafe work environment, partly in an effort to meet production deadlines.

    Those are bold claims levied at a startup with an equally bold vision to change the world.

    We described the claims in this story in detail to Hampton Creek executives and Hampton Creek's CEO Josh Tetrick. Everyone declined to comment on the record.

    A vision to change the world

    San Francisco-based Hampton Creek has said it's on a mission to change food by eliminating animal products. Part of that mission is making the egg obsolete by replacing it with plants.

    The company's CEO, Josh Tetrick, is a vegan who grew up in Alabama before he went to West Virginia University to play football. After he switched schools and graduated from Cornell, he spent seven years working for nonprofits in sub-Saharan Africa.

    He first launched 33Needs, a crowd-funding website, before he teamed up with childhood friend Josh Balk, who works at the Humane Society of the United States, to find a way to reduce dependency on animal products.

    Hampton Creek tastingThe 3-1/2-year-old startup already has a popular line of eggless mayo, called Just Mayo, in stores from Costco to Wal-Mart. This product recently replaced all of the mayo used in 7-Elevens.

    Hampton Creek is working on cookie dough, pancake batter, and a complete egg replacement.

    All these products use plants to replace the eggs. In the mayo products, it's a yellow-pea protein. In the cookies, it's sorghum.

    The startup has raised more than $120 million, according to CrunchBase, including investments from Asia's richest man, Li Ka-shing. Bill Gates, an indirect investor, singled it out as a company shaping the future of food.

    Hampton Creek's other investors are big names in Silicon Valley, too. Hampton Creek has investments from Yahoo founder Jerry Yang, Khosla Ventures, Founders Fund, Facebook cofounder Eduardo Saverin, and Salesforce CEO and founder Marc Benioff, to name a few.

    From the outside, all looks well. But based on the accounts of some former employees, the reality at Hampton Creek is different.

    Business Insider was alerted to a problem by some reviews on Glassdoor, an anonymous company-review website. The reviews were salacious, and the company earned a score of 2.2 out of 5 on July 7. After we started reporting this story, the reviews on Glassdoor suddenly became more positive — 19 of the 44 reviews on Glassdoor came after July 7, and the score has jumped to 3.2 out of 5.

    The complaints weren't just online musings. We spoke to more than a half-dozen former employees who told us stories about questionable science, slippery ethics, and a tough work environment. None of the former employees wanted to be named in this article — some signed severance agreements, others were concerned about repercussions throughout the industry.

    Not much science

    Several former employees told us Hampton Creek is not employing nearly as much science as it says it does.

    Many Silicon Valley startups exaggerate about how advanced their technology is, the properties of their products, and other metrics. But many former Hampton Creek employees say the company pushed them beyond their ethical comfort levels.

    One former employee called it a "food company masquerading as a tech company."

    The company made deliberate actions, like hiring former Google employees, touting Khosla as an investor, and putting Bill Gates on its website, to bolster its image as tech company, a former employee said. As a result, it has likely raked in higher funding rounds and valuations than a small natural-food production company normally would, former employees said. It's currently valued at $300 million.

    But the science behind Hampton Creek is lacking, according to several former employees. One went as far as to describe it as a "cult of delusion."

    One example cited by former employees is Hampton Creek's database of plants. Hampton Creek proudly talks about having thousands of plant samples in a database that it categorizes and analyzes.

    Former employees we spoke with said Hampton Creek exaggerated the number of plant samples it had analyzed. One person said that the actual number was below 1,000. Another said, "when they were saying 4,000, it was probably closer to 400. At least 5x less than it was claimed, and that's conservatively."

    This may be a case of semantics, as Hampton Creek includes the results of third-party research in its database. But some employees felt uncomfortable with how Hampton Creek portrayed its role in the data analysis.

    Hampton Creek Office 01

    Former employees also grumble about Hampton Creek's initial innovation.

    The first version of Hampton Creek's flagship product, the Just Mayo mayonnaise substitute, was not initially developed in house. Hampton Creek outsourced early development to Mattson, a food-tech company in Silicon Valley, according to several former employees.

    "We just threw money at them, and they came back in the first week with a formulation. It's just food starch with pea protein," a former employee said. "Josh [Tetrick] got this, and he promoted it like it was an amazing invention."

    Tetrick has mentioned working with Mattson in interviews, though not often.

    Pea protein is a common substitute for vegan food; you can buy it on Amazon. The company has since developed new versions of its mayo.

