An Australian startup directly inspired by Y Combinator graduate Product Hunt is hoping to ride off the back of the existing platform’s success – even going as far as having almost the same name. Steven Speldewinde, co-founder of Product Hoist, says he is a “huge fan” of Product Hunt and what it does for founders, investors and tech journalists. “I think it’s one of the most interesting and supportive places for startups and founders on the internet,” he says. “But it’s hard for Australian founders to be discovered on the site. I thought it would be useful to create something similar for startups in Australia. Ideally, we’d love for it to be a place where startups come to get thoughtful feedback on their product.” Speldewinde says Product Hunt has been “really open” to other people using similar models and he doesn’t shy away from the fact that his startup was directly inspired by the company. “There’s a collection on Product Hunt called ‘Product Hunt for X’,” he says. “I think Product Hunt wasn’t the first company to employ a site in this style – obviously Reddit and Hacker News use it as well. The idea is to be valuable for a particular community, this being the Australian startup community.” Because of this, Speldewinde doesn’t think Product Hunt will swoop in any time soon and demand that the copycat site be shut down. “Ryan Hoover favourited a tweet of mine when I launched – what that means I don’t know,” he says. “I think they would embrace it. I don’t think it’s a competitor… any Australian startup would love to get featured on Product Hunt as well. I see it as a value-add for Australia as opposed to a competitor.” Speaking to StartupSmart previously, Ryan Hoover said it can be difficult for founders to have their startups featured on Product Hunt but talking “like a human” can increase your chances of success. “That’s something I think a lot of people miss out on,” he says. “The hardest thing right now isn’t building a good product or the product itself – the hardest part for some is getting attention. And if you can’t describe your product very simply, you’re not going to get anywhere.” Follow StartupSmart on Facebook, Twitter, and LinkedIn.
The founder of online community Product Hunt has learnt the value of empathetic copy after being called out online for an automated message that implied all founders are male. Product Hunt is a message board updated daily that lists exciting new products and startups – everything from a website that sends your enemies glitter to apps that change people’s lives. The site’s founder, Ryan Hoover, is a graduate of the Y Combinator program – an accelerator responsible for startups such as Reddit and Dropbox. Towards the end of last year Product Hunt raised a Series A round of $US6.1 million ($A7.7m). Three days ago the startup was alerted to the fact its uses masculine pronouns in certain automated messages to users when they add details about a product – such as the identity of a founder. Allyson Downey, the co-founder of product advice platform weeSpring, posted a photo of an automated message from Product Hunt on Twitter and asked: “What’s with the assumption that all makers are a ‘he’?” [email protected] I love you and am totally addicted, but what’s with the assumption that all makers are a “he”? pic.twitter.com/nyMfxlZuEU — Allyson Downey (@AllysonDowney) February 19, 2015 Hoover responded within a matter of minutes, apologising and explaining that the message was “an embarrassing typo”. He later posted an apology on Medium where it was shared widely on social media and Product Hunt was praised for addressing the issue so quickly. The website’s copy now uses gender-neutral language. “In the past year I’ve become increasingly aware of gender inequality and more empathetic of what many women have gone through, thanks to events like YC’s Female Founders… stories shared by women, and conversations with female friends of mine,” Hoover wrote. “It may appear like a small typo, but the pronoun ‘his’ subtly shouts disregard for women makers, particularly to those that have been mistreated because of their gender. Going forward we’ll be more careful in how we communicate and hopefully this is a reminder to others of how important it is to be thoughtful and empathetic when crafting copy.” Impressed with @rrhoover and @ProductHunt for making this fix super-fast. #ChangeTheRatio pic.twitter.com/4MUTBh0hKA — Allyson Downey (@AllysonDowney) February 19, 2015 Awareness around diversity issues in tech startups has increased as the industry has grown, with giants such as Twitter and Google as well as smaller players admitting female representation and cultural diversity in their workforces is not up to scratch. In July last year, women made up 30% of Twitter’s overall workforce but only 10% of tech employees. According to the StartupMuster survey, the results of which were released last month, 19% of the more than 500 startup founders who responded were female. Follow StartupSmart on Facebook, Twitter, and LinkedIn.
