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The latest news on Startups from Business Insider

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    Sebastian Czaja

    The political party behind an advertising van that was driven around London in a bid to get startups to move to Berlin says the German capital could become the next European startup hub following the result of the EU referendum.

    Germany's Freie Demokraten (FDP), or the Free Democratic Party, said it expects "quite a number" of London startups to move to Berlin now the UK is planning to leave the EU.

    In a bid to encourage startups to move, the party drove a van through London's Tech City displaying the message:

    "Dear start-ups, Keep calm and move to Berlin."

    The van was spotted outside Bloomberg's UK headquarters in Finsbury Square, London, by Bloomberg UK banking reporter Stephen Morris.

    After we wrote about the van on Business Insider, the leader of the FDP party, Christin Lindner, told Business Insider Germany editor-in-chief Christin Martens: "Those who would like to enjoy the advantages of the EU are invited to come to Berlin and make the city even greater together with us. With the combination of liberal policy and smart minds from London, Berlin could be the next European startup hub."

    Berlin is considerably cheaper than London and home to a growing number of young technology companies, including the likes of Rocket Internet, Wunderlist, and SoundCloud.

    Sebastian Czaja, Secretary General of the Berlin FDP, added: "Many start-ups don't see their future in London after last weeks decision of the UK leaving the EU. And as Berlin is one of the worldwide start-up capitals, quite a number of them might move towards the German capital, where the rapidly growing start-up community offers a highly creative environment for business."

    Czaja explained that the FDP, which isn't currently in power, wants to reduce the barriers for all startups in Berlin, adding that Berlin needs to continue to "open doors" to companies from around the world.

    He explained that although Berlin's startup scene is thriving, it still needs a "fairer tax system" and "functioning wi-fi."

    "Companies should be able to establish themselves quickly, get a good start and then reach their full potential," said Czaja. "This is only possible with a minimum of bureaucracy and a lot of mobility. And it’s not possible without Tegel airport, which we must keep even after the opening of BER airport."

    Tech journalist Neil Murray has criticised European startup hubs for trying to prey on London startups.

    "The reaction and actions of Europe’s startup hubs to London’s post-Brexit has been extremely distasteful to put it mildly," he wrote in a Medium blog post titled "To the vultures circling London’s tech scene post-Brexit."

    "Whether it’s gleefully shouting 'we could be Europe’s next main hub' or setting up websites to entice London’s startups, it’s reminiscent of greedy cousins fighting over a newly dead relatives possessions."

    Matt Smith, director of independent national enterprise campaign Startup Britain, said: "We wish our German startup friends well with their endeavours. Berlin is a great city. But London is the true European home of entrepreneurial Schöpfungskraft.

    "Part of our capital's attraction is its gateway status. Indeed, London is a global city located in Europe. That
    hasn't changed because it cannot change: it is a historic and geographic fact. London is where European entrepreneurs come to go global. Here are the ideas, the talent, the funding and the subsidiary services, a pull force without parallel in any other city around the world. No amount of wishful thinking — or even lobbying — can remove that. But nice try Berlin: we appreciate the chutzpah!"

    n

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    Eyas Taha (L to R), Nabard Jawad, Integrify CEO Daniel Rahman and Sharmake Abukar Amin work at startup Integrify’s office in Helsinki, Finland, May 2, 2016. REUTERS/Tuomas Forsell

    It’s tough being an entrepreneur. Sometimes we’re struck with brilliant startup and product ideas during romantic dinners and sometimes the brilliant idea we scribbled on our girlfriend’s napkin isn’t so brilliant after all.

    If you’re an entrepreneur, you probably think of dozens of near-excellent ideas daily - in the shower, in the car, in the office -- constantly wondering if someone’s already developed an app for your very unique idea.

    If someone didn’t, it’s probably not long before your excitement gets the best of you, and you find yourself already drafting your next startup’s mission statement in your head. But in a few months, you might stop and realize that you rushed into a startup that doesn’t have an explicit market need.

    Unfortunately, this happens a bit too often. Or, to be exact, it happens 42 percent of the time. In this post, you'll learn four ways to test your startup idea before you ask your brother-in-law for that loan.

    1. Check out the competition.

    Your competitors are a great indication of the direction your startup should go and what aspects are lacking in the industry. First of all, if you have a viable direct competitor with active users, you know there’s a market for your idea. While healthy competition is always good for a given industry, knowing your differentiator is smart, especially if your rival is already very popular.

    A good place to start is with features that competitor is lacking. For example, when Uber launched in 2009, there were many other startups eager to get in on the action. Lyft and Gett were some of Uber’s biggest rivals, but with Uber being extremely successful, they needed something to focus on that would tempt people to try its services as opposed to Uber’s.

    Uber

    For the Israeli startup Gett, this was the surge charges. Since Uber charges an extra fee during prime travel times, such as during morning and evening commutes, Gett decided to run a campaign called #surgesucks to differentiate themselves. In looking to improve on Uber’s flaws, Gett was able to establish a successful differentiating factor, helping them break into the business, and gain a significant following.

    Leaping over to a different industry, Israeli startup Pepperi says it has identified a market opportunity in the CRM space for consumer packaged goods companies.

    “We realized that traditional CRM vendors had neglected this space so we chose to focus on this blue ocean with a vertical-specific platform,” Pepperi CMO Oren Ezra said.

    2. Conduct market research.

    Now that you know what the competition is up to, it’s time to look into the market with the same level of scrutiny. Looking into the best methods, platforms and ways to gain exposure is the first step to making sure that your startup is on track to get the right exposure.

    This is a great way to ensure that even before your product goes live, you have a leg up in getting your name out there.

    People Working on Laptops in Cafe

    Market research comes in many shapes and sizes: direct from the user, through agencies and even by running your own polls.

    For example, you can create a survey asking if people would be interested in a potential product using Survey Monkey, and distribute it to relevant LinkedIn and Facebook groups. You can hold a focus group for group discussions to get real time feedback about what people think of your idea. You can also cold call, set up interviews, and poll people in target groups.

    3. Try Google AdWords.

    Today, we have everything at our fingertips: taxi cabs, movie tickets and of course, potential consumers. There’s a huge community out there, and it’d be a shame not to use the Internet to your advantage.

    First, find $100.

    Second, draft a few ads. Type out a few key features and the pain points your startup solves.

    Third, link it to a landing page, mentioning that your product is launching within the next few months. Be sure to provide a space for them to leave their email address so if they’re interested, you can contact them once you’ve finally launched.

    Last but not least, run the ads.

    After a few weeks, you should see hopefully some telling results. Is Google giving you enough impressions? Are people clicking on the ads? Is anyone leaving their email address?

    If you’ve answered yes to all three questions, then you’ve got your answer: You’re good to go. If not, I suggest tweaking the keywords, copy and landing page and trying again. If you’re still not getting positive results, well then, maybe it’s time to rethink your idea.

    entrepreneurs

    4. Test your product.

    If you want solid market validation, obtaining a proof of concept is probably the best thing you can do. The results of a proof of concept will tell you whether or not it’s prudent to continue pursuing your startup idea. Startups looking to acquire a proof of concept will find it’s not always easy to find an enterprise willing to invest in the proof of concept acquisition process since it’s been known to be a complicated and sometimes risky process. However, finding pilot opportunities means companies can test new products and technologies that will turn into solutions for their expanding innovation efforts.

    The process of testing a proof of concept, in turn, helps startups connect to enterprises to examine how well their product or service actually serves the enterprise. If you're in this stage, then you may want to check out Proov, a Pilot-as-a-Service marketplace.

    If you're still not sure about your startup idea, then maybe your idea isn't meant to be brought to life. I'm all about following your passion, but if all of the above phases returned negative results, it may just be more logical to move on to your next brilliant idea.

    Join the conversation about this story »

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    In the wake of Brexit, somebody drove a mobile billboard around London with a message on it imploring startups to "Keep calm and move to Berlin."

