GigaOM » Tech

Klout makes its first acquisition: Local-mobile app Blockboard

Colleen Taylor — Tue, 07 Feb 2012 18:41:55 +0000

Klout, the San Francisco-based startup that measures people’s “influence” across a variety of social networks, has made its first acquisition with the purchase of Blockboard, a Twitter-like mobile app that functions as a community bulletin board letting users post messages viewable to other people in their immediate area.

Financial terms of the deal haven’t been disclosed, but it looks like an acqui-hire more than anything else. Blockboard, which was previously known as BlockChalk, raised $1 million in a seed funding round back in May 2010, and since then the service does not appear to have generated any revenue. The four-person Blockboard team will be joining Klout, and according to the companies the Blockboard product will live on post-deal.

Klout announced the deal in a blog post Tuesday, writing:

“Blockboard has built an amazing local-mobile app that connects neighbors to build stronger communities through technology… With their experience, Blockboard brings an awareness of how social media can be meaningfully woven into the fabric of a local community, as well as a killer mobile app development team.”

Klout kept a relatively low profile for a couple months after some privacy-related snafus last year, so the announcement of the Blockboard acquisition serves as a public relations re-entry of sorts. It looks like Klout is not giving up any time soon, and it will be interesting to see how the company develops on the mobile and local fronts going forward.

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Ignite raises $5M to become the World of Warcraft of car racing

Colleen Taylor — Tue, 07 Feb 2012 11:00:28 +0000

Ignite Game Technologies, the San Francisco-based online gaming startup that specializes in car racing games, has raised $5 million in new funding. This latest batch of funding serves as Ignite’s Series C round and brings the company’s total outside investment to $17.5 million.

Ignite’s flagship game, Simracway, launched to the public in November 2011, along with its physical steering wheel game controller. The game allows people to race against multiple other players in real time. Ignite touts racing pros such as IndyCar champion Dario Franchitti as advisors, and has secured licensing deals with car companies including Bentley, Bugatti, and Mitsubishi.

On a larger scale, Ignite’s purported aim is to have “the most authentic, immersive simulated racing experience on the market” — to basically be like the World of Warcraft of online auto racing. Seems like $17.5 million and a bunch of big name partnerships should help a lot toward making that dream a reality.

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Startups pass on Silicon Valley to find their fortunes in New York

Ryan Kim — Fri, 03 Feb 2012 22:33:09 +0000

Though Silicon Valley has lured away plenty of startups, (cough, Facebook), New York is becoming a magnet of its own, attracting companies that want to build their businesses amid the bright lights of the big city. In the past couple of months, New York has drawn former San Francisco startup Qwiki, PlaceIQ from Colorado and recent 500 Startups graduate Snapette, which started in Boston before spending the past half of a year in Silicon Valley.

These are just a few recent transplants, but they show how New York increasingly makes sense as a headquarters for certain startups, especially those with ties to finance, fashion, media, retail, advertising and increasingly big data and location-based services. ConsumerBell relocated to New York from the Bay Area in May, and Take The Interview, which started in Boston, is moving as well. The relocations fuel the continuing momentum behind New York, which has eclipsed Boston in the number of VC deals and is now becoming a destination for big companies like Facebook, which announced an engineering campus in New York, and eBay, which bought Hunch and plans to build out a New York office.

Close to brands and retailers

I talked with Snapette founder Sarah Paiji about why she chose New York after building a lot of connections in Silicon Valley and Boston. She said despite the presence of Facebook and Google in the Bay Area, it made more sense to be near brands and retailers, which are mostly based in New York. Snapette, which recently moved into Dogpatch Labs, is a kind of Pinterest for the real world, with users’ supplying images of products that can be found in nearby shops.

Snapette co-founder Sarah Paiji

“We are about fashion and shopping. We want to drive foot traffic into local stores. We also take a lot of meetings with brands and retailers and we have over 30 boutique partners in New York. In Palo Alto, it just doesn’t make as much sense to stay,” Paiji said.

PlaceIQ, a Boulder, Colo., location startup, also announced a move to New York in December, saying it wanted to be closer to partners and customers and the general ecosystem. PlaceIQ has built a vast database of locations down to the block level that can be used by advertisers to better target consumers without tracking them individually.

New York has changed

Duncan McCall, the CEO and co-founder of PlaceIQ, said he had no interest in ever relocating to New York. But over the past year, after making a lot of visits to see customers, partners and company investor IA Ventures, he realized the city had changed and was now a logical home for his startup. And he was tired of traveling so much and saw the value of more face-to-face meetings. He just moved into a new temporary space in the past few days and is hunting for more-permanent digs.

“I previously spent some time in New York and I thought the technology business isn’t big enough, there’s not enough talent and there wasn’t a business around data. But that’s changed dramatically in New York,” McCall said. “Over the last year, it’s grown on me. The people and the investment scene are great and with the customers and ecosystem, it became obvious that if we want to maximize our chances, we have to be in New York.”

Qwiki's new SoHo headquarters

Qwiki, which helps produce multimedia information videos, announced its move in December and relocated into a hip SoHo space. CEO Doug Imbruce said in blog post that despite being known as a Silicon Valley company, the company saw New York as the place to become a medium for people to tell stories and share opinions. Qwiki needs to be close to where the most content was produced, and that’s New York, he said.

Local strengths

Not every company will be tempted to make the move. But these recent transplants show there is plenty of incentive to do so. With so much media and advertising here, a company like Qwiki can tap a lot of media partners as it pursues more publishing tools for users. Snapette is closely aligned with the fashion industry and revolves around location, something New York is becoming good at with Foursquare, Hyperpublic and LocalResponse. New York’s big data scene has also risen to the fore, building on the experience of the finance industry, which has long been involved in data. Now with venture funds like IA Ventures, which looks primarily at big data opportunities, there is more momentum in building data startups.

Paiji and McCall said the move to New York comes with trade-offs. Paiji said it is harder to find talent, and for a startup mostly made up of women, they get less attention from men now that they are away from testosterone-heavy Silicon Valley. And McCall said he doesn’t have ready access to skiing like he did in Colorado.

Not ready to topple Silicon Valley

SA 500 job fair

New York has also lost some startups, including Think Near, which moved to Los Angeles, and BankSimple, which moved to Portland. And many companies still flock to Silicon Valley to make their big break. The Valley still has an edge in investment dollars and talent and has a culture built around entrepreneurship that has flourished for decades, thanks to companies like Apple, Google, eBay, Facebook and others.