Twitter has announced it is rolling out a range of new features aimed at boosting public conversations on the platform. Group messaging will now be available for the private message function, including for people who do not necessarily follow each other. New! Use Direct Messages to speak privately with a group of up to 20 people. Share Tweets, show emoji & be yourself. https://t.co/8giGhC6OO0 — Twitter (@twitter) January 27, 2015 Users will also be able to capture, edit and share videos directly from the Twitter app in the same way that they can upload photos. Videos can be up to 30 seconds in length. The new features will be available to users in the coming weeks. Snapchat introduces news and entertainment service Snapchat has launched a new feature aimed at selling ads and sharing content from news organisations such as Vice and CNN. “Snapchat Discover is a new way to explore Stories from different editorial teams,” the company said in a blog post. “It’s the result of collaboration with world-class leaders in media to build a storytelling format that puts the narrative first.” Snapchat is currently valued at around $10 billion. Fintech startup raises $1 million in seed funding Credit card startup Final has raised $1 million in seed funding ahead of its 2015 pilot program. TechCrunch reports the round was led by Ludlow Ventures, T5 Capital Partners, Y Combinator and other angel investors. Founded a year ago, Final aims to give credit card users more transparency about their spending and eliminate the friction around having to cancel a card due to fraud or theft. Overnight The Dow Jones Industrial Average is down 1.62%, falling 287.22 points to 17,391.48. The Australian dollar is currently trading at US79 cents. Follow StartupSmart on Facebook, Twitter, and LinkedIn.
Startup founders should always shoot for the stars according to Reddit co-founder Steve Huffman. Speaking to StartupSmart from the United States ahead of his appearance at Above All Human in Melbourne this week, Huffman says many of the mistakes he and co-founder Alexis Ohanian made during Reddit’s early years arose because they were “aiming lower than they should have been”. “That little piece of business advice, dress for the job you want to have. I think that’s important when you start a company too,” he says. “Think about the company you want to be, the founder you want to be. A lot of the mistakes we made were simply out of naivety. We weren’t thinking big enough. “You’ve got to think - ok we’d like to be the largest person on the internet for X. What’s the path we need to take to get there, and what’s the first step. You should always be evaluating that position, because the path may change, monthly, weekly, or maybe even daily.” Reddit was founded in 2005 and was one of the startups in Y Combinator's first class of companies. In the early days Huffman and Ohanian were responsible for providing most of the content for its few hundred users. In the decade since Reddit has grown into a platform that now has 174 million users and includes a subreddit for just about every topic imaginable. Huffman is reluctant to offer advice based on his time at Reddit, as he’s almost certain it won’t be useful to today’s startup founders. He says he and Ohanian were very fortunate that the site was easy to grow. His experience at online travel startup Hipmunk, which he founded after leaving Reddit in 2010, only serves to confirm that feeling. “Reddit has always grown fairly linearly. We never really had that exponential hockey stick growth that everybody talks about,” he says. “Reddit has largely grown on its own, both from the community management point of view, and from the technology point of view. Reddit is an adventure that I try not to draw too many conclusions from. “I’ve learnt at Hipmunk that growth is not always that easy.” "At Hipmunk growth is a part of the business that needs a lot of attention. Huffman says it’s required a much more “block and tackle” marketing effort. “We’re not inherently social or viral or addictive in the way Reddit is.” he says. “It’s a completely different ball game because people only travel a couple of times a year, so we need to make sure that we are top of mind when people are thinking about buying a plane ticket.” Huffman was just 21 when he founded Reddit, it was his first proper job. At the time he and Ohanian knew very little about running a business. “We didn’t know how to hire, we didn’t know how to fire, we didn’t know how to raise money,” Huffman says. Living in Boston at the time, a city with a small startup community, the duo set about attending startup competitions, meetups and parties in an attempt to fill the gaps in their knowledge. “I don’t know if any of those things actually worked,” Huffman says with a laugh. What worked for Reddit was good content and an authentic voice, which Huffman and Ohanian had to provide in the early days, but eventually came from its growing base of users. “If there’s one thing that works on the web more than anything else, it’s giving people a reason to come back,” Huffman says. “One of the thing users appreciated about us was they were getting a real deal. There weren’t editors between them and the stories. We weren’t censoring comments or content or that sort of thing. I think that made us compare favourably to a lot of our peers at the time.” In 2005, Reddit’s main competitor was another news aggregation startup Digg, along with the traditional media companies. “Nobody trusted Digg for a second, and then you had major media companies which were even worse right. So we were in the right place at the right time, with the right attitude,” Huffman says. It’s that good content that keeps Reddit growing today, almost 10 years on, even despite its flaws, which continue to frustrate Huffman. “Every once in a while I get really pissed off with how shitty Reddit is on mobile, considering I do 100% of my browsing on my phone, god it just makes me so angry,” Huffman says with a laugh. “That and the fact the product hasn’t changed in the five years since I’ve left, makes me really upset. We didn’t really know what we were doing (when we founded Reddit). I could probably came the people in charge don’t really know what they're doing either. “But by and large, content rules and Reddit still has really great content.” Follow StartupSmart on Facebook, Twitter, and LinkedIn.