    But as this chart from Statista shows, Berlin doesn't really need the help. It's already the top of the heap in Europe when it comes to size of venture capital investments, and investment is growing faster there than in London. Interestingly, VC investment in Stockholm skyrocketed last year, vaulting the Swedish capital ahead of Paris. 

    20160708_Startups

    SEE ALSO: 4 things that could hurt Netflix in its quest to take over the world

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    go cubes

    In recent years, Silicon Valley has turned its eyes on the food industry. From coffee-infused gummies to lab-grown meat, the foods in development today are shaping the culinary scene of tomorrow.

    Whether your ideal meal is a quinoa bowl served by "robots" or meal-replacement beverage Soylent, there's something for everyone.

    MORE: The beaches of Hong Kong have become a 'plastic tide' after being flooded with garbage

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    You can ditch your cup of joe for "chewable coffee."

    Imagine if instead of rolling out of bed to brew a pot of coffee, you pop a sugar-coated, caffeine-infused gummy into your mouth to get moving.

    Nootrobox, a hot startup out of Silicon Valley once dubbed the Birchbox of cognitive enhancers, has made "chewable coffee" a reality. Its Go Cubes are made with real cold-brew coffee and aim to improve clarity and focus, without causing unwanted side effects like jitteriness.

    The bite-sized cubes are the equivalent to drinking half a cup of coffee.



    Plant-based foods may soon be indistinguishable from the foods they imitate.

    Until recently, veggie burgers resembled pan-fried Frisbees more closely than beef. Now, startups are reinventing meat and dairy substitutes.

    A new plant-based burger by Beyond Meat"bleeds" juices in every bite (it's actually a pulverized beet blend). Impossible Foods, a company Google tried to buy for $200 million in 2015, makes a legume-based burger that's so convincing, Momofuku restaurant empire head David Chang wrote in a review, "Today I tasted the future and it was vegan."

    Craving dairy? Try Kite Hill's yogurts and cream cheese spreads made from almond blends. You might not notice the difference.



    The automat is back.

    The automat first became a go-to lunch destination in the mid-twentieth century, when New York City's 50 automat locations attracted some 350,000 customers a day. Now, decades later, it's back.

    Fast-food chain Eatsa uses technology to automate the ordering and pick-up processes, so a customer can dine in or out, no interaction with a human required.

    The vegetarian restaurant specializes in quinoa bowls that cost about $7 and serves food through glass-doored cubbies in the wall. The first locations are now open in San Francisco and Los Angeles.



    See the rest of the story at Business Insider

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    ben holmes index ventures

    A venture capital fund with billions of dollars at its disposal is advising non-UK technology startups to consider shunning London as a possible outpost now that the UK has voted to leave the European Union.

    In a Brexit note to non-UK startups, Index Ventures wrote: "Before the Brexit vote we would have advocated wholeheartedly for London as a European HQ.

    "Today, we recommend that companies also consider Amsterdam, Berlin and Dublin, in addition to London, for their European bases."

    The venture firm, which has invested in the likes of Facebook and Dropbox in the US, said that startups in heavily regulated industries like financial services should be particularly careful about where in Europe they expand their operations, adding that financial services may no longer be able to conveniently passport their status from the UK across the EU.

    Officials in countries like Ireland and Switzerland are already preying on some of the UK's bestknown fintech companies.

    TransferWise CEO and cofounder Taavet Hinrikus said officials in the aforementioned countries have contacted him to see if TransferWise is interested in starting or moving operations to their shores.

    Earlier this week, a van was spotted driving through London with a billboard that read: "Dear start-ups, Keep calm and move to Berlin."

    The note was published on the Index Ventures website on Wednesday after a number of US entrepreneurs started asking questions about what Brexit means for their businesses.

    Index Ventures added: "There is no denying that the referendum result has added uncertainty for entrepreneurs, but this doesn’t change our view that a great team, pursuing a big market with an inspired product vision can create value that outweighs macro risks by orders of magnitude."

    Join the conversation about this story »

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    Melissa Morries Network Locum

    Melissa Morris, the CEO of Network Locum — a healthcare startup that helps hospitals and GP practices to find cheap on-demand doctors — was introduced to venture capital firm Beringea by boyfriend George Marangos-Gilks, who is the cofounder of student media publication The Tab.

    The introduction has helped Morris, who founded Network Locum in August 2010 after a stint in the NHS, to raise around £1 million from Beringea, which has funds of around $650 million (£489 million).

    Beringea investment director Rob Hodgkinson explained the encounter to Business Insider:

    "George, who runs The Tab, was looking to raise money about 18 months ago. I can’t remember where I met him. I think I read an article about the Tab and just got in touch with him. So we were looking at The Tab [and realised] it’s a bit too early for what we do. But he said you should speak to my girlfriend, who runs Network Locum.

    The Tab Jack Rivlin George Marangos-Gilks"She already had £2 million but we managed to persuade her, that because we’ve got this US angle, because we’ve got quite a lot of healthcare expertise, that actually, we would be useful. So she made space for us [in the funding round]."

    Morris added: "It's brilliant going out with your best friend who also completely understands exactly what you are going through. We help each other out 24/7. "

    Network Locum has raised a total of £8.5 million, with the most recent round of £5.3 million announced on Sunday.

    The startup is one of the first young technology companies to announce a significant investment round following the UK's decision to leave the European Union — a move that has startup founders worried that they'll struggle to raise the capital they require.

    Join the conversation about this story »

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    Nootrobox

    Free food and startups typically go hand in hand, but at Nootrobox, a smart-drug company, team bonding takes a different form: fasting.

    In a profile in The San Jose Mercury News, Nootrobox cofounder Geoffrey Woo said his company has become "super productive" on Tuesdays because no one eats.

    The fasting isn't meant to curtail lunch costs for employees, but to supercharge their brains.

    As a so-called smart-drug company, Nootrobox specializes in creating nootropics designed to improve brain performance and gummy caffeine cubes to help people get an extra boost throughout the day.

    It's all part of "biohacking," or a movement in Silicon Valley in which people experiment with various supplements or devices that they believe lead to increased productivity, mental acuity, and other benefits. Some use supplements, like the kind Nootrobox manufactures, but others, like the well-known biohacker Dave Asprey, mix butter into coffee.

    Those who fast, like the four employees of Nootrobox, are trying to reach a state of ketosis, where the body starts burning fat for fuel. They each fast for 24 to 36 hours (or a dinner-only diet), but it culminates in a breakfast with other biohackers on Wednesday mornings.

    "It's hard at first, but we literally adopted it as part of the company culture," Woo told The Mercury News.

    SEE ALSO: Food delivery is a 'winner takes most' market, but this startup CEO isn't afraid of Amazon

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    Grand Central Tech 9

    Grand Central Tech is a bit of an anomaly in the world of startup "incubators," which usually give budding entrepreneurs money, mentorship, and connections in exchange for a slice of equity in the company.

    GCT doesn't give investment or take a piece of its startups. Instead, it provides free office space in its coworking building in New York City for a year, plus all the "networking" elements, with no strings attached.

    That's an amazing deal, and it proved compelling to over 1,000 applicants this year, 19 of which became GCT's third annual "class," which ranges from a startup that guarantees you'll sell your house in six weeks to one that wants to change how women think about their periods.

    So how are these startups able to get offices for free?

    The key to GCT's business model lies in a unique relationship with the billionaire real-estate dynasty, the Milstein family, cofounders Matthew Harrigan and Charles Bonello tell Business Insider.

    The general idea is that by providing a year's worth of free office space to these young startups, GCT will be able to convince them to stick around and rent the other 40,000 square feet of its coworking building, creating a hub for hot startups. The rent in this second portion of the space is comparable to a WeWork, the founders say, and all the startups that have stayed in New York have opted to do so. The premise has proven sound in its first two years of operation.

    Grand Central Tech 4 Monthly GiftBut the truth is that for the Milstein family, GCT isn't a big money-making venture, and it's certainly not a cold economic calculation. GCT is an endeavor designed to bolster the New York tech scene, and it has one foot in philanthropy and the other in business.