    Hampton Creek Just MayoFast production timelines put pressure on how much the company could develop and test products in certain situations, like how the products would behave when shipped overseas.

    When the mayo was launched, it would turn brown when added to seafood salads or completely break down in other recipes, former employees said. The company didn't know this until after it shipped.

    When it was time to launch the shelf-stable version of the mayo, like the kind you see in stores, two former employees say the scientists had only one month for stability testing — even though the company was guaranteeing a six-month shelf life.

    "We didn't know how the product was going to react to being on the shelf," one of these people told us.

    "It was unsettling. The last few months I worked there I wouldn’t sleep very well. There were certain projects that made me uncomfortable on ethical ground," one of these former employees said. "The idea that we understood how it worked was completely off base."

    This never put customers in danger — the mayo has been updated and the shelf life turned out OK, the former employees we spoke with said. Over time, though, the former employees came to believe that the company was less concerned about the science and more about delivering a product as fast as possible to meet whatever contract was due, which disappointed many of the former employees we spoke with.

    "The entire time I was there we weren’t aware of how it emulsified," a former employee said, referring to the eggless mayonnaise. "We weren’t able to prove how it works. Josh liked to convey this notion that we had a great understanding of the science."

    Another former employee said: "It was supposed to be a science research company, and it's not a science research company, and that's a very big disappointment."

    Slippery ethics

    screen_shot_2015 08 04_at_9_11_01_am skitchSeveral former employees say the company stretched the truth on ingredient statements because it had promised samples in a tight turnaround.

    The mislabeling was never in manufactured products but in samples sent out, they said. One example cited multiple times: The company allegedly added preservatives to the mayo product so that it could last while being shipped overseas, but claimed the product was natural without preservatives.

    Former employees said the company also debated how to label ingredients and knowingly used more general terms so the products appeared more natural. These employees told us that, compared to other food startups and larger companies they had worked for previously, it was always a battle to put the correct label on Hampton Creek products.

    One illustrative example: Former employees said that the lemon juice used in the substitute mayonnaise is actually a concentrate, and, per FDA food regulations, concentrations need to be listed as such on the labels.

    As of August 4, the ingredient label on Hampton Creek's website and on jars of the product that Business Insider bought at Safeway and Whole Foods still said "lemon juice" and did not list that it was from concentrate.

    A person familiar with the company says the labels have been changed to accurately reflect that there is concentrate. We have seen emails from Tetrick telling his team to change the labels in March of this year.

    "It certainly happened more than a handful of times where there were definitely issues that made a lot of people uncomfortable," a former employee said.

    All the former employees who spoke with Business Insider said Hampton Creek's CEO Josh Tetrick knew they were uncomfortable with these practices, but the conversations were overlooked in favor of pleasing investors, fulfilling contracts, and moving fast.

    "Once it’s instilled in you, that’s kind of how you operate. He certainly put it in there that you have to do what it takes to get that," a former employee said.

    hc mayo labelTetrick's lack of scientific background — he's a Fulbright Scholar with a degree in law — combined with a need to be in control resulted in tense situations, former employees said. They believed that some of what Tetrick asked employees to do could not be done on a scientific basis — an answer Tetrick allegedly did not like.

    "Any pushback that we gave about his choices being illogical and unfounded in science ended up putting us on shaky ground," a former employee said.

    Employees knew their time was coming when they stopped being a part of the media tours and investor meet-and-greets.

    "There are certain people who consistently delivered news he has liked. The sun shines on them. That’s just how it goes," a former employee said.

    Trouble in the office

    The slippery ethics extended to other parts of the company, too.

    We spoke with two former employees who claimed they caught Morgan Oliveira, now Hampton Creek's director of communications, in a file cabinet swapping out the second page of their employment contracts. The new page of the contract changed the severance package from three months to three weeks, the employees said.

    When Oliveira was confronted, she allegedly said that Tetrick told her to do it, the former employees said. Business Insider has seen what appears to be a photograph of the false contract page that includes both Tetrick's and Oliveira's signatures.

    After Oliveira was confronted, the company allegedly reverted to the original, longer severance package, the employees said.

    One source at the company said: "Josh said he was sorry in front of the company," telling everyone, "I f------ up and we will make sure to get better." Several other sources backed this up.

    But two former employees who were with the company at the time dispute that Tetrick apologized in front of the company.

    Tetrick's relationships with female employees also created an uncomfortable environment for employees — and a risk to the company, according to our sources.