Startup Victoria chief executive Lars Lindstrom says there have been lessons in the six months since Startup Victoria launched, as Melbourne prepares for a national tech innovation conference called above all human. “It’s been a group of people and a not for profit organisation finding its feet and its purpose. We want to see more tech success stories in Victoria, through a mix of more founders and better founders, and we’re working out ways to do that,” Lindstrom says. “We run Lean Startup Melbourne meetup group, we had a chat with Paul Bassat in July, two weeks ago we had a full house for Steve Blank, and we’ve got an event coming up on December 1 with Dave McClure. “That will be our first paid event – $40 to get in – but free for Startup Victoria members.” As with any good startup or app, developing the organisation and learning what the community wants is an iterative process. “We have learnt a lot about what our members want. One of these things is a big tech conference in Melbourne,” Lindstrom says. “That’s what we’re doing with Above All Human, and it’s sold out – 500 tickets so far. That’s just off the Lean Startup Melbourne list.” 'above all human', a one-day tech conference, which will take place on December 9, from 8am to 5pm, at the Arts House Meat Market in North Melbourne. The conference is being organised by Stripe founder Susan Wu and StartupSmart editor Bronwen Clune. Big name international speakers include Y-Combinator partner Justin Kan, MIT Media Lab fellow Joyce Kim, early Skype investor Morten Lund, early Pinterest engineer Tracy Chou, Reddit cofounder Steve Huffman and Pase founder Tikhon Bernstam. “Y Combinator in live Office Hours on stage hasn’t been done before in Australia,” Lindstrom says. “So Startup Victoria’s events are building on what individuals have done in the past. The problem with individuals organising events is they run out of steam. Putting on a big budget event Above All Human is not something an individual could do.” While he has no firm numbers at hand, Lindstrom says he feels the Melbourne startup community is growing in momentum. He says he has been surprised by is the level of enthusiasm in the startup tech ecosystem. “From feel, yes we are growing. There are bigger events, more people attending, and a growing awareness among corporates that to innovate they have to be close to the startup community. “One of the things about being a startup founder is that you have to be an expert and you have to constantly pitch to your customers and staff that what you’re doing will be successful. But it can be tough. “So networking means something different in startup land than for corporates. In corporations, you network to make contacts for your next job. In startups, you look for ideas you can apply to your startup. That’s why an ecosystem is more important. “We feel the top 100 startup founders in Melbourne should know each other, so we’ve put together the Better Founders Group, where we put them in groups of 10 to meet up regularly. Looking forward, Lindstrom says Startup Victoria has big plans for the future. “'above all human' growing – with mainstream media we could have sold 8000 or 9000 tickets. It will probably double next year and grow from there. We can’t replicate South-by-Southwest, but we can grow to be the best tech conference in Australia,” he says. “We will improve the monthly events with more big names, workshops, and a new initiative around office hours so members can spend some one-on-one time with members of the board.” Follow StartupSmart on Facebook, Twitter, and LinkedIn.
In our continuing video series on Startmate companies, here is the story of Vero. Success so often is measured in the dollars you have raised or your staff headcount, but ultimately these are only proxy signals for something that really matters: happy customers. The story of Vero has refreshingly never been about the artificial chest-bumping metrics of dollars raised and people employed. The story of Vero was actually not even about Vero in the beginning. Originally, co-founders Chris Hexton and James Lamont were working in their small agency and thought the process of freelancers invoicing clients who were all around the world could be helped by better software. The two applied to Startmate in 2012 with this idea and invc.me was born. For the first three months of Startmate they built a product that had hundreds of users and worked to some degree, but unfortunately none of those customers really loved it. Peering in from the outside it is easy to observe with a detached eye, but one of the hardest and most gut-wrenching decisions is to kill an idea or product that is kind of working. Where failure or success is not evident in the small amount of evidence you have accumulated. Chris and James went to San Francisco and pitched investors the idea of invc.me. However, in their hearts and from the tepid reaction of investors, they knew that raising a round was not possible. Nine times out of ten, when teams reach this fork in the road, the founders give up. But Chris and James took the road less travelled and persevered. They threw out the idea of invc.me and started completely afresh. The problem had to be one where it is clear customers had a big pain and that meant paying them right from the beginning. If I remember correctly, they had set themselves a target of $1000/month in revenue within 5-6 months. Exploring problems that they themselves had run into at invc.me as well as what they had heard from others, they settled on Vero, which lets applications trigger emails based on certain behaviours. Instead of sending the all of the people in a free trial a set canned sequence of emails, a company can send different messages to those that have used the product X times versus those who haven't activated at all, for example. Working out of a two bedroom apartment with fellow Startmates team Flightfox (who were doing Y Combinator at the time), they convinced Todd Sullivan, Flightfox CEO, to become a customer (no mean feat). Vero was a stark contrast to invc.me, clients got huge benefit out of the product straight away and had no problem paying a small monthly fee. The other fascinating thing was as the team hit product/market fit, Chris and James didn't take the well-worn path of fundraising and decided to build a company that would break even or be profitable from the get go. As the company grew, they would hire and invest every dollar of growth back into the business. They now have over 400 paying customers and are building a wonderful company in Sydney that has the chance to become an iconic one over the next decade. Below, we filmed an interview with the team about their journey so far and the help Startmate gave them in this mini documentary. Applications for Startmate 2015 close today (30 September) and we'd love for you to begin your own story. Apply now.