    The start

    GCT's origins lie in New York's Regis High School, where Harrigan and Bonello met as students. Regis, like GCT, is free once you get in — in the school's case, an anonymous benefactor set up a system to allow it to run tuition-free.

    Later in life, the pair were talking over beers about how to recreate that sort of model for businesses, and decided to try to run a tech accelerator at Regis during the empty summer months. They were able to set up the same "no rent, no equity" formula and even tapped recent grads of Regis for internships. The budding program caught the attention of the Milsteins' accountant, and the GCT cofounders were able to supersize the program to what it is now.

    Because the startups in GCT are meant to strengthen New York's tech community, many of the startups have a social mission or an eye toward bettering some aspect of life. They don't have to all be trying to cure cancer, Harrigan says, but they certainly bend away from the frivolous. And they also tend to be companies that have taken some funding, as GCT is not in the business of providing that initial seed investment.

    Here are a few of the standouts in this year's class:

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    Knock

    A standout in this year's class is Knock (formerly Knockaway), a real-estate startup from members of Trulia's founding team, which guarantees to sell your house at a certain price within six weeks. If the house doesn't sell in that time, Knock will buy it from you, and CEO Sean Black tells Business Insider they expect to buy 20-25% of the houses.

    "About half of people are buying and selling [houses] at the same time," Black says.

    Knock wants to take the inherent uncertainty out of the equation. Knock takes a standard 6% as a broker, but is able to offer this sort of price guarantee by using tech to cut out about 75% of a traditional broker's workload, Black says.

    It's basically an insurance policy, Black says.

    Knock is launching in Atlanta because of a few key factors like population and job growth, and job diversity. Black says Knock initially wants to choose its markets carefully, since by guaranteeing a certain price Knock is opening itself up to some risk. But Black says his team has already identified 49 other suitable markets for the startup in the US — though you won't see Knock in New York City or San Francisco anytime soon because of the high price of individual properties.



    Monthly Gift

    Monthly Gift, a subscription service for pads, tampons, and liners, aims to change how women think about periods — and make sure they're always prepared with enough necessary products. Users can design their own "Little Black Box"— complete with a chocolate bar — that is sent in accordance with their monthly cycle.

    "The idea of the Little Black Box and the branding and having it feel more like a beauty product really stems from the idea of how do we change how women talk about this," Kimmy Scotti, founder and CEO, tells Business Insider. "We want to make it feel sexy and beautiful and not like a girl running on a box playing volleyball when she has her period, which is what we feel like store brands look like."

    The company also designed a free app for period and fertility tracking, which Scotti and her sister LisaMarie Scotti, COO of Monthly Gift, say was the result of frustration with similar apps.

    "One of the things we found when looking at the other period tracking or fertility tracking apps is that they're all really unattractive," Kimmy says. "These apps have things like condoms on bananas as their symbol for sex, and we're like, 'Who talks to women like this?'"

    The company is currently accessible in all 50 states and aims to go international within the next several months.



    Ohmygreen

    If you want to build a healthier life for your employees, snack food is a good place to start, Ohmygreen CEO Michael Heinrich tells Business Insider.

    Many companies view snacks as an easy way to keep their employees happy, but most snacks are processed junk. Ohmygreen's pitch is that it will step in and change that by selecting and stocking healthy food for employees.

    Though the startup offers varying levels of service, Heinrich says 85% of its current customers are "fully managed," meaning Ohmygreen does all the work of getting them the food.

    But food is just the entry point for Ohmygreen, Heinrich says. The eventual goal is to have Ohmygreen facilitate a healthy life for employees overall through things like yoga, meditation, or athletic health goals. The company is in the process of developing its "holistic model," he says.

    It should come as no surprise that Ohmygreen's early clients have tended to be tech companies, but Heinrich thinks there is a greater market for his type of service as companies realize the effect health and wellness can have on their workers.



    See the rest of the story at Business Insider

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    Gerard Grech, Tech City UK CEO

    A survey of 1,205 people working in tech has found that 74% of tech workers think Brexit is going to make the UK economy worse, not better. 

    The research — carried out by government quango Tech City UK — found that access to talent is the biggest concern among UK tech workers, with more than half (51%) saying they think it will get more difficult to recruit and retain the best people.

    Concerns over investment and access to the single market were close behind. 

    Almost a third  (31%) of those surveyed said they are likely to slow down hiring as a result of the UK's decision to leave the EU, while 22% said they expect to scale back their planned growth ambitions. 

    Despite the obvious concerns from the tech industry, Tech City UK claims there are reasons to be optimistic. 

    "There are unexpected upsides and very real opportunities," wrote Tech City UK CEO Gerard Grech in a blog post on the organisation's website, titled "Cause for optimism as tech rises to Brexit challenge." 

    Grech added: "If there’s one thing tech entrepreneurs are good at, it’s holding their nerve. The slings and arrows involved in starting and scaling up a digital business require a thick skin and the ability to hold on to a vision, come what may.

    "It’s these qualities of resilience, as well as risk-taking, that Britain’s tech stars will be drawing on now as they face perhaps one of the bigger bumps in the road yet. And I’m confident that they’ll make it over the hump." 

    In order the make the best of a bad situation, the UK tech community has a series of demands. 

    Of those surveyed, 70% said they want to hear a clear message on EU residents’ ability to live and work in the country, while 79% want improvements to the visa system.

    Melissa MorrisThe UK tech community is particularly keen to see government negotiate to remain part of the European Single Market, with 85% of respondents saying they want existing trade relationships to remain in place. 

    Raising capital

    Another concern among the UK tech community is access to capital, but a number of post-referendum deals suggest that Brexit isn't putting investors off in the short term, with cybersecurity firm Darktrace announcing a £50 million round and healthcare startup Network Locum announcing a £5.3 million round.  

    Network Locum founder and CEO Melissa Morris said: "We are a small island and our immediate market is small, this has always been the case.

    "The true unicorns [businesses worth $1 billion] of the UK all find ways to break borders. Post Brexit, UK startups possibly have higher barriers to accessing Europe. But the way I see it, the earlier we start to learn to do this the better. Practice makes perfect." 

    Join the conversation about this story »

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    cuddling

    This post was previously published on MEL, a new voice in men's lifestyle and culture covering what guys think about when nobody's looking.

    “Hug me, I’m 18,” the t-shirt in the photo reads.

    It clings to the torso of a young woman sporting a come-hither look.

    This may be a cuddle-for-hire website, but it’s not extolling the restorative power of platonic touch.

    Unlike the Snuggery, which has the soothing color scheme of a therapist’s personal blog and says it aims to “make the world a gentler place, one cuddle at a time,” Cuddle Time Agency is all about the women, with photos of cuddle babes lying in bikinis on yachts and scrunching their boobs together in grainy webcam shots.

    “I need one [of these women] in Orlando,” a would-be customer writes below a photo on Facebook. “Here’s our new Chi town girl,” the agency posts in response, along with a photo of a young, curly-haired woman posing at a party. “Oh if only she was in Orlando,” the would-be customer writes wistfully.

    The founder of the agency is a New York-based mortgage auditor named Richard Banach, whose business practices don’t sit well with pro cuddlers who have made it their mission to desexualize connection via human touch.

    “These businesses are atrocities,” Samantha Hess, who has provided more than 100,000 minutes of paid cuddle sessions, says. “Anyone who uses the platform of platonic touch to promote sexual intention is abusing people in the worst way.”

    “People seek this out instead of sexual services because they want to feel secure, not used. It infuriates me that my service is compared to these,” she continues. “This is in no way the same industry. “

    coupleThis schism over the future of for-profit cuddling has been long in the making. Ever since cuddling emerged as a trendy news item, new cuddling services have attempted to capitalize on the buzz, often with little thought to their approach. Cuddlr, an app which launched in 2014 to widespread press, was quickly pulled from the App Store after refusing to ban users who tried to hook up with their cuddlers.

    Similarly, Cuddle Time seems primed for creating uncomfortable moments. It doesn’t help that Banach refers to his cuddlers as “soft escorts” and compares them to literal pieces of meat.