    Josh Tetrick HeadshotBusiness Insider has seen text messages from 2013 in which Tetrick worried early on that he would lose the company and support from investors if an affair with one woman on staff got out or resulted in a legal trouble. 

    "Khosla would hang me — it is a huge lawsuit" one text message sent by Tetrick in 2013 said.

    The text messages also showed that Tetrick thought he could not fire this woman. Instead, the woman received promotions, multiple former employees said.

    "It just went along with the whole 'nobody was rewarded on work ability and efforts' thing," a former employee said, reflecting widely held beliefs among the former employees we spoke to. "It was all if you were sleeping with him or if you came from money and have influential ties."

    However, Hampton Creek pointed us to another person who joined the company last year who disputed that Tetrick works this way. "I can attest, undeniably, along with many others that this is an organization that promotes based on merit only. I have never seen or heard anything to make me think differently."

    In February 2015, two months after the company announced a $90 million funding round, the startup had a round of layoffs. Including those who left with a severance offer, the company reduced its staff by about one-fifth.

    Several former employees who left in February confirmed their departures but would not comment further because of their severance agreements.

    In a high-profile incident, Hampton Creek investor Ali Partovi joined the company in September 2014 as chief strategy officer. Nine days later, Partovi left.

    A statement from Tetrick to The Wall Street Journal at the time confirmed that Partovi had left the company, but would stay on as an advisor to the startup. Partovi later told The New York Times that he "resigned completely" and was not working with Hampton Creek "in any official capacity."

    Partovi left because he was "ethically uncomfortable with the false representations about its finances and its technology," said a former employee with knowledge of the situation. 

    Crafting an image, not a workplace

    When investors, clients, or media visited the company, some scientists would be asked to run experiments on cool-looking machines or use liquid nitrogen to dramatic effect — even if it had nothing to do with their work, a former employee says.

    It was all to create an appearance of a hardworking lab, even though it distracted from the actual research that needed to be done, former employees said. Employees were also coached on what to say and how to avoid certain words like "plant-based" or "vegan." If an investor was arriving early, employees had to come in to make sure the office looked like it was bustling.

    "When people came in there, when [TV personality and chef] Andrew Zimmern came in, he made it appear like we were doing so much. But really, we didn't have anything," a former employee said.

    It was Zimmern who wrote: "Mark my words, HCF founder Josh Tetrick will win a Nobel Prize one day. You heard it here first."

    Beneath the meticulously crafted mirage of the company, former employees complained of hazardous and pressure-filled work environments.

    The company's first office was essentially a converted garage (an old motorcycle club) and a second-story house turned into a lab and kitchen. 

    "There were a lot of corners to cut to do [work in the building]. You have hazardous materials that the biotech people need to use for research. There’s not the appropriate facilities to conduct that sort of research," another former employee said.​

    Hampton Creek Office 02

    Tetrick's dog, Jake, roamed through the office and was there during our visit in May 2015. While pets in Silicon Valley offices are almost a norm, in a food lab, some former employees viewed it as a problem. The dog had a taste for cookie dough, for example, and ate several containers of it that were being used for shelf-life experiments.

    "Luckily, at least that I know of, nobody ever found dog hairs in the samples, but the possibility was always there,” a former employee said. 

    Big dreams, and big problems

    No one denies that Tetrick and his vision for the company are ambitious. Many CEOs in Silicon Valley cut corners and push their teams hard to "move fast and break things," in the famous words of Facebook founder Mark Zuckerberg.

    Hampton Creek has hustled to push out new products, from ranch dressings to sriracha mayo to pancake mix. It has tried to capitalize on its media-darling status and take advantage of events like a bird-flu outbreak in poultry farms to promote the company's products.

    It was Tetrick's charisma and his promises for the future of food, noted in most news articles about the company, that propelled it — and in the end, may have compromised it.

    Still, the former employees we spoke with take a less charitable view of Tetrick's hustle. He opted to push out bad or underdeveloped products, a former employee said, rather than telling a company they missed a deadline because the product wasn't ready. 

    Josh Tetrick and Michael Arrington (L & R) attend Day 3 of TechCrunch Disrupt SF 2013 at San Francisco Design Center on September 11, 2013 in San Francisco, California."You have to be very ambitious and charismatic to be able to talk people out of millions of dollars," said a former employee. "True to form, that’s what he did. He could talk you out of thinking the sky was blue."

