GigaOM » Ron Conway

Y Combinator startups to get less cash, more connections in strategic shift

Eliza Kern — Mon, 26 Nov 2012 21:52:16 +0000

In a big change for Silicon Valley’s oldest startup incubator, Y Combinator announced today that it would change how its classes of startups receive investments, with Y Combinator taking control of the funding process, changing which VCs make the investments and halving the amount of money given to startups.

The changes scale back how much money startup founders will receive with the YC program — $80,000, down from $150,000 — but YC said it would organize network connections with notable local investors, which is arguably what YC is all about — building connections and networking while getting critical feedback as your company gets off the ground. Sure, it’s less cash, but it seems unlikely the changes will halt the flow of applications that come to the incubator each year from startups desperate to join. And the group hopes it will decrease founder disputes without hurting any of the successful startups.

In a post, Y Combinator explained that the decision shouldn’t hurt successful startups — who can still go out and fundraise after Y Combinator — and will cut down on founder disagreements for the companies who go bust, since there will be less to fight over. The decrease in initial funding could prove tough for some hardware companies, who tend to need more cash upfront, or international founders looking to secure visas and relocate, but otherwise should be an improvement, said YC partner Harj Taggar.

“It just made the disputes more heated becasuse there’s more at stake,” he said.

Initially, all companies selected as part of a Y Combinator class were offered a convertible note for $150,000 from investors Yuri Milner and Ron Conway. While Y Combinator wasn’t directly making that investment, it explained in a blog post that it ended up taking part in the complicated process. So, YC decided to create its own investment to simply the process:

“Although we didn’t organize this program, over the years we ended up de facto managing it, and it was awkward to manage something we hadn’t started. So we decided to take control of the situation and replace it with something of our own design.”

Now, YC startups will still receive a convertible note, but only for $80,000, and it will come from $20,000 each from Milner, Andreessen Horowitz, General Catalyst, and Maverick Capital. Conway is notably absent from the list.

While upcoming classes of YC startups will likely be disappointed in the funding changes (who wouldn’t prefer twice as much money when starting a company?), the incubator has never been about making the most money possible in a few months. It’s about building connections with Silicon Valley investors, access to later funding rounds, and an alumni connection that can help with everything from finding office space to hiring programmers.

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Rewarder gets $7 million to fulfill your oddest, nerdiest dreams

Eliza Kern — Wed, 24 Oct 2012 11:30:14 +0000

Have a penchant for pomegranates and or a longing to be Lucius Malfoy? You’re in luck – Rewarder, the startup launching Wednesday with a $7 million Series A funding round, hopes to make all your weirdest dreams come true.

Part Kickstarter, part TaskRabbit, part reverse-eBay, Rewarder allows users to post things they want and list a price. But it’s not local like TaskRabbit, and people post both physical items they want as well as tasks they want performed, so it goes beyond Kickstarter. Frankly, searching through the listings on the site, which span an incredible range of topics and categories, reminds you of just how weird humans are. A few examples:

$2 offered for a pomegranate sauce recipe (high sugar suggestions need not apply)
$50 offered for help locating an original set of Dungeons and Dragons dice (all pink)
$50 offered to a Navy SEAL willing to help a Navy SEAL hopeful
$50 for someone willing to locate a duck or goose-hunting field in Minnesota (the poster notes that he’s willing to hunt with people of all ages)
And my personal favorite, $2,000 offered for a legit Lucius Malfoy Death Eater Costume (do not bother with your cheap replica suggestions, the poster is onto you)

While the “unique request” section is especially entertaining to peruse, the site, which has been in beta for almost a year now and raised an angel round last November, has popular categories for collectibles, antiques, clothing, lost pets, crime-solving, business advice, genealogy and diet tips. So pretty much any kind of thing people might have trouble locating and would pay someone to help out with.

The company said users have posted $10 million worth of requests, although they would not release the dollar amount associated with fulfilled and paid requests so far.