New York has to continue to build its startup culture and fix its talent crunch problems, which could be alleviated by a new applied sciences university and programs like the HackNY, the Turing Fellowship and SA500. But with more investors, incubators and startup infrastructure and companies moving in, New York is increasingly an appealing place. Will it topple Silicon Valley anytime soon? No, but it is showing that it is becoming a competitive tech destination for startups convinced that if they can make it there . . .

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Doxo wants to take the paperwork out of healthcare

Colleen Taylor — Fri, 03 Feb 2012 20:20:26 +0000

Screenshot of Doxo healthcare (click to enlarge)

Doxo, the Seattle startup that makes “digital file cabinet” software, has thus far focused on giving users a single place to manage regularly occurring bills for services such as telephone, cable, and credit cards. But now, the company is taking on a much bigger and more complicated system: Healthcare.

Doxo is announcing Friday that a number of major healthcare provider systems have signed up to send medical bills and receive patient payments through the online service. According to Doxo, its new clients comprise 40 hospitals and 3,000 physicians, and include Saint Luke’s Health System, Advocate Health Care and Advocate Medical Group, Novant Health, Northwestern Memorial Hospital, University of Illinois Medical Center, Rockford Health System, and Rush-Copley Medical Center.

It’s a big coup for the Doxo, which was founded in 2008 and launched its service to the public in mid-2011. The company has raised $15.3 million in venture capital from Sigma Partners, Mohr Davidow Ventures and Amazon CEO Jeff Bezos’ VC firm, Bezos Expeditions. Doxo is free for consumers, and the company charges the businesses who sign up to send bills through the service. According to Doxo CEO Steve Shivers, companies pay for the service because it saves them a significant amount of money compared to paper billing — and the healthcare space can especially benefit from this type of savings.

“Hospitals send invoices to patients three times, on average, before they pay it,” Shivers said. “So for a $10 copay, they’re spending $10 to $15 just to collect it. This is an industry that has runaway costs, and from a consumer standpoint there’s runaway complexity.”

But of course, it’s not easy to convince complex, entrenched industries like healthcare to try something new. That’s why it’s a big deal for Doxo to have inked these initial contracts. The hope is that after this initial batch, many more healthcare providers will be emboldened to sign up to do paperless billing through Doxo, Shivers said.

“Since we launched to the public last summer, the first providers we really signed up were what I call more conventional categories like banks, credit unions, alarm systems,” Shivers said. “But healthcare has been one of most important verticals for us to get into. We have these six providers signed up now, but the healthcare industry is huge. This is just the start.”

I think it’s a great move: The time for healthcare to really adopt technology is right now, and going paperless is a great first step toward that goal. Many health providers have websites that patients can create profiles for, but the reality is most people don’t go to the doctor enough to create a log-in ID and remember a password. So we end up getting paperwork sent in the mail that often goes ignored, since many of us prefer to do our bills online. It’s a big cycle that ends up creating stress for consumers and costing healthcare providers lots of money. There’s a big opportunity here, and it’s nice that a startup like Doxo is gaining a good foothold in the space.

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Everything I need to know about startups, I learned from a crime boss

Donald DeSantis, Giant Thinkwell — Sat, 07 Jan 2012 14:00:08 +0000

The door opened and into the room walked the most dangerous person I’ve ever met. He reached towards his belt and slowly pulled out his .45 caliber handgun, raised it and paused to evaluate my expression. “No disrespect, but it’s been pressing into my hip all day.” He placed the gun on the coffee table, relaxed into the leather sofa and let his guard down for the first time in a very long while.

This person, let’s call him Kobayashi (I’m a Usual Suspects fan), is one of the most interesting people I’ve ever met. He was a well-educated entrepreneur who ran a profitable business that employed dozens of people. He lived in a swanky downtown Los Angeles penthouse. His kids went to private school. He kept his fridge well stocked with imported beer and wine for guests even though he didn’t drink. He was, by all measures, a gentleman.

But Kobayashi ran an unusual business. He was in the business of organized crime. He started this venture quite young, expanded his operations, diversified revenue streams, and created very profitable independent business units. “I have two lawyers,” he once told me. “I keep them both because they hate each other. Neither one of them can get out of line because the other one is watching him. That keeps me safe.” Kobayashi was brilliant, witty, and dangerous. He was a friend and mentor to me during an interesting period of time in my early 20s.

Everything I need to know about startups, I learned from Kobayashi. While I can’t get too deep into specifics (would you?), I can share a few the things he taught me.

Don’t sell rocks when you can sell mountains

Kobayashi didn’t work with small packages. His business transactions involved risk at every stage – product acquisition, transport, and distribution. But the marginal risk on each decreased with the size of the transaction. Working in large volume reduced his overall risk and rewarded him with a shrink-wrapped palette of cash rather than a suitcase of cash.

As founders and early stage employees, we go to great lengths to mitigate risk. So why do we overlook the total marginal risk?

Building a profitable small-market company is difficult and carries a high risk of failure. Building a profitable large-market company is also difficult and carries a high risk of failure. But the marginal risk in building a company decreases as the addressable market increases. While a larger company may require more total work, the relative effort is less. Make no mistake: small-market companies still come with 18 hour days, flaky vendors, upset customers, and exasperated spouses.

Thinking small increases our risk. So let’s think big.

[Notes: “Large vs. small” is a different debate than “bootstrapped vs venture-backed”, though the two are often conflated. It’s also worth noting that serving a small segment and progressively expanding outwards to serve the larger market is a totally legitimate large-market strategy.]

Cut out the middleman

As Kobayashi’s businesses grew, he was in a position to start bypassing middlemen. Instead of dealing with distributors, he went straight to producers. Instead of hiring contractors, he purchased required equipment and moved people onto payroll. Everywhere he saw a third party making money, he figured out a way to replace that person or bring them in-house. He reduced costs at every step. He constantly encouraged me to do the same.

Interesting things happen when we cut out the middleman. In addition to reducing cost, we often end up creating an internal byproduct that can be productized and sold to a completely new customer. (Amazon Web Services is an example of this.) Sometimes the middleman’s market is so huge, that a freaking enormous business can be built simply by providing their customers a lower cost and more efficient option. Two-sided marketplace businesses are a textbook example of this type of disruption.