    “[Customers say] ‘I would like number five, or number eight… it feels like I am running a Chinese takeout restaurant,” he said via email.

    takeoutWhile most professional cuddlers are loath to associate sex with their profession, Banach doesn’t seem to care. “One of our better ad headlines is ‘Cuddle with a College Cutey!’” Banach says. “Heck, I would pay the $95 to have one of these dreamy college girls in my bed for an hour.”

    His marketing methods are equally unconventional. Instead of framing cuddling as a type of physical therapy for the lonely and touch-deprived, Banach advertises his services on Craigslist and in the back pages of alternative newspapers. He used to stand outside Madison Square Garden handing out glossy fliers while sporting a t-shirt that read “Cuddle Women!,” but people thought he was promoting a strip club because the visuals he used were so graphic.

    Blurring the line between cuddling and sex work can lead to dangerous scenarios. Some have quit the profession altogether after realizing how many clients wanted more than just to be the big spoon.

    “I stopped working at Cuddle Buddies because I no longer felt comfortable going into other people’s homes,” wrote one former cuddler in a Reddit AMA. “Overall it was a very safe job but after one particularly pushy client and hearing some other stories, I realized that even if I could handle a sticky situation (mace is a girl’s best friend), I didn’t want to have to.”

    Others have complained about wandering hands and uncomfortable come-ons during sessions gone awry. In an essay about her experience, one former cuddler recalls attempting to disentangle herself from a particularly grabby customer. “His scratchy, gray mustache drags itself up my neck and his nostrils wheeze as they fill with the scent of my hair. ‘You smell so good,’ he whispers, his sticky breath hot in my ear.”

    This isn’t how it’s supposed to go down. Jean Franzblau of the Cuddle Sanctuary says the whole point of cuddling is to detach touch from titillation in order to provide real healing. Franzblau teaches her cuddlers how to give and receive consent, which can be complicated. Certain positions, like spooning, are more advanced, so she starts slow; sometimes all she does is gaze into a client’s eyes for half an hour, which makes her feel “honored, touched, moved; I feel compassion and love coming through me.”

    “Spooning is heavenly, but it’s an advanced position,” she explained. “If people connect sexually to cuddling then of course, when they’re spooning, their bodies are going to be like, ‘It’s sexy time!’ In these situations, I just adjust positions so that clients can move their energies from erotic to platonic.”

    Hess, meanwhile, has devised a 40-hour training session for those who wish to learn how to cuddle in a way that won’t make their clients aroused, or cause them to become romantically attached. It’s not always simple to avoid boner contact, but she knows exactly how to do it.

    professional cuddling startupsIn contrast, the only training provided by one of the largest cuddle websites, “The Snuggle Buddies,” is a book called the Cuddle Sutra, which includes poses like “Cheek to Cheek,” “Come to Papa,” and “Sardines.” Hess points out that the book is meant for people who are romantically involved.

    Snuggle Buddies’ sister site is foot fetish service called Touch Feet. Some women are listed on both sites — a detail that hasn’t escaped Hess. “It’s (excuse my language) fucked up,” she said via email.

    Scrolling through Snuggle Buddies, most of the profiles you see feature women; founder Evan Carp told me he only caters to male customers now. Indeed, the struggle to find female customers could help explain the rise of agencies like Cuddle Time. “There’s already a culture for men to pay for services that involve touch,” Franzblau says. “They’re able to advocate for that need.”

    After looking at the website for Cuddle Time, she was disappointed to see a lot of sexualized images of young women. “It’s not a direction that I will be taking in my business,” she said. “But their site is pretty smart business-wise because it gives men a pat on the back for using their services. Rather than being something to be embarrassed of, the site makes you feel like you’re shopping for porn or an escort.”

    Still, Franzblau says she would rather market her services as being akin to visiting a luxurious spa. “That strategy feels more in line with my values.”

    Steven Blum is a freelance writer in Los Angeles. His work has appeared in Broadly, The Stranger, Blackbook Magazine and The Daily Dot. Follow him on Twitter.

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    wrestle wrestling struggle

    Here's a sign of how much things have changed in Silicon Valley in the past six months.

    Tech startups, which once eagerly scooped up VC funding just because they could, are now practicing a form of fund-raising abstinence and going to pains to not raise money — even if they actually need a fresh infusion of cash.

    According to Merus Capital's Sean Dempsey, later-stage tech startups increasingly are doing everything in their power to avoid going back to the well and taking money from investors.

    "A lot of companies are trying desperately not to have to raise money. They know that if they have to go back to the market it's going to be a bloodbath," Dempsey told Business Insider.

    Why would a company deprive itself of capital that it needs?

    The funding climate has changed, and many startups know that if they raise money now it will be on much less generous terms than their previous funding. That could mean doing a down round, or a flat round, in terms of the company's valuation. Or it could mean accepting unfavorable "ratchets," which are conditions that put investors' interests ahead of the startup's interests.

    "Many of these rounds were done at valuations that got ahead of the fundamentals, certainly in the case of most unicorns. So knowing that market sentiment has shifted and investors have become more fearful than greedy, companies are pushing out fundraising as long as possible," Dempsey said.

    One example of such unfavorable conditions was cited in a recent report by The Information, which noted that some investor term sheets include the right to veto a startup's initial public offering if the price isn't to the investor's liking. According to the report, the number of highly valued tech firms that raised new rounds of funding in the first quarter fell by 63% compared with a year earlier.

    The fear of raising new money means that startups are being forced to "extend the runway," stretching their existing cash reserves as long as possible by cutting back on hiring, slashing costs, and looking for other creative ways to tighten the belt, Dempsey said.

    "The hope being that they can become profitable or at least grow into the valuation and/or investor sentiment improves (not likely anytime soon) when they raise the next round," Dempsey said.

    SEE ALSO: The top 17 startups to launch so far in 2016

    Join the conversation about this story »

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    Matthew Miller

    Investors put money into technology startups for a plethora of reasons. Most want to get rich, some want to change the world, and others just have FOMO (fear of missing out).

    But usTwo cofounder Matt Miller, or Mills as he likes to be known, said he invests in businesses as a way of accumulating mates.

    "I'm essentially buying friends [when I invest]," he said at a talk in King's Cross on Wednesday that was organised by Creative Entrepreneurs.

    Mills is investing in startups through a small fund that usTwo set up after building digital products for the likes of Google, Sky, and Adidas, as well as launching its own hit mobile game: "Monument Valley".

    When deciding whether to invest in a startup "it's about whether I want to spend time with them and do they inspire me," Mills said, adding that he's looking for something magic in people.

    The startup pitch deck is one of the most widely used methods adopted by founders on the hunt for capital but Mills said: "There's nothing worse than looking through a pitch deck. I'm purely about people."

    Monument Valley

    Mills has invested in companies like music ticketing platform Dice, which is based out of usTwo's London headquarters in Shoreditch.

    "I love investing in people and helping to grow them and their projects," Mills said. "Peering into a company and seeing what they're doing is great."

    However, Mills advised startups to avoid taking on investment from venture capitalists if they can help it. "We don't have any external investment at usTwo," he said. "Stick away from it if you can," he added, explaining that it will allow the founders to remain in control of their destiny.

    Join the conversation about this story »

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    DueDil CEO Damian Kimmelman.

    DueDil, a startup with a platform that allows you to see the financials of others businesses alongside several other insights, is expecting to take $10 million (£7 million) this year.

    The London fintech firm, which has raised almost $30 million (£22 million) from technology investors, announced its Q2 results on Thursday, saying sales were up 118% year-on-year.

    DueDil CEO Damian Kimmelman was unable to break down DueDil's financials during an interview at the company's office on Wednesday but he did say: "We’re well on our way this year to get to a run rate of $10 million." Kimmelman added that the company is not yet profitable, saying that Brexit and the current funding environment means it's important to focus on business fundamentals and become profitable as quickly as possible. "The game has changed," he said.