But investors are betting that the site will become profitable, with Granite Ventures and Radar Partners leading the Series A round, which also includes angels such as Ron Conway, David Lee, and Kenny Lerer. Chris Hollenbeck of Granite Ventures and Doug Mackenzie of Radar Partners will be added to the company’s board of directors.

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Red hot Codecademy gets $10m from Index and KPCB

Bobbie Johnson — Tue, 19 Jun 2012 10:59:34 +0000

Updated: Much-vaunted New York teaching startup Codecademy is taking on a new round of funding, adding Index Ventures and Kleiner Perkins as investors — and raising $10 million to help it expand globally.

It’s fair to say that the site, which provides game-like online courses to teach people how to code, has had a blockbuster year so far. It’s spent 2012 seeing enormous growth, adding new marketplace features, and gaining a legion of fans, including New York mayor Michael Bloomberg.

But even though the site has seen a breathless rise to prominence, the money isn’t just being used to keep the servers spinning while demand grows: it’s got ambitions too.

Ahead of an on-stage interview with me at LeWeb London on Tuesday, co-founder Zach Sims told me that the new funds “give us the ability to go international” — something useful given that 50 percent of the company’s user base already comes from outside the U.S.

And in a post on the company’s blog, he explains his belief that the latest investors are well-placed to help it achieve that expansion.

“A few weeks after we launched Code Year, we met Neil Rimer and Saul Klein of Index Ventures. Saul told us, about the world he wanted for his kids – one where code was a foreign language as important as Chinese and English for people to learn. Mary Meeker of Kleiner Perkins visited our office around the same time and painted a picture of a few industries that needed to be shaken up – education chief among them.”

“It became clear that we needed partners who both understood the importance of a global company… and the process of scaling a company far beyond the nine people we have grown to now.”

It’s actually the first investment from Index’s new €350 million early stage fund, but still, it’s only eight months since the business announced its last round of funding, a $2.5 million round from investors including Union Square Ventures, Ron Conway’s SV Angel and Michael Arrington’s Crunchfund.

This time round Union Square is following up, with Index’s Saul Klein leading the round and KPCB’s Mary Meeker joining in too.

So what do they see in it?

Index’s Klein told me that he was excited by Codecademy for many reasons, but not least because “it’s not a content-needy educational publisher” but “a marketplace for students and teachers.”

He also pointed out that with a global depression, it made sense to back a company that gives people the chance to learn new skills and potentially find jobs that they wouldn’t have otherwise been able to access.

That seems a proposition that is not just popular with VCs but also a magnet for billionaire tycoons: not only did Bloomberg express his support for the site, but investors include Russian Yuri Milner (who adds to his previous investment) and Virgin founder Richard Branson.

Here’s my chat with Zach Simms at LeWeb:

Photograph of Codecademy founders Zach Sims and Ryan Bubinski used under Creative Commons license courtesy of Hack NY

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BetterWorks Cuts Staff, exploring options

Om Malik — Thu, 17 May 2012 19:06:26 +0000

Paige Craig’s photo courtesy of Venturebeat.

BetterWorks, one of the most well known startups to emerge from Los Angeles seems to have hit an air pocket. The company which was started by super angel, Paige Craig (along with Zao Yang and George Ishii) is said to have laid off close to thirty people, a very credible source of mine tells me. The company is said to be looking at making some dire choices. I left voice mail for Craig and emailed him and am awaiting a comment from him.

I emailed his lead investor, Satish Dharamraj of Redpoint Ventures, who is offline for family reasons and pointed me back to Craig. My attempts to reach some of his other investors in the company have drawn a naught as well. Dharamraj is the lead investor in the company which raised a whopping $8 million in August last year. Forbes put the estimated valuation of the company at $100 million and recently called it one of the 10 startups changing the world.

Craig, who dodged my phone calls and repeated requests told Pando Daily:

The outside sales model is a big risk. When we were on-boarding early adopters, the signals were that it was working. Once we got past the early adopters, the real numbers didn’t justify the cost.

To that I say, keep spinning dude!