Google is giving startups $100,000 in Google Cloud Platform Credit and 24/7 support to help them take advantage of resources in the cloud, and use those resources to quickly launch and scale their ideas. Google senior vice president Urs Hölzle announced Google Cloud Platform for Startups at the company’s Google for Entrepreneurs Global Partner Summit recently. Sydney co-working space Fishburners is one of a number of the world’s top incubators, accelerators and investors, whose startups will have access to the program. Google says it’s working with 50 such partners to roll out the service, and that number is expected to increase over time. Partners include the likes of Y Combinator, 500 Startups and Startup Grind. It will be available to startups that are less than five years old and have less than $500,000 in annual revenue. In a statement announcing the offer, Google director developer relations Julie Pearl says it supports the Google Cloud Platform’s philosophy. “We want developers to focus on code; not worry about managing infrastructure,” Pearl says. “Thousands of startups have built successful applications on Google Cloud Platform and those applications have grown to serve tens of millions of users. “It’s been amazing to watch Snapchat send over 700 million photos and videos a day and Khan Academy teach millions of students. We look forward to helping the next generation of startups launch great products.” Other prominent startups that have built their applications on Cloud Platform include car-sharing service Getaround, and Leanplum, a platform for optimising the mission-critical metrics of mobile apps. Startups wanting to apply should contact their accelerator, incubator or VC about the offer. Google says if they’re not in the program, email [email protected] to get them added. Follow StartupSmart on Facebook, Twitter, and LinkedIn.
After two years development and having already raised $3 million in funding, Sydney-based e-commerce startup Alphatise has launched. Alphatise’s smartphone and web-based app allows consumers to request a product they want, indicate how much they’re willing to pay for it, and then gives sellers the opportunity to match that deal. If 10 people want to buy a TV for $800, sellers can offer all 10 that deal, or give it to the first five. Sellers are charged a 4% fee of the product price to access Alphatise consumers. The startup was founded by friends Paul Pearson, Richard Frey and Ben Nowlan, who says it has the potential to be a powerful platform. “What you’re getting is an e-commerce platform that allows you to buy what you want and have a say in what you pay,” Nowlan says. “Putting the consumer in the driver’s seat becomes an exciting prospect. “From a seller perspective, we’ve become fairly disruptive from that side as well. They can actually see customer demand, and we move away a lot of the noise from the market.” The startup counts eBay and Amazon among its competitors, which Nowlan says are basically all companies operating in the online retail space. One more direct competitor is Greentoe, a US startup out of Y Combinator which launched recently and offers a similar service. Greentoe shows its users an average price for the product they’re after from a bunch of vetted online retailers, and allows them to say what they’re willing to pay, and sellers can accept that price. Alphatise’s launch marks the first time customers get a chance to use the product, Nowlan says. Because the platform needs to be large it wasn’t possible to offer it as an MVP, although he says in many ways that’s how the platform will be treated in the weeks and months after launch. That’s not to say the Alphatise team didn’t have an MVP, theirs was just the absolute minimum. Alphatise’s MVP was essentially a bit of paper, Nowlan says. They polled various people by showing them a grid of products and getting them to tick the ones that they wanted and write down the price they would pay to buy it right then and there. “We found consumers would often put down they would buy the product now if it was within a 0-15% price variable,” Nowlan says. Armed with this research the team were able to approach investors and secure investment. Since beginning in 2012 the company has raised $3 million in funding and plans to open a Series A round in the coming months. For the platform to really thrive it needs a large user base and Nowlan says that is the biggest challenge for the startup moving forward. With that in mind, the startup is aiming for 100,000 Australian users by December. “We fully acknowledge that’s our biggest challenge, getting the demand and getting the businesses to meet that demand. “(Then) you’ll be able to create a wish for something and set the price, and have that demand met in minutes. Once we do that it becomes a different game. “We have ambitious goals, but that’s exactly what Australian startups need to do to be successful.”