    Former employees claim that the company is rapidly burning through cash. The savings of swapping out the egg — less than 10% of what is in mayo — might not be enough to overcome the costs and support the science. 

    Aside from former Hampton Creek scientist Dan Zigmond, none of the former employees we spoke with were surprised by any of these claims. Some even had written records that they kept during their times just in case someone reached out.

    For one former employee, the airing of complaints about Hampton Creek has been "a long time coming." Another said they had been "waiting for this, forever."

    SEE ALSO: The CEO of New York startup Quirky steps down in the wake of lay-offs and funding struggles

    Join the conversation about this story »

    NOW WATCH: Peter Thiel's 3 Keys For Building A Successful Startup


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    graava

    One of the beautiful elements of action cameras like Go-Pro is their ability to fade into the background. You strap on the camera and then you just do what you normally would. You don't have to worry about breaking it or setting up each shot — the whole process is simplified.

    That is, until you have to edit the footage.

    Slogging through hours upon hours of footage can be a major pain point for action camera users. Now one startup is taking a stab at solving it by releasing an action camera that will auto-edit your footage for you.

    The camera, which is available for pre-order at $249, is called Graava. So how does it work? According to the creators at Matter Design, Graava uses different sensors — image sensors, microphones, accelerometers, GPS, third-party heart rate monitors — to identify the most exciting moments of your life.

    The heart rate option is particularly intriguing. Imagine a heightened heart rate, monitored by a device like an Apple Watch, being able to control the way the footage of your bike ride or snowboard run is edited.

    But the real question around Graava is not whether the concept is compelling, but whether the device actually works. Here are two videos showing a bit of the process.

    This is a 30-second clip edited by Graava:

    And here is the original four-minute footage:

     

    SEE ALSO: The awesome life of GoPro's Nick Woodman, America's highest-paid CEO

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    NOW WATCH: 2 texting tricks you didn't know you could do on your iPhone


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    hero zirtual standby

    In the middle of the night, a startup that had raised $5.5 million dissolved and disappeared. It deleted its Twitter accounts, Facebook pages, and Google+ profile. It changed its website to say it was "pausing operations."

    At 1:34 a.m. PT on Monday, Zirtual, a virtual-assistant company, sent an email to all of its employees saying it had ceased operations, effective immediately.

    A follow-up note to its clients said it was "pausing operations" to reorganize its structure.

    The news stung because there was no warning from the company, according to several former employees who spoke with Business Insider.

    The company and its CEO, Maren Kate Donovan, did not respond to requests for comment on this article.

    Everything seemed normal ...

    Even 13 hours before it shut down, Zirtual was still accepting sign ups and the money that came with them, according to Aaron Weber, who posted photos of his short-lived run with Zirtual on Twitter.

    Donovan, the company's CEO and cofounder, had just written three weeks ago in Fortune about the need for transparency during a company shift, saying employees needed time to adjust:

    Because what my employees don't know could ultimately hurt the entire business. The sooner your team knows about upcoming shifts in the company — the better.

    Additionally, give your employees ample time to adjust, as change in a company can often lead to people feeling unstable in their positions. And be transparent.

    Zirtual maren kate donovanYet Monday's email was not a warning to employees, but a door slammed in their face. Employees said they felt blindsided and not prepared for the news, according to the employees Business Insider spoke with and the outpouring of shock on Twitter.

    "I woke up this morning thinking it was a normal Monday morning. I was going to wake up, have my coffee, and have my weekly morning call with my client," Carol Murrah, who had worked for Zirtual for 2 1/2 years, told Business Insider.

    Before Murrah had a chance to read the email, the client broke the news over the phone as Murrah tried to fire up her computer and found herself locked out.

    "I always knew I was going to get my paycheck, until today," Murrah said. "I expected to get paid this Friday, and that's not happening."

    Growing, but too fast?

    Former employees told Business Insider the company had been on a rapid hiring spree during the past 18 months, ballooning its numbers from around 150 to the 400 employees it laid off Monday.

    In an interview on Friday with Jason Calacanis — who is also an investor in the company — on "This Week in Startups," Donovan said the hardest part of scaling Zirtual was "growth capital."

    "Since we're employees versus contractors, it's hiring ahead, building out this stuff," Donovan said of the challenges, just three days before the startup shut down. "It's seeing the future and playing the game right now."

    Over the past few months, work had slowed from some of its virtual assistants, but many thought it was because of the summer vacation season.