Other investors in the company include Jeff Clavier of SoftechVC and Ron Conway’s SV Angel. The company also attracted angel dollars from well known angels such as Naval Ravikant of Angel List, Keith Rabois, COO of Square, Michael Jones ex-MySpace, Brian McClendon, VP of engineering at Google and Yishan Wong, a director of engineering at Facebook.

BetterWorks describes itself an employee perks program. The idea was just as Google and Facebook offer a variety of perks (meals, coffee, gym, etc.) to their employees, startups (and others) could use BetterWorks’ platform to offer perks to their employees. And because it can aggregate a lot of employees, the company could get better offers for the employees and the whole process could be managed through its web-based interface.

Update: I used exclusive in the headline, but later was told by Erin Griffiths that PandoDaily beat me to the punch. Apologies to them and to the readers.

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Why Ron Conway is fighting SOPA

Ryan Lawler — Wed, 18 Jan 2012 22:05:38 +0000

More than perhaps anyone else in Silicon Valley, SV Angel’s Ron Conway knows how important free expression on the Internet can be to allow fledgling technology companies to grow and prosper. Conway has invested in more than 600 technology companies since 1994, so it probably isn’t surprising that he’s emerged as a vocal opponent of the proposed PIPA and SOPA bills circulating in Congress.

In a phone interview Wednesday, Conway said the crucial issue with SOPA is that it would lead to censorship on the web — and that would end up costing jobs. That echoed his remarks at the San Francisco anti-SOPA rally, where he noted the Internet had created and allowed free expression to the public that had never been seen before. As a result, he said the Internet had added 4 million jobs, making it the largest job creator in the U.S.

“We should let technology find new ways of fighting piracy instead of adding more legislation,” Conway told me by phone. That goes along with the key theme of the protest, which he said was, “It’s about innovation, not legislation.”

Of course, Silicon Valley and the entertainment industry have been at odds for years over the issue of piracy and censorship. So how should the two groups bridge that divide? Conway suggested creating a working group between media companies and technology companies to find ways to solve the issues around piracy.

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Live stream: The S.F. street protests against SOPA

Janko Roettgers — Wed, 18 Jan 2012 20:39:47 +0000

The protest against the SOPA anti-piracy bill isn’t just happening online this Wednesday, there are also street protests scheduled in New York and San Francisco.

The S.F. protest will feature prominent venture capitalist Ron Conway as a headline speaker, and we will stream the event live right here:

Watch live streaming video from gigaomtv at livestream.com

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Young, Experienced Co-Founders Are Key to Success

Ryan Kim — Mon, 23 May 2011 16:35:29 +0000

The key to success in start-ups is making sure you’re young, experienced and not the only founder. That’s the takeaway from a new survey conducted by SV Angel of successful startups. The survey, which has gotten response from 300 start-ups that have been funded by SV Angel, looked at what goes into a successful entrepreneur and what type of founder profile makes for success.

One could argue that the data provided has an obvious bias, given it only documents companies that have made it past the hurdle of getting funding from SV Angels, and typically angels and venture capitalists subscribe to narrow views of what makes a successful founder. So based on this sample, the survey found 90 percent of companies that had either a $500 million exit or a projected $500 million exit had repeat founders. For smaller companies with a real or projected $25 million exit, 63 percent were repeat founders. SV Angel’s Ron Conway ticked off a number of entrepreneurs who found success as repeat founders including Marc Andreessen, Evan Williams and Dennis Crowley. “The more experience the entrepreneurs have, the better,” he said at the TechCrunch Disrupt conference.

While experience is an obvious plus, it also appears that younger entrepreneurs are having more success in larger exits, something that’s often odds with experience. According to the survey, 67 percent of founders of large $500 million companies were younger than 30. For smaller companies, it was more tilted toward older entrepreneurs with 53 percent of $25 million companies older than 30. It seems like the emerging profile of a successful founder is someone who has managed to gain a lot of experience while still being young enough to be patient and still embrace risk.