Sydney-based mentor-driven seed funding program Startmate has opened applications for its 2015 intake, with the iconic program now entering into its fifth year. First run in 2011, the Startmate program was a pioneer in the Australian startup scene. Based on an observation that VCs were missing in action in Australia at the time, it was inspired by the success of US-based seed funding programs such as Y Combinator and Techstars. Startmate and Blackbird Ventures co-founder, Niki Scevak told StartupSmart the program has proven Australia has the talent to build world-class tech companies. “If you look at something like 500 Startups or Y Combinator, a large proportion of the teams there are international and they’ve moved to San Francisco to start their business,” Scevak says. “But really, you can launch a startup anywhere and we believe Australia punches well above its weight in terms of talent.” Scevak says the big change in 2005 will be the increased importance of Startmate graduates from past years. “The big change after five years is the network of alumni companies. We’ve invested in 29 companies over the years, and that network is increasingly becoming even more important to the program than the mentors. “The folks who have gone through Startmate want to give back to the program, so the alumni and the mentors is really a one-two punch.” Startmate initially offered startups a $25,000 investment in exchange for a 7.5% stake – a figure that has since been increased to $50,000 (which gives successful companies a valuation of $666k). Aside from the investment, the program offers startups office space and legal advice for its duration, and includes demo days where technology can be demonstrated to potential early-stage investors. A key feature of Startmate has always been the use of high-profile mentors from the Australian startup and tech community. Some of the mentors have included Atlassian co-founders Mike Cannon-Brookes and Scott Farquhar; Tjoos co-founder Bart Jellema; and Spreets co-founder Dean McEvoy. The first program in 2011 generated 86 applications, which were eventually narrowed down to just five participants. The first intake was made up of Bugherd, Chorus, IRL Gaming, Grabble, and Noosbox. By the end of the year, one of the participants, Grabble, had been acquired by the US retail giant Walmart. Between January and April 2012, Startmate returned with its second intake, with the program increased to eight participants. The number of aspiring entrepreneurs and startups boomed to 164, with Clique, Flightfox, Property Inspector, Invc.me, Ninja Blocks, ScriptRock, Setkick and Young Republic eventually chosen for the program. It returned bigger than ever in 2013, with the initial investment doubling to its current level of $50,000 for 7.5% equity. The 2013 participants included 7pm Anywhere, Bugcrowd, GetStall, Kinderloop, SalesTeam, Shiftr, Storyberg, and Tutor on Demand. In late 2013, applications opened for Startmate’s fourth intake, with the 2014 program kicking off earlier this year. The participants included Lumific, HayStackHQ, Inductly, Drawboard, Flirtey, Foogi, Composure, and SportHold. In 2015, Scevak predicts Startmate will attract more than 250 businesses, with the growth of applications now tracking the number of startups in the ecosystem. Applications for the 2015 program are available on this page.
Ash Davies wants to make publishing e-books as easy as publishing blogs. In 2012 he founded Tablo, a cloud-based e-book publishing platform that has just secured $400,000 in seed funding. Tablo’s platform allows authors and readers to create, share and discover new e-books. “A lot of people think that, because publishing has gone digital, that it’s simple,” Davies says. “It’s still incredibly complicated and expensive though, and it’s even harder for an author to have their work discovered. “We’ve built the best publishing tool in the world, where publishing a book to major bookstores is as easy as publishing a blog. “Authors can drop in a document or write in the cloud and reach the iBooks Store or Amazon with a single click.” Lead investor and former CEO of the Catch Group, Paul Reining, has joined Tablo as a director and adviser, while other investors include Y Combinator partner Kevin Hale, and one of Tablo’s most successful authors, John Buck. Davies says the advantage Tablo has over traditional publishing methods is the service allows authors to build an audience as they write, by releasing parts of their book as they work on it. “Traditionally authors write solitarily for months and years before submitting to publishers,” he says. “Tablo empowers authors to connect with readers while they write their book.” The advantage of that share-as-you-write approach, Davies says, is that by the time the book is finished, it already has a following. “We have a number of successful authors on the platform, and the key point of difference is we help that author build their readership as they write their book. “The next bestseller can be discovered before it’s been published. “As opposed to traditional publishing where an author will work very hard for a long time and then publish to an empty audience.” Since going live roughly 12 months ago, Tablo has built a community of 10,000 authors from 100 different countries. It offers a ‘freemium’ based subscription model. It costs nothing to create and share books, but authors who want to publish on the iBooks Store and Amazon need to subscribe, which starts at $7.95 per month. Authors receive 100% of the royalties, once Apple and Amazon take their commissions. The startup is a graduate of the AngelCube accelerator program and he says the program had a big role in making the funding round possible. “As a new entrepreneur it was never going to be easy,” Davies says. “But going through AngelCube and working with their network made it easier and at the core of it we have a great product.”