    "In the last two months or so, work has slowed down significantly," Murrah said. "We were pretty confused as to why. We weren't having client cancellations. We were never once told that was something to worry about."

    For employees, it seemed as if growth was on the up-and-up, according to several virtual assistants we spoke with. Donovan's monthly "state of the union" emails never hinted at problems, and there was even talk of gradually raising the minimum wage of virtual assistants to $15 an hour from $11. Zirtual was beta-testing a teams product that could allow whole teams to sign up.

    "We were looking at it as, 'Oh, there's progression, we're growing,'" Daniell Wells, a virtual assistant who was with the company since February, told Business Insider.

    What goes up, must come down

    In the end, it's unclear why Zirtual has shut down, though it's clear it was in haste. While the company had raised $5.5 million, all of its rounds after seed funding were debt rounds, including one at the end of July.

    When it started, Zirtual was a personal, virtual concierge service that charged only $99 a month for unlimited tasks, Donovan said on the show. The company has been loyal to some of those plans, though, and that may have cost it.

    "A completely unsustainable business model, but we still have some legacy plans that are sticking around," Donovan told Calacanis. "We grandfathered a crap ton of stuff."

    Calacanis, who had interviewed Donovan on Friday, said on Twitter he found out as an investor that there were problems only on Saturday, though he hopes it can make a comeback.

    Calacanis did not immediately respond to requests for comment.

    While some may be more positive about a restart, the shock is still fresh for those who lost their jobs.

    Wells said they had received only the notice of the company ceasing operations, but no other massive direct communication from leadership. Important information regarding things such as severance and health insurance is still unresolved.

    Former employees said they didn't know whether Zirtual would even be able to make this Friday's paycheck for the employees' last week of work.

    Despite the lack of communication from leadership, former employees have created a Facebook group and a Slack team so they can stay in touch and share what little information they have received. They are scrambling to educate themselves on how to be come 1099 contractors, how to get in touch with old clients and how to rebuild their careers.

    "There are 400 employees who were given the notice this morning," Wells said. "They are all available for work. It was a really poor move. I'm at a loss for words."

    SEE ALSO: 9 tech companies that came back from the dead to become wildly successful

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    Zirtual maren kate donovan

    Earlier this week, a virtual-assistant startup that had raised about $5 million dissolved, suddenly laying off about 400 employees via email and changing its website to say it was "pausing operations."

    Former Zirtual employees told Business Insider's Biz Carson that they felt blindsided by the news. Clients felt left in the lurch too.

    Today, CEO Maren Kate Donovan explains what happened in a Medium post, writing that she "cannot express my deep sorrow at letting down our employees, our clients, and our investors."

    What went wrong? Her short answer: "Burn."

    A company's burn rate is how much money it spends above what it makes. Donovan says Zirtual's burn skyrocketed after the company stopped using independent contractors and started hiring real employees instead (causing the employee count to balloon from about 150 to more than 400 over about 18 months).

    "At the end of the day we grew faster than we could handle," Donovan writes. "Our burn spiraled out of control even with our high revenues, and that led to the pausing of Zirtual’s services."

    The pause didn't last long though.

    In her post, Donovan announced that during the last 24 hours, Startups.co, a company led by Zirtual investor Wil Schroter, offered to buy the company's assets and restart the service, "to offer our clients support and give us the opportunity to hire some of our Zeople back."

    She also promises that all former Zirtual employees will be compensated fully, despite the initial shutdown.

    Here's the key part of her essay about Zirtual's burn:

    Burn is that tricky thing that isn’t discussed much in the Silicon Valley community because access to capital, in good times, seems so easy. Burn is the amount of money that goes out the door, over and above what comes in, so if you earn $100 in a month but pay out $150, your burn is $50.

    Zirtual was not flush with capital —  for as many people as we had, we were extremely lean. In total we raised almost $5 million over the past three years, but when we moved from independent contractors (ICs) to employees, our costs skyrocketed. (Simple math is add 20 — 30% on to whatever you pay an IC to know what it will cost to have them as an employee).

    And at the end of the day … “burn” is what happened to Zirtual.

    The reason we couldn’t give more notice was that up until the 11th hour, I did everything I could to raise more money and right the ship.

    After failing to secure more funds, the law required us to terminate everyone when it became clear to us that we wouldn’t be able to make the next payroll.

    This also meant that all of our clients immediately lost their support.