Don’t shit where you eat

“When someone’s doing something for the money, people can sense it, like a desperate lover. It’s a turnoff.” – Derek Sivers, Anything You Want

During this period of my life, I was running a couple businesses that overlapped around the edges. One business had loyal and enthusiastic customers. This business was glamorous, but hemorrhaging money. The other business was transactional and lacked any customer loyalty or love. This business was “anti-glamorous” and a bit closer to Kobayashi’s world than I care to admit.

As time passed, I felt increasing pressure to monetize customers from the first group. I began to overlap these businesses more and more. While they included the same customer segments, there were two completely different products. This pollution of something beautiful with something cheap was my act of shitting in the proverbial kitchen. I watched as revenues increased and looked away from the damage I was causing to the customers I really cared about.

Thankfully, Kobayashi pulled me aside and straightened me out.

The lesson for us is simple. Don’t screw with your users. They are your golden-egg-laying goose. Protect them from rapacious cofounders and investors. Don’t spam them. Don’t abuse them. Don’t be a douchebag.

If it don’t make dollars, it don’t make sense

“A business without a path to profit isn’t a business, it’s a hobby.” – Jason Fried, Rework

We can build an awesome product and then give it away for free. We can bolt advertising to it. We can turn it into a lead-gen property. We can even sell some virtual goods.

Kobayashi wouldn’t.

He would have built Birchbox rather than Pinterest and Airbnb rather than TripAdvisor. He would have found product market fit and a viable business model before spending money on development resources. Kobayashi stayed close to the money, close to a transaction.

Kobayashi was around for the late 90’s tech bubble. He knew many of the players and saw the writing on the wall long before they did. He talked about the first tech wave as if it was a fad that had simply passed, saying things like “when dot-com went out…”

“If it don’t make dollars, it don’t make sense” may sound like a gross oversimplification. But Kobayashi outlasted those late 90’s startup founders. And he’ll probably outlast most of us.

Closed mouths don’t get fed

I’ve written before about the importance of networking and moving from wallflower to evangelist. Kobayashi was adamant about the importance of this. “Closed mouths don’t get fed,” he would say. “If you want something, you have to either ask for it or walk up and take it.”

We can’t expect good fortune to fall into our lap. It’s our responsibility to create the circumstances for it and then capture that good fortune. The meek may inherit the earth, but they’ll be getting it from Kobayashi.

Be a badass

“There’s only one thing that will make them stop hating you. And that’s being so good at what you do that they can’t ignore you.” – Orson Scott Card, Ender’s Game

My friend Chris DeVore makes a comparison I love: pirate ships as organizational models. Pirate ships combine an “us against the world” mentality with a hunt for treasure. This crucible of chaos and ambition somehow allows unstructured groups of mercenaries to complete complex tasks without killing one another (very often). A pirate ship is a meritocracy where he/she who is most badass, leads.

I’ve met several “badasses” over the years, though Kobayashi is the most memorable. Each one of these people had a gravitational pull for talent and resources. The world reorganized itself around them as they passed through it. They were larger than life, energizing everyone in their periphery.

The one thing these badasses shared was the source of their power: influence rather than authority. This lesson is the most important and also the most difficult to implement. There’s no pill, book, or retreat that will turn us into badasses. But if we want to captain a pirate ship, we must become the most badass version of ourselves. Kobayashi taught that we lead only with the influence we earn.

Donald DeSantis is a developer and UX designer at TechStars company Giant Thinkwell. In his free time, he travels to faraway cities and helps make Startup Weekend events successful. You can find him on Twitter at @donalddesantis.

Image courtesy of Flickr user Abhisek Sarda.

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Can newspapers also be tech incubators?

Mathew Ingram — Thu, 05 Jan 2012 23:09:12 +0000

We’ve written before about the need for newspapers to be “digital first” and to think like startups as they try to adapt to the evolution of the media industry. Can a traditional newspaper take an even bigger step and actually help give birth to new technologies or services by acting like a startup incubator? At least two of them are planning to give it a try: the Philadelphia News Network just launched an incubator, and Digital First Media recently launched a venture-capital arm and says it plans to invest in tech startups. While both of these efforts could easily fail, at least these two media entities aren’t just sitting back and relying on paywalls to save them.

The Philadelphia incubator is known as Project Liberty, and is being operated by Ben Franklin Technology Partners, a non-profit agency aimed at fostering new business in Pennsylvania — who also chose the three existing entrants to the program — but will be based in the same complex that is home to the Philadelphia Inquirer and the Philadelphia Daily News, as well as the online site Philly.com. The project is being funded by a $250,000 grant from the Knight Foundation, which has backed a number of media-related startups over the years, and gives the three startups six months worth of office space and other support while they work on partnerships with the papers.

New technologies could help companies adapt

Read/Write Web has an overview of the three startups that have been accepted to the program: CloudMine provides an API service that makes it easier for developers to come up with new applications, and another named SnipSnap lets customers scan printed coupons and then use them online — a natural fit for a newspaper that carries plenty of advertising inserts. The third is ElectNext, which is developing a web app to help readers decide who to vote for, a goal that has an obvious fit with the editorial side of the newspapers.

The CEO of the Philadelphia News Network, meanwhile — former Newsweek publisher Greg Osberg — has said he has much bigger goals for the project, and that he wants to “find the next Foursquare and house it at Philly.com.”

Whether that’s going to happen or not remains to be seen, but at least the startup idea shows a spark of life from the newly reformed newspaper company, which was created after lenders to the previous owner of the Philadelphia Inquirer and Daily News bought the assets out of bankruptcy. And it’s not the first unusual venture to come out of the new media company: earlier this year, it announced a plan to offer discounted Android-based tablets to readers who signed up for one or two-year subscriptions to the Inquirer and the Daily News.

Digital First Media, the parent company of the Media News Group — which owns a chain of newspapers across the U.S., including the Detroit News, the Denver Post and the San Jose Mercury News — is also wading into the tech-startup funding game. The company’s CEO, John Paton, who helped turn around the bankrupt Journal-Register Co. before taking the helm of Digital First Media, last month announced the creation of a new venture-capital arm that will invest in media-related tech startups. Paton said this approach was a natural outgrowth of the company’s “digital first” mantra, which he has outlined in a number of presentations as well as on his blog.