    Founded in 2011, DueDil claims its software is used by 175,000 businesses, including the likes of KPMG, Aviva, Deliveroo, and WeWork, with PayPal and private jet operator Netjets signing up in the most recent quarter.

    Businesses pay a minimum of £15,000 a year to use DueDil's platform to find and track companies, including potential customers. It allows them to download a list of all the tech companies in Birmingham, for example, and find people within those companies that they could contact about a potential sale.

    Kimmelman said there has been increased interest for DueDil's platform from US companies in the aftermath of Brexit. "In times of uncertainly, businesses rely on DueDil to know who they're dealing with," said Kimmelman.

    He believes US firms are looking for tools that can help them to understand the impact of Brexit on businesses that they have relationships with, or businesses they're looking to form relationships with.

    DueDil is carefully considering its own business expansion plans post-Brexit. The company has got its eye on Dublin as a potential destination for setting up a sales operation, and Berlin as a possible engineering hub. "London is more suited for what we do but there are great companies being built in Berlin," added Kimmelman.

    Join the conversation about this story »

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    In addition to increasing labor costs, startups in San Francisco are facing monotonically increasing real estate prices. JLL, the real estate broker, shared their data on the average asking rent in San Francisco from 2007 to 2016, year to date. In 2009, the average asking rent was $31.37. In 2016 that number has more than doubled to $73.05, for an average annual increase of just about 13%.

    Tomasz Tunguz

    The most expensive neighborhood in San Francisco is Mission Bay/China basin at approximately $85 per square foot per year for class A real estate, followed by South market for an average of $80 per square foot.

    Rising prices reflect an increase of demand. But the trend does show some signs of slowing.

    Tomasz Tunguz

    The chart above shows net absorption of real estate. A positive number indicates more real estate was leased than was vacated and was built. From 2011 two 2015 we’ve seen more than 1.4M sq. ft. per year, with recent years exceeding 2M sq. ft. But 2016 is on track to be the lowest in six years, at an annual rate of just about 1M sq. ft. New leasing activity in 2016 is on track to be about 69% of 2015.

    This decline in absorption and leasing activity has decreased the year on year average asking rent in gross dollar terms already, and suggests that at least a plateau is near, if not a decline in prices.

    This decline in demand for real estate reflects a changing fundraising environment where many startups are conserving cash, shifting plans to profitability rather than growth at any cost.

    Perhaps at some point in the not-too-distant future, the startups will also begin to benefit from decreasing prices of San Francisco real estate.

    SEE ALSO: Here's what you need to earn to buy a home and live comfortably in 27 US cities

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    WeWork Adam Neumann and Rebekah Paltrow Neumann

    WeWork is cutting its revenue forecasts by 14% and telling employees to change how they're spending money, according to a report from Bloomberg's Ellen Huet, who saw internal documents.

    The company cut its EBITDA profit forecasts in April by 78%, from $65 million to $14 million, according to Bloomberg. It also lowered its revenue estimate by 14%, and its negative cash flow surged by 63%.

    In a statement to Business Insider, the company said it is "performing incredibly well."

    "The internal document referred to in the article was stolen by a former employee, and we have referred this corporate theft to the US Attorney's office," the company told Business Insider. "The stolen document was prepared months ago for scenario planning purposes and does not reflect our robust operating momentum. We achieved our best sales month ever in June with over 7,000 desks sold, and in August we will open over 10,000 desks, the most in the company's history. Occupancy levels for buildings open more than 12 months average 97%."

    At company all-hands meetings, WeWork CEO Adam Neumann sang a different tune, though, telling staff to cut costs and citing other startups that had gone out of business for frivolous spending, Bloomberg reported.

    Indeed, cost-cutting has become the norm these days at many richly valued tech startups like Dropbox as venture capital funding has become harder to come by.

    WeWork has already gotten rid of breakfast for its Monday morning executive meetings. Neumann also begged his employees to send him notes if the lights are left on at 2 a.m., or if people are wasting company money.

    "We did not use to be this way," he said to the company, according to Bloomberg. "We used to fight for every dollar. We did not spend."

    Much of the lost revenue came from building-opening delays, although the company expects some of the numbers to catch up in later quarters. This week, Neumann said that WeWork is on track for a $1 billion revenue run-rate this year.

    In June, the company said it planned to cut 7% of its staff after pausing hiring. However, its spokesperson insisted at the time that it was still on track to hire hundreds of employees by the end of the year.

    SEE ALSO: WeWork CEO says the startup will hit $1 billion in revenue next year and gave a touching tribute to his cofounder wife

    Join the conversation about this story »


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    Natalie Massenet

    Getting to know the personalities of the high fliers in the European tech community isn't easy. They're busy people and constantly on the move. 

    Thankfully, many of the top founders, CEOs, and investors have Instagram accounts that they use to document their day-to-day lives as they jet around the world, attend swanky dinners, and rub shoulders with government leaders. 

    We ranked some of Europe's best tech Instagrammers according to how good their photos are, how regularly they post, and what they post snaps of.

    See the ranking:

    19. Dailymotion CEO Cedric Tournay. WHY? Tournay enjoys experimenting with a filter while travelling to Asia and beyond.

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    18. Mike Butcher, editor at large of TechCrunch. WHY? Butcher posts snaps from tech conferences around the world.

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    17. Eileen Burbidge, partner at Passion Capital. WHY? Burbidge's Instagram is a snapshot of her family life, and the glamorous parties she attends.

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    See the rest of the story at Business Insider

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    Seb2Swedish payments startup Klarna is now a $2.25 billion company, but when CEO Sebastian Siemiatkowski cofounded the company a decade ago, none of the three founders had any experience in finance whatsoever.

    That was, he tells Business Insider, actually a blessing.

    The cofounders were naive 23-year-olds, who didn’t think the same way that traditional bank and finance executives did, and that gave them an advantage.

    The idea

    One of Klarna’s earliest ideas was to try and separate "buying" and "paying" for online purchases. Everyone knows how annoying it is to input card information when you are trying to check out. The Klarna dream was to have you just input an email address, one click, and then pay later. Klarna would guarantee the payment, and customers would have a week or two to pay up.

    The problem was Klarna didn’t have any money to speak of, beyond some seed capital, which was certainly not enough to cover the money during the in-between period. How were they going to get the money to pay the merchants while they waited for customers to make a payment?

    Klarna’s solution was to just ask the merchants if they would be okay with waiting to get their money.

    “Banks would never have dreamed of asking that,” Siemiatkowski laughs. It simply wouldn’t have occurred to them that any merchants would ever agree to that. But the merchants Klarna talked with wanted to grow their online sales, badly, and were willing to experiment.

    A decade later “pay after delivery” has become a cornerstone of Klarna. Klarna's technology instantly assesses whether an online shopper is trustworthy for a particular transaction, taking up to 140 factors into account, and then assumes the risk. The customer puts in his or her email and zip code, and then gets to examine the product before paying 14 days later.

    Klarna had $330 million in revenue in 2015, and is profitable, according to Siemiatkowski. It's also in the midst of a big US push, and has been integrated with retailers like Shoes.com and Overstock.com.

    But all this might never have happened if any of the founders had possessed any experience in finance before diving headfirst into the industry.

    SEE ALSO: How to use Acorns, the app that helps you easily turn your spare change into an investment portfolio

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    Chamath Palihapitiya, Launch Festival 2013

    Venture capitalist Chamath Palihapitiya is an outspoken voice in Silicon Valley.

    The investor, who was born in Sri Lanka, started his career at AOL, then went to Facebook to lead user growth, increasing the site’s number of users from 50 million to 700 million in just four years and becoming a near-billionaire in the process. 

    After leaving Facebook, in 2011 Palihapitiya launched Social Capital, a VC firm with more than $1 billion in assets. The firm’s most notable investments include the file-sharing platform Box, workplace messaging application Slack, and online investment manager Wealthfront

    Though Palihapitiya is one of the savviest investors in the Valley — and a minority owner of the Golden State Warriors — he’s also known for his candid remarks on the shortcomings of the tech industry. He’s recently decried the gender gap, shared which startups he thinks are “mostly crap,” and publicly criticized Apple CEO Tim Cook. But Palihapitiya, who’s intent on building the VC firm of the future, is righteous in his conviction that today’s generation has the opportunity to put “a massive dent in human suffering and make trillions of dollars in return.”

