If you’re a startup, how big a stake would you give up to get thousands of influential users to test and share about your product? That’s a question that Wahooly, a new company, is trying to answer. The Minneapolis-based company has just added the last members of its initial pool of 25,000 influential testers and is now opening the doors to startups to apply to engage this group of users. You can sign up here.
Startups that need users, a social media boost and some helpful feedback from knowledgeable users can work with Wahooly to create testing groups of 5,000 to 8,000 people. Those groups will share in a pool of equity ranging from 4–6 percent. In exchange for giving up a small chunk of its company, the startup gets a very influential group of users whose Klout scores are in the 90th percentile. The users, a collection of bloggers, coders, web celebrities and others who choose to sign on with a startup, will see their share of the equity pool increase or decrease over time based on their individual feedback to the startup, their activity in sharing about the product, and their reach and conversion success.
Wahooly, which gets its name from the fast Wahoo fish, is now receiving applications from startups who want to be part of Wahooly’s 2012 class. Wahooly said it will accept 200 startups for next year, with 50 selected each quarter. Already, 160 companies have already expressed interest in joining Wahooly for 2012. Startups that sign on will engage with Wahooly until they exit, either through a sale of the company, a share buyback or an IPO.
Wahooly’s co-founder Dana Severson said the startup, which is also looking for seed funding, is a hybrid between an accelerator and a crowdfunding provider. He said Wahooly is designed to help companies that have recently launched or are poised to launch, enabling them to get past the early adopter phase. Wahooly is ideal for companies looking to score a Series A round.
“We’re delivering traction. It’s one of the biggest issues start-ups face and without it, they can’t get funding. We’re here to help start-ups that are getting close to Series A and need a boost,” Severson said.
This is complicated business, verifying the influence of users, engaging them and directing their attention to specific companies. There are also disclosure concerns for users, who will be de facto investors in companies. Wahooly has signed a deal with Klout to use its scores and has also inked a deal with Cmp.ly to include disclosures and tracking services for users, so their activity can be measured and their financial interest in a company can be shared with their followers.
I wonder if this model will fly or if it’s a sign of the bubble times we’re in, with so many people drawn to the startup game. Many companies that are already doing well won’t need to turn to Wahooly for a boost. But it’s another example of new startup services that are helping developers and entrepreneurs fill specific needs, in some cases in exchange for equity. Kayweb Angel is an investment group in New York City that provides development services, advice and mentoring to startups in exchange for equity. There are also more resources like AngelList, CapLinked and Kickstarter, which help unite entrepreneurs with funders.
It’s still early to see if Wahooly can make its model work. I have questions about how effective it will be for startups and how much users will stick with Wahooly when exits, many of them paltry or worth nothing, could take some time to happen. Severson said Wahooly can handle the traffic and is building in systems to prevent people from gaming the system. It also requires startup applicants to get enough users signed on to their company or risk getting pushed out of the system, which provides a vetting system so only worthy startups move forward. And he said as users get involved with more startups, there is a better chance to back a winner.
Overall, it’s another sign that in this gold rush era, there are opportunities of all kinds for startups, including helping other startups.