Experimentation is something more companies should try

I admit I was skeptical when I heard about Digital First’s new venture-capital entity, in part because it sounded like the media company was going to try and compete with the hundreds of VC firms and angels who are already trying (and mostly failing) to pick the next Foursquare or Facebook. But Paton said the emphasis of the new venture would be on partnering with companies that could help the company take advantage of digital media in new ways, which is something more traditional media outlets should be thinking about.

Other media companies have already taken similar steps in this direction: the Financial Times just acquired the company that developed its HTML5 app, which allowed the newspaper to do an end-run around Apple’s restrictions on iOS apps — as well as the 30-percent fees it charges content companies that offer subscriptions. And the New York Times helped give birth to News.me, a social content-filtering app that was later acquired by Betaworks, a New York-based incubator run by John Borthwick, in a deal that gave the newspaper shares in the company (News.me has since been spun off). The NYT also has its own in-house incubator of sorts in the beta620 lab project.

As Om and others have mentioned, there are plenty of reasons to be skeptical about the explosion of incubators — a trend that didn’t end well in the last tech bubble — but despite the low odds of success, it’s still interesting to see companies like the Philadelphia Media Network and Digital First Media trying to think outside the box a little.

Post and thumbnail photos courtesy of Flickr users John Donges and David Daniels

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Buffer gets $400K funding — and tells exactly how they did it

Colleen Taylor — Wed, 21 Dec 2011 02:37:01 +0000

Every day, it seems like there’s a new press release about a startup landing seed funding. You know the headlines — “Startup X nabs $1.2 million for dog-friendly mobile app” or “Y raises $700K to digitize your sock drawer.” Sure, it’s exciting for the companies involved, but the straightforward financial news is not always terribly interesting. The story behind the funding is usually the really cool part, but it often goes untold.

That’s why Buffer is doing something different. The startup, whose app enables users to easily schedule Tweets and Facebook posts to be posted at a later time, has raised new seed funding. But for Buffer, the fact that it has taken on $400,000 is secondary to explaining how it all happened — and the company’s hope is that other startups can learn from the experience.

Pulling back the curtain on seed funding

Buffer on Tuesday published a detailed blog post that details exactly how founder Joel Gascoigne and co-founder Leo Widrich met each of their 19 new seed investors (including Guy Kawasaki, AngelList designer Graham Jenkin, Huddle co-founder Andy McLoughlin, and AngelPad’s Thomas Korte and Gokul Rajaram) and why they decided to take on each investment. A typical paragraph begins with, “It was a sunny day in October when we sat down in a Starbucks in San Francisco with Andy…” It’s a fun read and could be especially helpful for other startup founders interested in how the funding process happens.

From left: Buffer founder Joel Gascione, co-founder Leo Widrich, and engineer Tom Moor

“As a company, we always want to be very transparent,” Widrich said in an interview Tuesday. “So instead of the typical funding announcement, we decided to write this story where we explain every story behind every investor. We wanted to help people understand the fundraising process. There’s really no reason to be secretive about it.”

The Silicon Valley advantage

It was just five months ago that Gascione and Widrich moved from Birmingham, UK to San Francisco to turn Buffer, which had profitable operations as a “lifestyle business,” into a full-on company. Since then, the app has grown its user base from around 20,000 to 85,000, seen a huge uptick in engagement, and Buffer has added a third full-time employee. Right now, Buffer is making some $20,000 in revenue per month.

For Buffer, being in the Bay Area was a hugely important step for enabling this growth, and for helping its founders forge key relationships in the tech world. Widrich said:

“The most interesting thing about Silicon Valley is the aspect of serendipity. Here, if you keep your mind open and your eyes open, you can connect with anyone. Being here has been a fabulous way to get in touch with people.”

Unfortunately, due to an inability to secure H-1B visas, the Buffer guys are moving from San Francisco to Hong Kong this week. The company will use the new funds to hire more people, but in true lean startup form, all Buffer’s operations will be virtual. “We basically pulled up Google Maps and said, ‘Where in the world do we want to go?’” Widrich said. “Hong Kong sounded pretty cool.” Indeed — it’s a pretty cool time for startup founders in general, and for Buffer especially it should be an exciting road ahead.

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How to hire rock stars

Scott Weiss, Andreessen Horowitz — Tue, 20 Dec 2011 23:14:39 +0000

In Europe, most sports leagues participate in a system of Promotion and Relegation. At the end of each season, the top three teams in the second league get promoted to the first league and the bottom three teams in the first league get relegated to the second league. This maintains the intensity of games for low ranked teams at the end of the season, among other things. Now here’s an odd fact: The very best players only play in the first league — it’s in their contracts. If their team gets booted to the second league, these folks roll off and immediately find first-league work, typically with some of the recently promoted teams.

If you’re a newly promoted team, you need to augment your roster quickly in order to compete. Rock stars that were impossible to attract in the second league suddenly want a tryout. Winning in the first league is all about signing a few new superstars and integrating them effectively with your existing team.

You can get Beckham

There is a similar analogy with the talent wars at technology companies. For recruiting purposes, when a company’s metrics start to explode and they raise a significant round of capital, the company has effectively been promoted to the “first league.” When a company hits a sustained plateau or is acquired by a large public company, they get relegated to the second league.

As far as talent goes, Silicon Valley is akin to 15th century Florence: The best of the best have moved here to work in technology. For all the talk about how hard it is to hire in the Valley, first-league companies can literally have their pick of the best people in the world at every function. This phenomenon is especially true of CFOs and sales VPs, as these leaders are usually hired later in the company’s lifecycle and the best people can be extremely picky waiting for the right first-league company to come along.

One of the biggest mistakes I made as a CEO was not hiring these rock stars as soon as it was obvious we had been promoted. I was overly worried about the cultural fit and hegemony of the team. Specifically, after I parted ways with my first VP of engineering, I tried a number of experiments with my existing team. I promoted some director-level managers and then moved the responsibilities under another VP. Things didn’t go well, and we ended up slipping a major release by nearly a year. My reluctance to bring on a “been there, done that” executive almost tanked the company.