“Younger entrepreneurs are willing to slow-grow their company and take more chances,” said Conway. “Facebook is a good example of that.”

Finally, it appears co-founders are better for successful startups than single founders. The survey found that 89 percent of large companies had co-founders while 84 percent of smaller companies had more than one founder. Conway said it helps to have multiple founders who complement each other like Larry Page and Sergei Brin did at Google. We’ve also recently written about this why co-founders are favored.

SV Angel didn’t ask a specific question on the gender of founders, but David Lee, managing member of SV Angel said 95 percent of respondents had male founders.

This is still just a slice of data from SV Angel and as I mentioned, some of this can be self-fulfilling prophesy. And there are plenty of examples of companies that have succeeded by bucking these trends. It still takes a smart team with a great vision and an ability to execute. And that can come from anywhere. But it’s interesting to note what’s gone into the success of some of SV Angel companies.

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AngelGate Goes Nuclear, Startups Get the Fallout

Mathew Ingram — Fri, 24 Sep 2010 16:10:24 +0000

Just when you thought the AngelGate fuss — which Mike Arrington of TechCrunch touched off earlier this week with a blog post exposing a meeting of “super-angels” — couldn’t get any more emotionally fraught, legendary Silicon Valley investor Ron Conway upped the ante late Thursday with an email to some of the investors who were at the meeting, calling their discussions “despicable and embarrassing for the tech community.” Among other things, the long-time angel investor asked those at the meeting to remember who they are supposed to be working for, namely the founders of the startups they are investing in.

This is a message we tried to get across in a recent post as well, and a point that several other prominent angels and investment funds such as True Ventures (see disclosure below) have also made in blog posts since the AngelGate affair first blew up. True partner Jon Callaghan said it well in a post entitled simply “Founders Come First.” Angel investor Chris Yeh echoed this perspective in a post, saying “the last thing any of us — angel, VC, or entrepreneur — need is a conflict that will get in the way of what we’re all trying to do: Create great products and build great companies.” And entrepreneur Micah Baldwin of Graphic.ly wrote that “the best investors know that the moment you put the potential of your return ahead of the potential of your entrepreneurs, you lose.”

Dave Pell, meanwhile — an occasional angel investor and advisor to startups since the early 1990s — also made some great points in a post about advice he has given to startups, including how they should approach venture investment, from angels or anyone else. His advice includes a suggestion (probably not a popular one among super-angels) that they avoid doing so if at all possible:

The best advice I’ve ever given a founder during a pitch is: Don’t take any outside investment from me or anybody else. Most of the start-ups that are really products being built to flip to one of the big web companies are better off bootstrapping it than taking on outside money and all the hassles and headaches that come with that decision. If you can swing it without investors, do it.

It’s no secret that a big part of what led to the secret meeting of super-angels — where the topics of discussion (allegedly) were things like how to push startup valuations down — is the current bubble-like atmosphere around startups and seed investing in Silicon Valley. As Liz has pointed out, it seems as though every open house or launchpad event draws hundreds of angel and VC funds, with some offering YCombinator startups financing before the ink is even dry on the napkin where they sketched out their idea.

Dave McClure, an angel investor and startup advisor — who came in for particular criticism in Conway’s email — is just one of the “super angels” who have raised (or are trying to raise) large funds over the past few months. McClure’s 500 Startups has filed to raise $30 million, former Google executive Chris Sacca has raised over $20 million for his Lowercase Capital group of funds, and another former Googler, Aydin Senkut, has raised $40 million for his Felicis Ventures fund — and there are new funds appearing every few weeks, it seems. That much money chasing a relatively small startup field is bound to lead to pressure on prices, and to pressure on relationships between angels and traditional VCs. Some, like Kauffman fund advisor Paul Kedrosky, have even argued that there is a super-angel bust coming.