    We caught up with Palihapitiya in June, the week after the Warriors lost game 7 the NBA Finals to the Cleveland Cavaliers. We've already published several stories from that interview:

    But our conversation touched on a lot of other matters as well. Here's a transcript, edited for length and clarity.

    Biz Carson: I was hoping this would be a happier meeting. What was Game 7 like from your perspective? 

    Chamath Palihapitiya: Such a bummer. It’s pretty devastating. I walked out within one nanosecond of them winning so I didn’t even stick around to see what it was like. I was just so dejected. I felt bad for the guys. They’re such good guys.

    If you take a step back, I don’t know who said this but I saw it a lot on Twitter and on ESPN, but this may be one of the top three sporting feats of all time, what LeBron did. So, I dunno.

    These guys will be stronger for it, and life goes on.

    Carson: So what comes now?

    Palihapitiya: The big thing for us at Social Capital was launching our public hedge fund, which we did May 1. We’re putting all of the pieces in place for what I think Social Capital can become over the next 5 to 10 years. I think like any other startup we’ve now found a product market fit and it’s time to scale and it’s time to grow.

    The way that I see this is that the entrepreneurial struggle is the same at basically every stage in the sense that there’s maybe slightly less risk but strategic issues are generally always the same. And now there’s so much existential risk from another company either being able to compete or being able to disrupt you in the same way you’re disrupting somebody else, an entrepreneur needs a real steady partner who has the ability to start working with them in the Seed or the A and be credible and value-add [with] strategic advice, and just be backstopped by so much capital that you can do any growth round or even a public round.

    So for us, we said, OK, let’s put these pieces in place so we can basically be a turn-key partner for an entrepreneur. We can do the [series] A, $10 million bucks, great. Then our growth team goes in there and our growth team can help them implement the right data infrastructure, implement the machine learning, implement the right sort of customer acquisition metrics and reporting. All of the bells and whistles and suspenders that we learned at Facebook that made us so successful, let’s impart that.

    And what that immediately does is it lifts the probability of success and we see this is in the data. If you look at Mattermark, they have this great slide where they calculate a firm’s ability to generate follow on investor interest. And the number one company around the A and the B is us and the number 2 is Benchmark. So it just speaks to the fact that when we start with a company at its earliest phases, we really position them and help them have the best chances of being successful. 

     But our point of view was that wasn't enough. So now we can lead the B or we could lead the C or a growth round, $50 million, $100 million, $200 million, because we have that capital.

    But even then we can keep going. So when a company files to go public we can navigate the public markets. We can help them understand the nuances between RSUs and options. We can help them understand how to think about stock based compensation and dilution just as easily as we can help them with product market fit.

    There I think now we can be a partner with the CEO for 15 years or 20 years. And that to me is really exciting. And I think that an entrepreneur increasingly will need that kind of help.

    Carson: Why do you think that’s increasing? You just said that startups are facing more existential risk than ever.

    Palihapitiya: Because the half-life of companies is shrinking. So in the same ease in which you can start a company today to disrupt an incumbent, you have to also realize that somebody will do that to you as well just as easily. So if you’re not just going to get on top but stay on top, that will require a real prepared mind across many companies.

    Carson: What are the companies that have done this well?

    Palihapitiya: Facebook has done it well. Google has done it extremely well. Amazon.

    In our portfolio there’s about five or six companies that are the first batch of companies that will go public who are well poised to do that as well. 

    The other thing is, when you look at how the public markets treat private software companies when they go public now, it’s really important to have a strong voice in the public markets that anchors sentiment. That’s why we felt it was really important for us to also launch this public vehicle, because now as a large public hedge fund, we can shape sentiment. And if we have been a partner with the CEO since the series A for 5, 7, 8 years and we know that company intimately well and we have credibility with Wall Street, then we can help bridge the gap and help them do that. And that’s also important because it minimizes the volatility.

    And that volatility, as you saw with companies like LinkedIn or Box, can be really destabilizing. It can really have impacts to morale. Then what happens is the CEO is confronted with a really terrible set of choices: never go public and give their employees liquidity, or go public and have to deal with volatility?

    Carson: But why are startups scared of going public now? Is it really just that volatility? The election?

    Palihapitiya:No, I don’t think it’s the election.

    I really do think there are a couple things at play that we need to sort out.

    In this gold rush mentality that we’ve been in for the last five years there has been not enough focus on business model quality.

     

    The first is business model construction has been somewhat poor. Facebook very early on, and I’ve been kind of vocal about this, was profitable. I think since 2009 or '10 we were profitable. So two or three years before we went public. We knew what our margin profile looked like. We knew what our cost structure looked like. We knew what it cost to acquire [users]. We knew what it cost to support those users. We knew how to monetize those users. The very nascent set of things that came together even in our earliest model allowed us to be self sustaining. I would put that in the category of a good business model.

    Dropbox just announced that they’re free cash flow positive. I would also put them in the category of a good business model.

    I think unfortunately in this gold rush mentality that we’ve been in for the last five years there has been not enough focus on business model quality. So when push comes to shove, there actually aren’t that many great businesses that can go public. Because I think if you’re going to thrive as a public company, it presupposes that you make more money than you spend.

    And it’s weird but I think people in Silicon Valley are almost like “Why is that important?”. They don’t appreciate the fact that you have to be self-sufficient and self-sustaining. 

     

    Carson: Why has there been such a tolerance for this the last five years?

    Palihapitiya:If you look at the ecosystem, entrepreneurs as a class have gotten younger, younger, and younger. They also as a class have become less and less and less experienced.

    The good part about that is that you’re unlocking this ability to start a company to so many more people. That’s an amazing positive.

    The negative is they’re coming to that job with dramatically less experience than they’ve ever had. So there needs to be someone around the table that can then help them.

     I think that responsibility should be the investor's. But if the investors themselves are not sophisticated, if they themselves are not putting a lot of their own money to work, if they themselves don’t understand the continuum of capital and how different parts of the capital structures react differently, then they’re basically worthless. They’re not going to give great advice to these entrepreneurs who then need it.

    So that is unfortunately the cycle we’re in and we have to break the cycle. And the way that you break the cycle is that the investor class has to become more sophisticated, they have to become more integrated and then they can provide the kind of advice to these increasingly younger entrepreneurs so they can then plan for what has to be a business model that make sense, ideally two or three years before they go public.

    Carson: Do you think startups lost sight of the goal of going public the last few years?

    Palihapitiya: I think going public should not be a goal and the more that we make it a goal, the less it will be a goal. It’s kind of like, I have three young children and when I tell them to eat vegetables, the last thing they will ever do is eat vegetables. I think it’s just this weird thing where entrepreneurs have a reflexive negative reaction when people are pushing for it. I think you have to view going public for what it is, which is a transitional moment where you can consolidate mindshare and win at an even larger scale.

    The goal of a private company is, first, zero to one. Get past the product market fit, figure out whether people actually care about what you’re trying to build and someone will pay you money for that. That’s the zero to one problem.

    So scaling, one through N, is figuring out can you do that at scale and how big is the scale. And when people pay you more than what it costs for you to make it, does that equation end up leaving you with money left over, i.e. profits.

    Once that’s figured out, the reason to go public is that it is a massive branding, marketing, credibility, trust-building exercise with your customers, and then it allows you to consolidate power and scale and market share. Do we want to be a huge company with a huge impact? If the answer to that is yes, the only way that that happens is by going public. It it is effectively a branding event that catalyzes interest. It helps with recruiting, it helps with marketing, it helps with sales. It just helps on many dimensions.

    I think it’s basically a litmus test for the CEO’s ambition.

    Carson: What did you make then of the Microsoft LinkedIn acquisition?

    Palihapitiya:Amazing on both sides. I was stunned.

    Carson: I think we all were.