After royally screwing this up myself, I have some hard-earned suggestions to pass along to others in this situation:

Act fast. Once you have a sense that you need to make a change, start the process immediately. It almost always takes longer than you want it to (think 6-9 months, not 2-3 months)
Aim high—higher than you think you should. Work with your entire network (mentors, investors, customers, partners and friends) to help you triangulate on the top ten people in the world for the role. Try to meet every single one of them, even if they are not looking. It helps to know what to aim for. I was surprised how many superstars were actually very humble, approachable and culturally compatible with my team. This was not my assumption going in.
Don’t be cheap. Use great recruiters who will know—or will unearth—the crazy-great candidates who are often stuck vesting out at larger (second-league) companies.
Interview the hell out of them. When we were adding members to the executive team, we did 20+ interviews with the finalists. That process included lunches, dinners and drinks. The very best need to be pushed back on their heels a little bit, not just sold.
Make the time to integrate the new executive a priority. I learned (through several mistakes) that as the CEO, I needed to be all over making the new person successful during their first few months. Plan on being in the office, actively managing introductions and role definitions, checking in with peers and coaching the group toward success. Don’t do it alone—the whole executive team should actively participate.

But what about…?

I sent a draft of this post to a first-league CEO who is grappling with this exact situation and had some very relevant questions. Here are my answers:

When do you know which of your existing players no longer make the cut?

If there’s some reasonable doubt about anyone’s ability to scale, you are probably right and you have an obligation to go meet some rock stars to compare. Few CEOs ever say, “I was too fast in making a key change with an existing player.” I certainly waited too long on several occasions.

Do some players deserve the chance to keep playing in their current role because of history, dedication, effort and loyalty?

I’m all for keeping hardworking, dedicated and loyal employees on the team, but they may need to be coached into a different role that is more suited to their abilities. I think every CEO knows who’s “beyond a reasonable doubt” in their roles. If there are people on the fence, then you need to start scouting.

When is it appropriate to bring in rock stars underneath existing execs who are not scaling to help make them successful?

There are very rare occasions when your existing exec’s strengths are so outrageous that they give you confidence the exec can make it over the hump. Is the existing exec special enough to get a few rock stars interested in reporting to him? That’s a good test.

Clearly this logic, taken to the extreme, without any qualifying criteria, would leave you shuffling your entire organization. Is that what you are suggesting?

If you are playing in the NBA, then you have an obligation as a coach to put the best talent you can find on the court. That said, running a business is a team sport, so team chemistry is crucial and you also need role players. But talent is talent, and if you are overly loyal to players who don’t have the skills to compete in the first league, then you will put your company at a disadvantage. It’s a balance.

Finally, once you get to the “premier” level, how do you separate the “mercenaries” from the big-league people who want to build the company with you?

This is a big risk that is mitigated by interviewing and reference-checking. This was one of my biggest fears that I later came to believe was unfounded.

Scott Weiss is a general partner at venture capital firm Andreessen Horowitz. He is the former co-founder and CEO of IronPort Systems, which was acquired by Cisco in 2007.

Image courtesy of Flickr user mueritz

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The values-driven startup

Dave Kashen, Quantum Leading — Sat, 17 Dec 2011 17:00:16 +0000

The most neglected fact in business is that we’re all human.
– Chip Conley, founder of Joie de Vivre Hospitality

We humans are an extraordinary bunch. When inspired, humans can accomplish amazing things – from enabling flight to creating microprocessors to putting a man on the moon. As incredible as humans can be, we are fundamentally wired to maximize our chances of survival and our social status. This makes us highly susceptible to the cultural norms and principles of those around us.

At the societal level, we’ve created a political and economic system designed to optimize the overall production and consumption of goods and services; to maximize our financial wealth. Yet, over the last 50 years as our per capita GDP has skyrocketed, corresponding measures of well-being, life satisfaction and happiness have flat-lined.

The key assumption that has served as the backbone of our cultural norms and principles for nearly 200 years is no longer valid. Exponential increases in the efficiency of producing food, clothing and shelter have enabled Western society to overcome scarcity – we now have more than enough stuff. It is no longer true that maximizing economic productivity and consumption maximizes our individual and collective well-being.

Try to think of someone you know who goes to work every day inspired and leaves better off than when they arrived. Now think of someone you know who finds their workday draining and detrimental to their well-being. Which was easier?

Why are we tolerating this? There has to be a better way.

In the startup world, thousands of entrepreneurs focus their ingenuity on finding ways to make millions of dollars. They look for market inefficiencies and focus on questions like: “Will consumers pay for this?” without asking “Will this make people’s lives meaningfully better?” It’s not that we shouldn’t try to make money, it’s just that money should be merely one of many factors we strive for, and it’s played far too central a role for far too long.

So, if maximizing economic output fails to achieve the goal of maximized well-being, what might be an alternative hypothesis worth testing? Here’s my proposal:

When we operate according to our core values and principles, in pursuit of a vision for the future that inspires us, we maximize our individual and collective well-being.

As individuals, this seems relatively intuitive. In those rare moments when we have the audacity to truly be ourselves, we feel energized, alive, and free. When we dare to take a stand for our beliefs or go after what we really want in the face of social pressure, we feel exhilarated. When we take action for a cause we believe in, we experience a deeper, more sustained joy and peace.

I propose that we start testing this hypothesis at the company-level by architecting and building companies from the ground up that are designed to achieve an inspiring vision for how the world could be, driven by a core set of values and principles. I envision a world of values-driven people and values-driven companies. And what better place to start than with the youngest, most innovative companies in the world: startups.

The values-driven startup

The values-driven startup operates according to a set of clearly-defined values, aligned with an inspiring vision and strategy, that drive people’s behaviors and decisions every day.

The core building blocks of a values-driven startup include an inspiring vision, an effective strategy, well-defined values, observable behaviors for each value, and company-wide processes and routines that reinforce the values. The key is that everyone involved in the company truly embraces the vision, and actually lives the values day in and day out. There are already a number of startups beginning to operate this way, and they are illuminating the path for a new generation of companies built to maximize the well-being of all stakeholders. Here are a few that stand out:

Automattic

Automattic (makers of WordPress, see disclosure below) has a vision to democratize publishing and make “the web a better place.” They define their values in a creed that is included in each employee’s offer letter. When new employees sign on the dotted line, they’re committing themselves to live by Automattic’s core values of learning, taking initiative, embracing change, helping others, humility, impact, open source, maximum communication, long-term focus and perseverance.

Eventbrite

Eventbrite’s vision is to empower everyone to create, experience and share live events. They define their key values (“brand attributes”) as Accessible, Empowering, Social, Delightful, Innovative and Genuine. Their values are woven tightly into their hiring process, including an evaluation of each and every candidate for values alignment. Founders Kevin and Julia Hartz operate by the core principle of putting people first, company second and personal interests third. Despite raising more than $50 million in their recent financing round, Kevin and Julia did not take a dime off the table.