Over 90% of tech startups fail, but I never thought my baby, 99dresses, would be one of them. If there is one thing that doing a startup has taught me, its that I am much more resilient than I could have ever imagined. Looking back, when I started 99dresses fresh out of high school I was very naive and had zero idea what I was doing. In fact, I didn’t even know what a startup was! I just knew I wanted to solve a problem I personally experienced: Having a closet full of clothes but still nothing to wear. Since then I’ve survived being stabbed in the back by cofounders, investment rounds falling through, massive technology fuckups that brought sales to a halt, visa problems, lack of money, lack of traction, lack of a team, hiring the wrong people, firing people I didn’t want to fire, lack of product-market fit, and everything else in between. I learned so much, and yet I failed. I won many battles but I lost the war. I take complete responsibility for this failure. Were other people involved in 99dresses? Of course. Was any of this their fault? Absolutely not. The startup press glorifies hardship. They glorify the Airbnbs who sold breakfast cereal to survive, and then turned their idea into a multi-billion dollar business. You rarely hear the raw stories of startups that persevered but ultimately failed — the emotional roller coaster of the founders, and why their startups didn’t work out. As things were looking bleak at 99dresses I started seeking out these stories, desperately hoping for someone — anyone — to relate to. Failing is lonely and isolating. Every time I’d scroll through my Facebook feed all my startup friends were launching new products on Techcrunch, announcing their new fundraising rounds or acquisition, and posting photos of their happy teams. Ask any founder how they’re doing, and you’ll hear something positive. Whether that’s the truth or not, that’s what we’re trained to say. I found postmortems of startups outlining what didn’t work and why the company went under, but I was hard pressed to find anything that talked about the emotional side of failure — how it actually feels to invest many years of your life and your blood, sweat and tears, only for your startup to fall head first off a cliff. Maybe its because most founders are men, and men generally don’t like talking about their feelings. Maybe its because failure is embarrassing. I don’t know why this is the case, but here is my contribution to the cause: my story. This is what failure feels like. I hope it helps. Where it all began… Many startup folk say that failure should be celebrated. “Fail fast, fail early, fail often!” they all chant, trying to put a positive spin on the most excruciating pain any founder could experience. Let me tell you — failure fucking sucks. If I would have failed fast, early and often then I would have given up 99dresses years ago when, in 2011, I travelled to my parent’s place in the countryside of Australia, locked myself away in my room and cried for what seemed like an entire week. I had launched 99dresses in Australia 9 months earlier and received some great traction, but I was losing momentum due to technology problems that I didn’t understand and battling a whole host of other issues. I felt like I was drowning in a black ocean, and I couldn’t see any light at the surface. I didn’t know which way to swim. At the same time the Australian press would continue to approach me for interviews. The fact that I was a teenage girl working on a startup in a male dominated industry seemed to garner a lot of attention, and I’d take the interviews that came my way because that was my job. It was my job to be positive and paint a happy picture for the media, who seemed to talk about me as if I was some kind of entrepreneurial wunderkind because of my age and the fact that I had breasts. This didn’t help my impostor syndrome — the constant feeling that everybody was always giving me way too much credit. I remember one reporter saying “you must be so proud of what you have achieved” and I was completely stumped by that statement because I’d never actually thought about it. Was I proud? What had I actually achieved? We had some traction, sure, but we also had many problems that needed solving. I was just waiting for the day when everyone would figure out that I’m not that extraordinary. “But you’re taking a massive risk! That’s so brave!” they’d say. I never thought so. The biggest risk in my eyes was going to university, getting a stable job, and sliding into a comfortable life. There’s nothing wrong with that, but I knew it wasn’t me. Plus, the worst that could happen if I failed was that I’d end up living with my parents. I think the really brave founders are the ones who will be out on the street if they fuck it up, and still do it anyway. Its easy to take risks if you have nothing to lose. My mother said “Nikki, are you sure that you really want to do this? It is so much pressure for a 19 year old to take on. No one will think less of you if you decide this isn’t what you want”. My parents are my number one supporters but my mum hated seeing me in so much pain, even if it was character building. But despite the horrible sinking feeling in my stomach, and the fact that I had no money left, and the fact that I had no stable team, and massive product problems, and was feeling burnt out, and had no idea how to overcome any of the aforementioned obstacles, and felt completely alone in it all, I persevered. I didn’t fail then. I couldn’t fail. This was my baby, and if it was going to fail it would be over my dead body. I became numb to the pain, and despite waking up for weeks on end with no glimmer of hope and no desire to get out of bed, I still made myself sit at my desk and work. Eventually, things took a turn for the better. When