Whether there are too many angels is a moot point in some ways. As with other investment cycles, the number of investors tends to rise and fall. But without taking sides, Conway’s central point is a good one — if the in-fighting and/or attempts at collusion among angels (which Union Square VC Fred Wilson said recently has always been around) gets out of hand, then the ones who ultimately suffer are the founders and startups that are supposed to be at the heart of the entrepreneurial ecosystem (and some recent analysis shows the U.S. has some work to do in that area). As Clay Loveless of Mashery said about the AngelGate blowup: “I’m glad I’m not launching a startup in the midst of all this.”

That’s not to say Silicon Valley and a handful of “super-angels” are the entire startup ecosystem — they clearly are not. But they help set the tone and drive attention and funds towards startups of all kinds, and friction in that process does no one any good. In closing, we leave you with Hitler’s perspective on the whole fracas.

http://www.youtube.com/v/ZlZOfHCpFFs?fs=1&hl=en_US&rel=0&border=1

Disclosure: True Ventures is an investor in the parent company of this blog, Giga Omni Media. Om Malik, founder of Giga Omni Media, is also a venture partner at True.

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Post and thumbnail photos courtesy of Flickr user Dave Vaughan

Keith Rabois* Is the New King of Y Combinator

Liz Gannes — Mon, 30 Aug 2010 19:15:21 +0000

Updated. Last week I didn’t have much time to write (I was subbing at the GigaOM edit desk), but I did have the chance to drop by Y Combinator’s summer Demo Day in steaming hot Mountain View, Calif. This batch of companies in the three-month-long YC program is further along than previous classes, and more enterprise- and commerce-oriented, and at least six of 36 companies are already profitable (one, Brushes, said it’s taking in $60,000 per month selling iOS painting apps, a new Demo Day revenue record). Many have already raised funding, and (as I’ll tally below), many of them from the same set of angel and early stage investors. Angels Keith Rabois and Paul Buchheit (see update below) have surged to an early lead with five investments in the class prior to Demo Day.

Multiple presenting startups showed off cool ways to visualize and interpret data, and only a couple were focused on YC’s cash crop to date, productivity apps. More than a third of the presentations were designated off the record (grrr…), in most cases because the presenting companies haven’t launched products yet. At least eight teams touted their credentials as MIT graduates.

The most interesting trend I noticed was the funding status of many presenting companies. Ten weeks into the program, many YC startups already have money in the bank. Of the startups that have already raised funding, many have had success hitting up the same core clique of angel investors. I conducted an informal survey of investors at the event to ask how many of the summer Y Combinator class they’d already funded. I would’ve guessed archangel Ron Conway with his SV Angel outfit would be leading the pack, but so far that’s not the case.

Keith Rabois, the new general manager of Square after his company Slide was sold to Google, is actually the fastest on the draw, with five investments in summer 2010 Y Combinator startups as of Demo Day. Five out of 36 companies is a stunning proportion. Rabois’ picks include private and ad hoc social networking site The Fridge. (See our recent video interview with Rabois embedded below.) Update: Rabois tells us that as of Monday (less than a week after Demo Day), he has invested in six startups from the class.

Watch this video for free on GigaOM

Another update: Paul Buchheit of Gmail and FriendFeed fame says he also had five investments as of Demo Day, and is now up to six as of Monday.

Naval Ravikant is close behind with four. (We also recently captured him on camera.)

Conway’s SV Angel has three also had four at the time of Demo Day, including Hipmunk, and partner David Lee said he’s also interested in one of the off-the-record startups. Update: Lee says that as of Monday, SV Angel’s count is up also to six.

Dave McClure of 500 Startups, who’s been on a deal-making rampage lately, has three, including Ginzametrics and Rapportive. (GigaOM video here.)

First Round Capital has two.

Mike Maples and Ann Miura-Ko of Floodgate, who recently raised $73.5 million to invest in young startups, said they have yet to fund any summer 2010 YC companies. Josh Felser of Freestyle Capital also has zero under his belt.

To be fair, I didn’t talk to every angel investor (and I only attended the first of three Demo Day sessions). Plus, there may well have been additional deals completed over the weekend. (Update: Per Lee’s, Rabois’ and Buchheit’s additional information today, that definitely was the case!)