Sharethrough

Sharethrough’s vision is to build the future of media through their social video platform. They define their values as Optimism, Action, Purpose, Transparency, Respect, Creativity and Personal Growth. In the process of choosing a key vendor earlier this year, CEO Dan Greenberg had all but made up his mind. But when one of the company’s new employees pointed out to Dan that choosing a less experienced vendor would more fully honor Sharethrough’s value of Personal Growth, Dan and the team took a chance on the new vendor and haven’t looked back.

New questions

Entrepreneurs, I invite you to start asking yourselves new questions. What vision of the future truly inspires you? What values and principles do you want to live by? What will allow you and your team to flourish? In the words of philosopher Howard Thurman, “Don’t ask what the world needs. Ask what makes you come alive, and go do it. Because what the world needs is people who have come alive.”

Dave Kashen is the founder of Quantum Leading, a leadership coaching and culture development firm for startups, and the Unleashed conference series. He writes the Awesome Culture blog.

Disclosure: Auttomatic is backed by True Ventures, 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.

Image courtesy of Flickr user cdsessums.

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TaskRabbit gets rocket fuel with $17.8M funding round

Colleen Taylor — Wed, 14 Dec 2011 05:00:01 +0000

TaskRabbit, the online marketplace that lets people outsource errands and other small jobs, has raised $17.8 million in a fresh round of funding.

The new round, which serves as TaskRabbit’s Series B, was led by LightSpeed Venture Partners. The San Francisco-based company’s existing investors all pitched in as well, along with two new investors: Allen & Company and The Tornante Company, the investment firm led by former Disney CEO Michael Eisner.

The money comes just seven months after the nearly four-year-old TaskRabbit closed on its $5 million Series A round. According to the company, it’ll just serve as fuel for its already impressive growth: Since May, TaskRabbit says its net revenue and monthly task volume has tripled, while its customer base has increased seven fold.

TaskRabbit founder Leah Busque

The sizable new round also comes just a couple months after TaskRabbit swapped out its founder Leah Busque in the CEO role for a more seasoned executive, Hotwire co-founder Eric Grosse. Big investors often push for a CEO with some “grey hair” as a startup gets bigger, so the recent leadership change may well have been a factor considered — or even suggested — by the folks who participated in this latest batch of funding. Either way, it bears mention that Busque is still with TaskRabbit full-time as chief product officer, and is by all accounts quite happy with the move.

One thing is certain: With big money comes big responsibility, and TaskRabbit has ambitious plans to keep up the growth in the months ahead. The company says it will use the new funds to expand its service both in its native US and abroad (right now TaskRabbit brokers tasks in Boston, New York City, Los Angeles, Orange County, the San Francisco Bay Area, and Chicago) and on hiring more staff.

The past year has been a really strong one for the peer-to-peer space: TaskRabbit competitor and online marketplace startup Zaarly just nabbed its own $14.1 million funding round, for instance, and new startups in the space are cropping up regularly. It now looks like the excitement will definitely continue well into 2012, and probably beyond.

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Crunchies tickets go on sale today

Nicole Solis — Tue, 13 Dec 2011 18:00:38 +0000

Updated. The first round of 200 tickets to the Crunchies go on sale today at 10 a.m. The Crunchies, the annual tech innovation awards show hosted by GigaOM, TechCrunch and VentureBeat, will be held January 31, 2012, at Louise M. Davies Symphony Hall in San Francisco.

Update: And the first batch is already sold out. We’ll post an announcement when the next round goes on sale.

After you get your ticket, make sure you nominate your favorite startup, angel investor and VC. Nominations close at midnight tonight. The finalists will be revealed in early January.

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Pay-to-pitch startup auction nears $2,000 — and rising

Colleen Taylor — Wed, 07 Dec 2011 21:33:29 +0000

Pay-to-pitch deals are typically pretty controversial. Critics say the argument against them is simple: If your startup is any good, journalists and potential investors should be happy to hear about it — not asking for money in exchange for listening to your pitch.

But right now, some of the most reputable names in Silicon Valley are offering to give their attention to a startup pitch from the highest monetary bidder. There is a good excuse in this case, though: It’s all in the name of charity.

A current auction on CharityBuzz.com is offering a package that includes face time in Silicon Valley with Y Combinator, Wired magazine, and more. Proceeds will go to the Institute on Higher Awesome Studies (yes, that’s its real name) a non-profit which aims to develop ways to incubate and fund projects in under-represented geographic regions.

According to CharityBuzz, the winning bidder will get:

Office hours with Y Combinator’s Harj Taggar, Alexis Ohanian, Garry Tan and Jessica Livingston in San Francisco
Lunch with a Wired editor in New York City or San Francisco
Airfare courtesy of Hipmunk.com (a $350 flight voucher)
Accommodations courtesy of airbnb.com (a $300 voucher)
$250 worth of Z credits from Zaarly

It’s a pretty sweet deal for any startup founder, especially if a company is based far away from California; it appears bids can be made from anywhere in the world. Right now, the highest bid is at $1,900.00, and being that the auction is in $250 increments, the next bidder will have to offer up $2,150 to beat it. The auction closes at noon EST on Dec. 19, so startups still have some more time to shoot for the prize.

It’ll be interesting to see how high the price goes, especially given the currently frothy environment for web startups. If you have any bets on how much a Silicon Valley startup pitch should be worth nowadays, please chime in using the comment section below.

And here’s a video from earlier this summer of Jessica Livingston discussing what Y Combinator looks for in startup founders:

Watch this video for free on GigaOM

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5 tips for entrepreneurs building a patent portfolio

Nitin Gupta, LawPivot, and Eric Hutchins, Kilpatrick Townsend & Stockton LLP — Sun, 04 Dec 2011 20:00:54 +0000

Spending a lot of late nights with your startup colleagues developing a product with cutting-edge features can prove frustrating when those features end up in a competitor’s offering. At some point, once your startup begins to gain momentum, protecting your IP becomes yet one more thing to worry about. But it doesn’t have to be a nightmare — here’s a high-level overview of how to identify and protect new, potentially patentable inventions.