you’re at your lowest, the only way forward is up I applied for a university team business planning competition with a $10k prize, paid a friend $500 of the prize money to be on my ‘team’ so I could qualify to enter, wrote a winning business plan and took out first place. That was enough money to buy me a plane ticket and some accommodation to the US. I met my friend and advisor, Matt, who took me under his wing and helped me more than I could ever have hoped. My developer was admitted to hospital with a very serious illness and dropped out of the company, but I replaced him with 2 co-founders. I got into Y Combinator and headed to Silicon Valley — startup Mecca for a starry eyed young founder like I was — for 5 months. We rebuilt the 99dresses product and launched it in the US. We were getting traction. I signed a $1.2 million seed round with a group of investors on a valuation cap that I honestly thought was ridiculously high. 99dresses was back, baby! And then, all of a sudden, we weren’t. Another trip down the emotional rollercoaster I had to fly back to Australia to get a working visa as soon as the funding paperwork was signed, and the next day my two “co-founders” decided to tell me they were leaving the company without even a hint of warning. The $1.2 million hadn’t hit our account yet, but even if it had I would have felt uncomfortable accepting it with no team in place to execute my vision. I would have looked like a fraud and an idiot anyway — what kind of founder announces to her investors that she suddenly has no team the day after she takes their money? And furthermore, how could I not have seen this coming? I was completely blindsided. I went over to Matt’s office, and he proceeded to pour vodka down my throat whilst telling me I was much better off without them. Like most of Matt’s lessons it was hard to see that then, but he was right. The next day I rang up our lead investor who decided to pull out of the round. Then another investor fell off. Everything I worked so hard for was crumbling to pieces. If only I’d closed everyone individually, instead of agreeing to round up at least $1mil to get the lead on board. But then I realized that these “co-founders” would have left anyway, leaving me in this same position. I was stuck back in Australia still with a big vision, but as a single, non-tech founder with no team, no product (I needed these co-founders to keep the product running), no US visa and just some money that I’d gotten from being a YC company. I remember my sister taking me for a walk after it all happened. She sat me down in a park overlooking Sydney harbor at night time and made me listen to ‘Shake it out’ by Florence and the Machine. She told me I’d bounce back, that I’d overcome this like I always did. I wasn’t sure I believed her, but I knew I’d survived worse. This ended up becoming my motivational song that I would listen to when times were tough, because it reminded me that I could surmount huge obstacles if I wanted to. I didn’t fail then. I just started again. Starting over There were 5 investors who invested in me, despite all of this. They believed in me when I was having trouble believing in myself, but I couldn’t show them that — that’s the cardinal sin of any entrepreneur. Always be confident. Always be smiling. Always stay positive. Sell, sell, sell! I remember one investor sending me an email saying “Shit happens. Take the money and go sort it out.” Another told me to go make him some crack for women. My cap got sliced in half, but at least I wasn’t broke again. So I closed $595k and started looking for a new co-founder. Problem was, I didn’t trust anyone. Not after what my previous co-founders had just put me through. But then I met Marcin, who quit his corporate IT job and joined me in an office we referred to as ‘The Cave’ because it was cheap and nasty and had no natural light. I remember he came in on his first day, and midway through a conversation my chair completely collapsed. The next day he bought in his own chair. I was very jealous. We rebuilt 99dresses again and launched it in the US which was proving to be ridiculously hard when we weren’t physically in the US and having to handle some stock and seed a community from another continent. We were having trouble getting traction. The market had moved on, competitors had flooded the space and the product we had built just didn’t provide enough value in comparison. Add to that the fact that we were building a 2 sided marketplace, and you might get a sense for how tough things were. The US market is huge, hyper-competitive and way harder to crack than the Australian one. We were frustrated by our lack of progress, and the product I’d promised our investors just wasn’t working. I didn’t fail then. We pivoted. Our big pivot I caught a plane to the US and talked to as many women in our target market as I could. We interviewed more customers. We discovered a very clear set of problems that explained why our product just wasn’t working in the US market. I rang up the team in Australia, and told them, quite bluntly, that we needed to chuck everything out and approach the problem from a different perspective. I presented a new idea for a product that seemed to resonate with the girls I was talking to. The team did not take it well, and I definitely communicated the change very poorly. I almost got on an early flight home because I felt a mutiny brewing — we were throwing out many months of hard work. This wasn’t my finest moment as a leader. Despite this, the team rallied together. We threw out our website and concentrated entirely on mobile. We had a mobile website prototype in front of users within a week and iterated based on that before building out the native version. We hustled to get anyone we could to try out our beta