    Palihapitiya: I was stunned for a couple reasons. One, that’s immense courage by Microsoft to basically put themselves out there. Two, that’s a really courageous thing for Jeff and Reid to basically decide that they could do more for their employees by giving them a buffer and safe harbor of being a part of the Microsoft family.

    Jeff Weiner, Satya Nadella, Reid Hoffman

    If you wind the clock back to February or January or whenever that was that LinkedIn’s stock price collapsed, on basically air, it was not justified. 

    What’s sad is that that event, the short term, whether it was risk management or capitulation of all these public market investors, robbed a bunch of others — including me — of the opportunity to own what is just a fantastically useful well-run quasi-monopoly. Buffett tells you that these are the kinds of businesses you want to run forever. For me, I was disappointed that it was acquired only because it means I can’t own it anymore and I’m not a particularly enthusiastic Microsoft shareholder only because it doesn’t meet my growth targets.

    But if you look at why it happened, it didn’t have to happen if public market investors were more stable and less skittish.

    Carson: Well LinkedIn had that problem with stock-based compensation. You wrote about it. Is that a growing problem for more companies?

    Palihapitiya:It’s important to understand the compensation equation that a CEO and a founder has with his or her employees. I think it’s also important to understand because we have huge issues at least [in] Silicon Valley right now with respect to congestion, traffic, affordability of housing, and we have to understand where this compensation ultimately goes. I actually don’t think most of the incremental gains in compensation and inflation of wages that’s happened in Silicon Valley of the last five years goes into the actual pockets of the people who work at these companies. I think they end up largely in the hands of service providers and the landlords because I think rents have gone up lockstep with wages.

    chamath at facebookAnd so the stock based compensation thing was to sound the alarm bell that  things are changing, that you need to pay attention to this as a private company, if you start to scale, you’ll be faced with a decision on whether to switch to options to RSUs, and if you do, you need to understand what the complications are. And so you have to think about how do I manage dilution, how do I actually report metrics, how do I actually create business model decisions.

    Why should I not report on GAAP? Like the young entrepreneur right now that is starting a company, she should be telling herself “alright you know what f--- all the nonsense, I’m reporting GAAP from day one.” Immediately clarifying. You can’t hide the cheese. And then you have to set a goal, I’m going to spend less than I make.

    I swear to God if you say that people will scratch their heads. Now, you don’t have to do that day one, but you have to have a goal of getting there, right? It took [Facebook] six years to get to profitability. It took us eight years to go public. And when you look at some of our companies today, at a certain point of scale, it tends to happen at the $20 to $50 million mark for revenue, they tend to be 15 to 18 months away from being totally cash flow positive. And we have a bunch of them now that are basically at or near profitability.  

    Carson: I feel like a lot of entrepreneurs hear all this talk about profitability and realize they need to lower their burn. So, they just start chopping off perks and people.

    Palihapitiya: If you’re trying to get to profitability by lowering costs as a startup then you are in a very precarious and difficult position. You need to grow through profitability.

    The people who would’ve typically marked up deals and done huge growth rounds at crazy valuations, they’ve sobered up.

     

    Startups should be, if you graph their financial performance, it should be what’s called a J curve. You start out at zero, you’re not making any money, you’re not losing any money.

    As you start the company, you start spending spending spending ahead of revenue but then you come out of it and very quickly you should become a company that spends less than it makes. And what I mean by very quickly, is that window of time should be in that 6 to 8 year time frame. And the reason is because if you build your business model correctly it’s almost unavoidable.

    Carson: What does the funding environment look like from your perspective? Are you still bracing for the downturn? 

    Palihapitiya:I think we’re in a long, protracted, negative cycle. There will be no shock to the system in my opinion. But I think what’s happening is basically two things.

    The first is that the people who would’ve typically marked up deals and done huge growth rounds at crazy valuations, they’ve sobered up. And the reason they’ve sobered up, is that going back to this original point, is that they’ve invested in some horrendous business models at huge prices. And what you’re going to see are a bunch of things amongst that class of company. And what do I mean by the class of company? Negative gross margins, terrible unit economics, high customer acquisition, low LTV, all of these things were ignored because of some vanity metric that justified a huge up round at a huge valuation. But all those investors are now having to deal with the impending reality that there is no greater fool to then mark up the deal after them, that they may have in fact been the greatest fool.

    And that’s happening right now.

    So you’re looking at the quality right now, these companies again that are gushing so much money are no longer are finding a bid at higher prices. So one of two things can happen. Number one, you find a bid at lower prices, i.e. a down round. Or number two, you reprice this last round at a lower price so that then you can then do a “upround” from the last price.

    However you want to put the lipstick on the pig, that’s what’s happening now.

    It will be silently for the most part. These are things that are not talked about publicly, but there are many companies going through this process, either a repricing or a downround.

    Carson: And this is all behind closed doors?

    Palihapitiya:Absolutely behind closed doors. But the inside baseball of it is that you hear enough rumors that you know it’s happening.

    And then the second thing that’s happening is that as they realize that these are the only options, the firms that did these rounds have to revalue their portfolio. So now that deal that looked amazing looks barely break even or is now underwater.

    So what happens then? They become more risk averse because they’re like “Oh my god, I need to slow down and just do a really good high-quality investment. No more speculative investing.”

    Then what happens? The limited partner gets the report. And they, who felt like the hero for investing in that great growth fund, now also feels sheepish because they’re like "Oh my gosh, what happened to all of this upside that was there that is no longer there?" So they go back to their committee and now they have to rebalance their risk exposure.

    Carson: But it seems like LPs haven’t slowed down their investing.

    Palihapitiya: The LPs have to decide where to allocate capital. I think we’re in the first phase of that. You have to remember that LPs get reports once a quarter. So I suspect you need four to six quarters of this kind of data before LPs really sober up to the fact that all the paper profits that they thought they had aren’t really there. And then what they will do I suspect is put a lot more pressure on the growth funds to sober up.

    I think they will also look at firms like us and Benchmark and say "I should just have more capital with these guys at the early stages because that’s where there’s the least risk." Because what they’re going to see is they invested in a growth fund thinking that they were buying high quality business models, high quality revenue, predictable outcomes, 18 to 24 months of liquidity. Instead what they really did was make a series A investment but with $100 million instead of $10 million. That’s really bad risk management.

    Bill Gurley

    Carson: So the past couple of years it’s been the growth funds making the risky calls?

    Palihapitiya: I think so. We’re in the process of unwinding all that. That’s the first big thing that’s happening.

    The second thing that’s happening is that there are incremental sources of capital coming into this market looking for a home. So for example, Saudi Arabia’s gonna sell $350 billion of Saudi Aramco. Where’s that going to go? Well if they’re looking to generate any sort of return, some of that is going to find its way back to technology. That money will find its way to Silicon Valley and some of that money will find its way into a bunch of these firms.

    Carson: Does that balance the effects then?

    Palihapitiya:It doesn’t balance it, but that’s why it feels more muted. If the capital wasn’t flowing in from other parties, I think this would feel a lot more dramatic and the downturn would be less moderated. 

    But at the end of the day, the partners though will probably be behaving differently. They got really cute, they learned a lesson, they’re probably not going to be held accountable for that lesson, but they’re probably not going to repeat the same behavior again.

    Carson: What about the employees? I was talking with someone and they said the difference between this bubble and the one from 2000 was at least then startup employees, even if the company collapsed afterwards, then at least they got money. Is it a bad time to be a startup employee in this downturn, even if it is gradual?

    Palihapitiya: That’s just wrong. Companies that went public in that first internet bubble were basically borderline frauds. 

    I think the reality is that it’s never been a better time to be an entrepreneur, it’s never been a better time to work at a startup. You work at a really intellectually free environment, you get to work with people who are like-minded, it’s very energetic. It’s wonderful. 

    Companies that went public in that first internet bubble were basically borderline frauds. 