1. Check employment and independent contractor agreements

Look at your employment agreements — and agreements with independent contractors — to make sure that they have an obligation to assign their rights in any inventions that they develop in the course of their work to your company. If their agreements with you don’t explicitly obligate them to hand over those inventions, it may be difficult for you to obtain a patent on them, particularly if that employee or independent contractor no longer works for you.

2. Circulate an Information Disclosure Form

The first step to getting a patent is identifying ideas that are potentially inventive and patentable. Learning about and understanding your employees’ inventions as early as possible will enable your patent lawyer to draft earlier applications with more accurate and comprehensive disclosures, which means stronger patents. No need to reinvent the wheel—ask your outside patent lawyer (get a referral from your corporate lawyer or VC if you don’t have one) for a PDF form and send it to your team.

3. Create a “patent team” to quickly review new inventions

Once your employees start filling out Information Disclosure Forms, you need to figure out whether these new developments are worth patenting. It’s best to include a diverse set of people in this discussion—a person from management (it can be a founder/CEO but just as often is a CFO), engineering, and marketing/sales, at a minimum. It’s important to keep the marketing and sales folks in the loop on patents because they often are the first to disclose new inventions outside the company. When your patent team agrees that a particular development is worth patenting, contact your patent attorney so that he or she can determine whether it is indeed patentable and, if it is, to prepare and file a patent application.

4. Give cash incentives for patented inventions

Sometimes your team may need a bit of encouragement to think about whether their product development is also generating patentable inventions. You may want to consider good old-fashioned financial incentive, in the form of bonuses paid when a patent application is filed and when that application matures into an issued patent.

5. Keep it all organized

Once you have started to seek protection for your patentable inventions, it’s important to keep everything organized so that you know what IP you have. Keep copies of your IP-related documents (e.g., employment/contractor agreements for inventors named in your patent applications, the Information Disclosure Forms, issued patents, technology licenses and other contracts) in a well-organized file. This can be as simple as a folder on your computer with chronologically ordered PDFs, or a sophisticated document management system — what’s important is that you have this information within easy reach for when a potential investor wants the due diligence on your IP.

Nitin Gupta is a Co-Founder of LawPivot, an online marketplace for businesses to receive crowdsourced legal advice from lawyers. Eric Hutchins is a patent attorney at the law firm of Kilpatrick Townsend & Stockton LLP in Menlo Park, California.

Image courtesy of Flickr user Alexandre Dulaunoy.

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Celebrity angels: a fad or the future?

Hunter Walk, YouTube — Sat, 03 Dec 2011 17:00:39 +0000

Some might snicker upon hearing that Disney singer/actress Selena Gomez has Angel invested in a photo app but I think it’s great, and makes total sense. The trend of ‘celebrity angels’ doesn’t surprise me at all, and with correct expectations on both sides, it can provide great value to both sides. But this still leaves the question — why are we suddenly seeing celebrities become more involved in tech investing?

1. Technology is approachable & hot

We forget that any celebrity under the age of 30 isn’t too different from any of us. They grew up in a world of mobile phones, game consoles and the Internet. While I might wax nostalgic about the first time i fired up a Mosaic browser, Ashton Kutcher has similar memories of his 2000 StarTAC and original AOL buddy list. They are digital natives who use technology as professionals and people. Investor Peter Lynch once suggested that most of his great ideas came from walking around a mall and seeing where folks were shopping. Well, celebrities are much the same way — they see what technologies their fans are using; their managers are showing them the latest and greatest; companies are sending freebies. I’d be more skeptical if Justin Timberlake was studying up on currency hedging — the idea that he might have an insight or two into how to turn MySpace around is reasonable.

2. Celebrities now have direct connections with their fans

Before YouTube, Facebook, Twitter, Google+, etc brand endorsements by celebrities essentially meant a TV commercial or billboard featuring the face of a movie star or musician. The conversion event (buying the product) was still separated from the advertising — you needed to later decide to hit a store and recall that Halle Berry thinks Revlon is swell. Now an influencer can often drive a conversion event directly and efficiently through social media. A tweet from a celebrity creates more product trial than an article in a major newspaper. It’s the new PR, the new sales channel. And celebrities are empowered like never before to directly build and talk to their audience. So for products they believe in why not move upstream and invest in the entity itself? Sort of like how musicians wants to own their recordings, not just get paid by the record company.

3. Traditional investments suck

Any time you are looking at a possible investment you need to judge the opportunity cost — what else could you be doing with that money. Over the past decade traditional investments like stocks have been risky and returning lower than historical rates. Just as pension funds seek to diversify into alternative classes such as venture capital or private equity, celebrities are thinking the same. I wouldn’t be surprised to hear that there has been an increase in venture funds bringing on celebrities as investors. Soon ‘LP’ might mean something very different to Lady Gaga (for anyone born after 1990 that’s a joke about an earlier form of music delivery called ‘an album’). And clearly these angel investments — sometimes at preferable terms due to the value they can bring above and beyond the money — round out a portfolio. So founders love celebrities, but do fellow angels? I asked some top consumer internet moneymen whether they had concerns about investing alongside celebrities:

Rob Hayes, First Round Capital: ”It’s all about distribution and if _any_ investor can help with that I am all for it.”
Chris Sacca, Lowercase: ”I don’t have qualms, but they need to pay market. No free stock.”
David Lee, SV Angel: “It’s great if they add value — particularly getting hands dirty.”
Dave McClure, 500 Startups: ”There are advantages & disadvantages, but on avg fame should help on cust acq.
Shervin Pishevar, Menlo Ventures: ”[Happy to invest alongside celebs but] no investor should be in name only. We all need to add value.”
Greylock Partner David Sze (might have a mistaken view of who the world considers to be a celebrity): ”No. I’d invest with @quixotic and @johnolilly all day! ;)”

It seems as long as celebrities are willing to work on behalf of their investments (like every other angel!) this should be a sustainable trend. A startup gets not only some cash but distribution and buzz. The celebrity gets the chance for financial outcome but also access to products which might become pivotal to their future success — the celebrity early adopters of Twitter & YouTube for example built substantial followings. will.i.amwith an Angellist profile? Perhaps not too crazy.Hunter Walk is the Director of Product Management at YouTube, focused on how nonprofits, social causes and educational institutions can use video to change the world. He first encountered the power of celebrity while working at “Late Night with Conan O’Brien.” Portions of this post originally appeared on his blog Elapsed Time. He can be reached at @hunterwalk.