    The outcome breaks my heart — hundreds of our people out of work and thousands of people losing a service they loved, and paid for, overnight.

    I cannot express my deep sorrow at letting down our employees, our clients and our investors. I’ve read notes from people calling me stoic as this s--- storm has hailed down on us. But in reality every time I am alone I cry like someone whose child has been ripped from her arms.

    Here's Donovan's full post.

    SEE ALSO: A startup dissolved overnight and laid off its 400 employees via email with no warning

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    The Rocky Fire burns through a fence line in Lake County, California July 30, 2015.

    The startup community has been in a tizzy recently about burn rates. Venture capitalist Bill Gurley kicked off the frenzy with a WSJ piece on the issue, and other high-profile investors, including Fred Wilson, quickly jumped on the burn rate hand-wringing bandwagon. Come a downturn and "many high burn rate co's will VAPORIZE," Marc Andreessen ominously warned on Twitter.

    So suppose you're a prudent founder listening to this debate and very much wishing to avoid vaporizing the startup you've shed blood, sweat, and tears to get going. With heavyweights like these all in agreement, no doubt you're keen to keep your burn rate to a healthy level. Now all you need to know is: What is a healthy level?

    Mattermark CEO and co-founder Danielle Morrill has written a Medium post that is, essentially, the answer to your prayers. She not only offers her own company's burn rate but also shares those of several others that volunteered to publicly publish them, as well as discussing what constitutes a "healthy" burn rate for a startup in the current bubbly environment.

    What's a Normal Burn Rate?

    The post is well worth a read in full if you're concerned about the issue, but to give those interested a preview of her conclusions, here's a quick peak. She starts off by referencing a 2011 post from Fred Wilson that suggests a good rule is to "multiply the number of people on the team by $10K to get the monthly burn. That is not the number you pay an employee. That is the 'fully burdened' cost of a person including rent and other costs."

    But Morrill notes that, thanks to the frothy startup scene, costs have risen since the post was written. So what's the new rule? On Twitter, Morrill asked, "What is the average fully burdened cost per employee at Series A startups over time?"

    Andreessen replied with an estimate of $200,000 per year.

    "That's $16,666 per month--a 67% increase from Fred's rule of thumb," notes Morrill.

    Circumstances Depending

    That's one theory of "normal" burn rate, but obviously what's healthy and necessary for one startup is ludicrous for another.

    "Definitely don't try to scale your team the way we have if you don't have the kind of revenue growth we have. We've been ringing the freaking cash register all along the way so we can offer market rate salaries and really good health care, and without it this hiring would be impossible," insists Morrill, for example.

    What questions should you ask if you're looking to determine how your company's burn rate should compare to this rule? Morrill suggests many questions to ask, including:

    • Do we truly have product/market fit?
    • Am I scaling up hiring because we have a real need, or am I stockpiling talent because people keep telling me it's an arms race?
    • Is more than 5 percent of my budget going to things outside of payroll, payroll tax, benefits, and rent?
    • Am I spending like we're chasing a big market, when it's actually a small one?
    • Is the kind of growth we're seeing sustainable beyond the first six months?
    • Am I willing to do what is required to get to break even?

    She also offers an explanation for what you need to think about around each question, so check out the post in full for much more detail.

    SEE ALSO: The CEO of the startup that dissolved overnight explains what happened: burn

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    500 Startups unicorn

    Ponies grow up to be centaurs who then transform into unicorns — or at least that's one Silicon Valley investor's view of evolution.

    At 500 Startups Demo Day, Dave McClure took the stage in a rainbow unicorn hoodie and introduced the audience to some new classifications of startups.

    "Unicorn" is already a widely-used term to describe companies with valuations over $1 billion. While this used to be a rare club, the pen is getting pretty crowded with more than 120 companies now qualifying as a unicorn.

    But what about those who haven't cracked the three-commas club? 

    Meet the centaurs and ponies of startup land.

    The "centaurs" are companies who have a valuation of more than $100 million, according to McClure's introduction. 500 Startups has spawned 25 of them.

    A league below are the "ponies," or startups who have a valuation of more than $10 million. The 500 Startups accelerator program has bred between 200 and 300 of them, McClure claims.

    So far, McClure is the only one we've heard use this terminology. We're awaiting the first startup pitch that uses one of these terms in earnest. 

    SEE ALSO: This chart shows why the number of 'unicorns' in tech is exploding

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