     

    It’s OK, by the way, that it takes 10 years for you to make “money.” Since when was it that being in your mid-30s to make a few hundred thousand dollars or a million dollars was like egregiously unfair? I think we have to have a sense of perspective here. We’re all going to live into our 80s or 90s. So what is everybody in such a rush for?

    I think what you should be in a rush for isn’t necessarily the immediate monetary return, but it’s to know that this equation that exists between an employee and a company is being honored.

    So what’s the equation? I’m going to give you my most precious thing that I have, which is my time and my reputation, I’m giving that to you. That’s what the employee says. And the company says I’m going to take your time and your reputation and direct it at things that we believe collectively have a huge impact opportunity to do something extremely positive. And that positivity will get measured in impact and also economic upside.

    And I want you to be happy and work here for 15 and 20 years, and that equation should pay off over all those years. That’s f---ing awesome.

    This should not be viewed as a get rich quick scheme. The point of Silicon Valley at least when I moved here was we’re all trying to do stuff and none of us quite felt like we fit in anywhere else. But we were all trying to do good things. And the money was just the byproduct of good things. The idea that there’s an obligation to have that thing happen in four years or five years or six years, I think we need to disavow that.

    Donald Trump

    Carson: Last question: Donald Trump. What is his affect going to be on Silicon Valley? Are you advising your startups to have contingency plans if Trump wins?

    Palihapitiya: No. So if I put my public market hat on, I think you’re talking about we in the public markets would call tail risk. Maybe the question is how much tail risk is there in a Trump presidency? And I think the answer is it’s unclear. I also think the answer is that markets are quite resilient. We’ve dealt with the almost implosion of the entire global financial system. We’ve dealt with the almost implosion of all of the European political infrastructure. We’re currently dealing with the almost breakup of Britain from the rest of Europe. So, markets are resilient.

    People should absolutely have a point of view about the political process themselves individually, but I think that we’re also at a point in the evolution of capitalism where any one individual’s impacts are probably over estimated because there is enough regulation and guard rails. They may be odious, they may be grotesque in what they say, but the practical day-to-day impacts from a policy perspective tend to be limited because the system made it so. I think that’s why you see a lot of political apathy because people have internalized the inability for anyone either really really good or really really bad to do anything.

    So I would tell startups to just keep your head down, keep building. Your contingency plan, if you have one, should be because you are still spending more than you make and you still don’t have a line of sight for that J curve. That is the most important contingency. Because otherwise you are betraying that equation to your cofounders, to your investors, to your employees and to your customers.

    SEE ALSO: 'Lots of contempt': What it's like to be a secret Trump fan in Silicon Valley

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    tink founders

    Financial technology, better known as fintech, is absolutely exploding around the world right now, with new businesses springing up doing everything from online lending to handling cryptocurrencies.

    London has emerged as a capital of fintech in Europe but Nordic countries — Denmark, Sweden, Iceland, Norway, and Finland — also have a flourishing scene. 

    The region is already home to a so-called fintech "unicorn"— a startup worth over $1 billion — and small business banking startup Holvi, founded in Finland, was bought by Spanish banking giant BBVA back in March (for that reason, we've not included it on the list.)

    We have rounded up the 16 most exciting fintech businesses from the region below. 

    16. Lendify — Swedish peer-to-peer lending platform

    Based: Stockholm, Sweden.

    Founded: 2014.

    Raised: $3 million (£1.95 million).

    What it does: Sweden's first peer-to-peer lending platform, focusing on consumer loans. The company launched to the public in April 2015 after a soft launching in September 2014. It recently raised €2 million (£1.43 million, $2.2 million) and loan applications worth SEK 400 million (£35 million) have been made since launch, according to its annual report.



    15. Pleo — A "smart" company card linked to an app

    Based: Copenhagen, Denmark.

    Founded: 2015.

    Raised: N/A.

    What it does: Pleo provides a "smart" company credit card for employees to use that automatically captures receipts and categorizes spending. It is also linked to an app for both employers and staff so they can add notes and track spending. The startup won Pioneer of The Year award at the prestigious Pioneer tech festival in Vienna and has launched a beta trial of the product with 500 companies, representing over 10,000 staff.



    14. Lendino — Danish peer-to-peer lending platform

    Based: Copenhagen, Denmark.

    Founded: 2013.

    Raised: N/A.

    What it does: A Danish marketplace lending platform for institutional and individual investors, with a focus on lending to people or businesses in your local area. Well-known early stage London tech venture capital fund Passion Capital invested in the platform, although the amount was not disclosed. So far DKR 28 million (£3.1 million) has been lent over the platform.



    See the rest of the story at Business Insider

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    Vana Koutsomitis Apprentice finalist

    Vana Koutsomitis, a runner-up on TV show "The Apprentice," is looking to raise £120,000 for the dating app that she pitched to Lord Sugar in the final of the BBC show.

    DatePlay, as the app is known, will use interactive games to try and understand your personality before recommending possible matches for singletons to swipe left or right on. 

    The app is currently under development and the money will be used predominantly for marketing purposes. 

    Oxford University graduate Koutsomitis is hoping to raise the capital on equity crowdfunding platform Seedrs, where investors can pledge anything from £10 to more than £10,000. 

    Koutsomitis is kicking off the crowdfunding campaign on Tuesday and she will have to hit her funding target within a month if she wants to see any of the money. Interestingly, she's already raised £75,090 of the £120,000 target from a number of private investors and that's reflected on DatePlay's Seedrs page, meaning she's only got to raise another £45,000. 

    The American-born businesswoman claims her dating app, which she's cofounded with university friend Joris Magenti, is unlike Tinder, Happn, Match.com, and any other dating platform that's currently on the market for that matter. 

    "The difference between DatePlay and the others is that we add an element of fun to the dating experience by integrating games into the interface," she told Business Insider at the Ham Yard Hotel in London earlier this month. "Tinder can engage you for short periods of time but once you have enough matches and once you’ve swiped left and right enough times, you start to get a little bit crazy. You’re just like, over it." 

    Koutsomitis left her job at Japanese investment bank Namora in order to pursue her dream of becoming an entrepreneur and launch DatePlay, which is targeted at 18-24 year olds. 

    Some 20,000 people have already pre-registered for DatePlay, which is yet to be fully developed and therefore isn't available in the App Store or the Google Play store. 

    The app will eventually be free to download but users will have to pay £4.99 a month if they want to access premium features like event invitations, blocked ads, increased messages and being shown at the top of the match list. 

    DatePlay

    DatePlay game

    Before any matching takes place, DatePlay will get users to play a quick game, which Koutsomitis describes as a "Buzzfeed-style quiz," in order to determine some of their personality traits. 

    "You log in and the app takes you directly to the game," Koutsomitis explained. "So you start playing immediately. Through the game we’re going to determine your personality, who you are, and what you want. And then we’re going to match you. We’ll show you your first match and your compatibility. It’s up to you to then swipe left or right if you like the person or not. We believe that you need to see the person’s photo in order to determine if you’re attracted to them or not so we have the second step."DatePlay

    Initially there will be just one game in DatePlay but Koutsomitis said more will be introduced in the coming months. 

    When asked how the game is able to determine a user's personality traits, Koutsomitis said: "We’re using a PhD to develop the games. It’s based on scientific research. I’m not the scientific expert so it’s hard for me to tell you in an educated way the exact personality matches."

    Harry Briggs, a startup investor that studied psychology at the University of Oxford, told Business Insider that games can be used to identify what kind of personality and behavioural characteristics someone has, such as openness, conscientiousness, extraversion, agreeableness, resilience, neuroticism, etc.

    "The big question, though, is whether DatePlay's 'compatibility score' is a valid measure of actual dating compatibility," said Briggs. "The limited research I've read suggests that dating outcomes still appear to be most correlated with similar levels of physical attractiveness, societal status and educational background, obvious and unromantic though those sound. It's no good knowing someone's personality type if you don't know what personality types they click best with."

    Briggs added: "If DatePlay can use simple machine learning from the "successful" matches to retrofit matching algorithms onto the personality scores, then they could ultimately create something that gives people a better chance of finding a good match."

    Join the conversation about this story »

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