Y Combinator head honcho Paul Graham was careful to announce that all participants in the summer class are currently raising money. That includes companies that have already announced completed rounds, like Rapportive, whose CEO Rahul Vohra said he would still take more money on the right terms. Because Y Combinator hosts Demo Day as a sort of coming-out party to introduce its startups to angels and early-stage investors, that’s an important distinction, even if it’s only semantic. Graham doesn’t want the hundreds of attending investors to feel like they’re out of the game.

In related news, after Y Combinator announced a partnership with Facebook last week for social startups in its upcoming classes, the always-provocative angel investor Jason Calacanis took the opportunity to warn entrepreneurs to stay far away. “If you tell Facebook about your startup before you reach critical mass, you are an idiot,” he said. “It’s a trap.” Calacanis was apparently referring to recent Facebook acquisitions of small companies that were effectively “acq-hires” of their young founders, with limited returns to investors.

Meanwhile, on the issue of the conflicted relationship between angels and venture capitalists, after his portfolio company Etsy announced a fifth round of funding, consumer Internet VC Fred Wilson noted on his blog that the transaction gave angel backers in the company an opportunity to sell their shares for cash, with VCs taking over more of the now-large company’s equity. He said he hoped that model of “angel liquidity” would help smooth out the (increasingly longer) path of a startup through angel to VC to sale or IPO.

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FitOrbit Brings a Personal Trainer to Your iPhone

Jennifer Martinez — Mon, 22 Jun 2009 12:30:21 +0000

For iPhone users, wading through a sea of fitness and weight-loss applications can be confusing and time-consuming — and, much like adhering to the latest diet craze, it’s often hard to stick with using the application once you download it. Los Angeles-based startup Global Fitness Media on Monday is launching FitOrbit — the iPhone app rolls out later this week — a fitness training web service that lets you select a real-life personal trainer over the web who customizes a seven-day nutrition and exercise plan just for you.

Nick Desai, CEO of Global Fitness Media (founded by celebrity trainer Jake Steinfeld and backed by Silicon Valley angel investor Ron Conway) walked me through the FitOrbit site to show how it works. FitOrbit reminds me of a fitness version of Facebook, which makes it easy for social network users to navigate. Users have their own profiles where they can track their weight-loss performance, send messages to their trainer, and invite friends to their support network. Comment boxes let people write their thoughts about assigned exercises and meal plans.

FitOrbit is different from other nutrition and weight-loss applications I’ve seen on iTunes because it connects users with an actual personal trainer who tracks their progress and modifies their fitness and nutrition plan as needed. Most applications act more like a food and activity log, providing little feedback. A FitOrbit membership costs $9.99 a week. That’s a small price to grow a business on, but Desai said the cost will increase in the long-term “given the value” FitOrbit provides.

There are currently 270 different trainers to choose from on FitOrbit. Users can fill out a questionnaire that pairs them with their best trainer matches. When finding a match, users select what body part they’d like to work on most, their favorite exercise activities, what type of equipment they have, and the type of person they’d like to work with. I liked that users can evaluate trainers’ personalities — I know I’m more motivated to work out when my trainer is encouraging me rather than barking orders. Desai told me trainers can only have 20 clients at a time.

FitOrbit’s nutrition program adjusts to impulsive behavior, something many calorie counting applications don’t. If you grab a burrito for lunch, the program automatically adjusts your dinner to accommodate for it, and your trainer may add more ab exercises or cardio for you to do the next day so you don’t get off-track.

I was initially skeptical about a trainer putting together a fitness program over the web, because it’s hard to try out new exercises without someone there to guide you. But with FitOrbit, you can watch videos that demonstrate how to do each exercise assigned, so you’re less prone to doing it wrong. And since the personal trainers work with whatever equipment you have, you won’t have to join a gym.

I haven’t had the chance to try out FitOrbit myself since the web service and the application aren’t out yet. If you try it this week, please share your experience in the comments section.

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