Image courtesy of Flickr user AleeDear.

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It’s time for startup founders to think bigger

Colleen Taylor — Thu, 01 Dec 2011 18:00:05 +0000

Thanks to the efficiency boost provided by cloud computing’s debut about five years ago, web applications can now launch on almost a shoestring budget. That’s why there are so many new web companies that deal in things such as photo sharing, daily deals websites, travel planning and the like. The truth is, it’s easier than ever to put together a web or mobile app and call yourself a startup.

But there are a few recent developments that, taken together, are creating an even more powerful efficiency boost: one that puts resources that were once limited to well-funded corporations and research universities within the reach of a new generation of startup founders. Perhaps it’s time entrepreneurs took advantage of this new environment to solve larger problems, instead of building yet another lifestyle app.

The way I see it, the big components at play here are:

New money is investing in big ideas

Even though the larger economy is rocky, there are a lot of people just itching to pour money into the next big technological thing — hence pre-launch photo sharing startups that net $41 million in funding. While many tech investors are focused on funding sure short-term bets (i.e. the tried and true realm of web and mobile apps), there’s a budding sect aggressively looking to invest in larger, long-term innovations.

Peter Thiel’s Breakout Labs is one of the most explicit examples of this. As we reported at the program’s launch last month, Breakout Labs will aim to fund nascent research proposals: opportunities too early stage or radical to attract dollars from VCs or government grants. Basically, Thiel, who recently told the New Yorker he doesn’t consider the iPhone to be a major technological breakthrough, is saying: Enough with the toys and games. It’s time for us to make something big.

Supercomputers are going mainstream

The next “something big” in tech might not require all that much money to make.

If you want to build something really complex — think aeronautics, new pharmaceutical drugs, medical devices, jet engines, and the like — you need high-performance computing (HPC). HPC solves advanced computational and scientific problems by using a massive amount of computing power to solve very complicated problems that involve a lot of moving parts.

HPC facility at Argonne National Labs (attribution below)

It has historically been so prohibitively expensive to do HPC that only entities such as governments, militaries, well-funded universities, or huge corporations have the kind of access to the machines needed for computational fluid dynamics problems and the like.

But last year, Amazon started offering HPC as a service with “Cluster Compute,” making high-performance computing available in the same way that EC2 made regular servers available in the cloud. Earlier this month, Amazon souped up its Cluster Compute offering significantly — now, Amazon’s HPC-as-a-Service offering provides access to one of the world’s top 500 supercomputers for around $1,000 per hour. Meanwhile, tools such as CUDA and OpenCL give programmers the ability to harness massive numbers of compute cores without having to learn a special programming language.

This takes HPC out of the realm of scientists and makes programming for massively multicore HPC systems accessible to software engineers. What Amazon’s EC2 did for democratizing the ability to develop scalable web apps, HPC-as-a-Service can do for democratizing the ability to solve computationally heavy engineering problems or build gigantic predictive models.

3-D printing is becoming a reality

Printed engine prototype by Mcor Technologies

Once challenging technology problems have been mastered with the help of HPC, some of the solutions will need to be prototyped and put into physical production. This is still a very labor- and cost-intensive process, which is a big reason why many startups prefer to stay in the virtual realm. But the emergence of viable 3-D printing technology is on the cusp of changing that, making it cheaper and easier than ever before to make a physical prototype of a new design.

How much of a reality is 3-D printing today? It’s now available at the consumer level with a startup called MakerBot, which makes a 3-D printer called a Thing-O-Matic. The Thing-O-Matic costs $1,200 and makes relatively simple items such as small toys and gadgets like bottle openers on demand. Three-dimensional printers from companies such as Mcor Technologies are aimed at making more complex prototypes for enterprise-level applications.

Of course, startups have the option of skipping the prototype step and selling simply the IP of their HPC-developed designs to a larger company. But if a startup wants to have more control over the production of what it has made, 3-D printing brings that much more within small companies’ reach.

What will be the hot startup of the next era?

If everything works out as it should, the smart, early stage entrepreneurs of the near future won’t be thinking about how to build the perfect restaurant recommendation app. Instead, they’ll devote their energy to designing a more efficient airplane wing to conserve jet fuel, or a tiny device that can perform real-time monitoring of kidney enzyme levels, or an even more awesome landing gear apparatus for the next Mars Rover. Starting the next SpaceX or Virgin Galactic won’t need the kind of funding that only an Elon Musk or Richard Branson can provide.

Today, the lion’s share of companies that emerge from incubators such as Y-Combinator and 500 Startups deal in consumer-focused web apps. Here’s hoping that in the near future, incubators will look for startup founders who are taking real advantage of their new-found access to serious tech tools to build bigger and bolder products. It seems to me that driving toward that kind of world is where the attention of the tech industry — and the media that covers it — should focus.

“What’s Next?” image courtesy of Flickr user Crysti

Image of the HPC facility at the Center for Nanoscale Materials at the Advanced Photon Source courtesy of Flickr user Brian Howard on behalf of the Argonne National Laboratory.

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Awe.sm nets $4M for social data monitoring platform

Colleen Taylor — Thu, 01 Dec 2011 08:00:24 +0000

Awe.sm has secured $4 million in funding led by the Foundry Group, the company will announce Thursday. The new investment round, which serves as the company’s Series A, also had participation from GRP Partners, Neu Venture Capital and kbs+p Ventures.

At the moment, Awe.sm is probably best known for its URL shortening service. But the San Francisco-based startup says it’s actually rooted in a deeper software platform attached to those shortened links that provides analytics tools for websites and apps to monitor social media activity about their properties. The company says it will use the new money to hire more staff and expand its data analytics offerings. It’s a smart move for Awe.sm to focus more on that side of its business, as Twitter launched its own URL shortening service this past summer.

While social media analytics and URL shortening are both pretty crowded spaces at the moment, Awe.sm has already established itself well in the 2.5 years its been in business: Among its hundreds of customers are Groupon and Playdom, according to the company.

In a statement released Thursday, GRP Partners’ Mark Suster explained his firm’s latest investment in Awe.sm thusly: “In a world where companies are mindlessly paying money for ‘Likes’ or ‘Followers’, we welcome the new era in which people will use awe.sm data to start spending their social media budgets on real metrics like customer conversions. I believe the end of the hyped phase of social media has begun.” That seems like something we can all root for.

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