app. We must have emailed thousands of bloggers, and some ended up giving it a go. Items were being traded, and girls were paying us money. This new thing was working! We couldn’t wait to launch it in the US, but we needed to physically move there first in order to do things properly. Visa issues Problem was, we didn’t have any visas. You see, its very easy to get into the US as an Australian if you have a degree in a specialized field, which I did not. Marcin had to wait it out to first become an Australian citizen with his wife, then get his E3 visa. However, right before joining 99dresses his wife had fallen pregnant with their first child, which they needed to give birth to in Australia. Marcin was then tasked with moving his wife and baby halfway across the world to chase our startup dreams. Needless to say, he’s a very brave man. I, on the other hand, was faced with my next big challenge: proving that I was ‘an alien of extraordinary ability’ that was worthy of living and working in the US without a degree (after all, I gave up my scholarship and dropped out of university when I got into Y Combinator). After about 7 months of working on my petition, I was ecstatic and incredibly grateful when I got approved for an O1 visa. I practically skipped over to the US consulate in Sydney for my appointment, where I was to pick up the visa. Instead, I was interviewed by a lady who took an obvious immediate disliking to me. She told me she was putting me through extra processing, so I wouldn’t be getting my visa that day. She told me it was random. She told me it would take 2 weeks. I later found out this processing was not random — it was reserved for potential terrorists, and could take up to several years. As an entrepreneur I HATE feeling helpless. I’m used to taking action on something and producing some kind of result. I like being in control. In this instance I felt completely helpless, and my startup was at the mercy of a government worker on a power trip. We were already running behind on launching this app in the US, and the consulate had my passport. I couldn’t get out of Australia. The consulate made me jump through hoop after hoop, and a few months later I still didn’t have my visa. It got to the point where I had to call the consulate hotline every single day and split test different types of crying (machine-gun bursts of sobs vs. long sad silences vs. loud ugly cries) on the operators (males were much more receptive to helping out), and occasionally I’d get lucky and have one of them put in a report for me. I hated doing it, but it was the only way to push things forward. I finally got my visa, and took the next flight I could get out of Australia with four suitcases — 2 full of clothes, 1 full of shoes and another with all my electronics and miscellaneous items. The contents of these suitcases just about summed up my life. I’d achieved my dream of moving to NYC, and I was living in a shoebox. It was all I could afford on my startup salary. Soon after, my 25 year old sister and 19 year old brother both bought gorgeous apartments in Sydney. Whilst I was absolutely thrilled for them, I also couldn’t help feeling a little jealous as I sat in my tiny convertible bedroom with no windows. If this all didn’t work out I’d be financially left with nothing, whilst my siblings were off investing in their financial future. That didn’t really scare me — I’ve realized that money isn’t a huge motivator for me — but it did flare my competitive side. We probably all compare ourselves to others way more than we should… Re-launch time! After hiring a few people and finding an office in NYC we were ready to launch. We solved the chicken-and-egg problem using techniques that we promised never to speak of again because they squarely sat on the grey/black spectrum of naughtiness. If there was a line, we definitely crossed it. We had to. These hacks were harmless to others, so I figured it was only a problem if we got caught. Our plan worked better and faster than I’d budgeted. Within three months we were doing over 1000 trades a week, and bringing in revenue on every trade. We continued to grow. Our app store reviews were overwhelmingly positive. Obsession did not begin to describe how some girls treated 99dresses. Within a few short months several power users had spent over $1000 each and traded hundreds of individual items. We steadily grew our stock turnover rate from 17% to 50% — that was 2-3x better than our competitors. Everyday I’d be wearing a new outfit that I’d received off the app. Our retention rates were really exciting. If my investors had wanted crack for women, then that is what we had created. Based on the way we were growing, we thought we could get cash-flow positive before our funding ran out. I had 99 problems and our runway was one… But then growth started to slow down. The average value of items listed steadily declined and our fees were based on this value, so although we were growing transaction volume our revenue wasn’t budging. We started to see some holes in the business model. Whilst our retention was great, we worried about our activation rate. In an attempt to save ourselves we made one more pivot; this would turn out to be our last one. The pivot made complete logical sense based on all of our research, but introducing it to our community was a nightmare. There was mutiny within the app. While our top line metrics shot up in a massive way, our one metric that mattered — transactions — plummeted. Meanwhile, I had approached our existing investors about getting a bridge. I knew we had something really special with amazing potential, if we just had enough runway to give it an extra push. I also knew we weren’t perfectly poised to raise a bridge round, unless our existing investors were going to pony up the cash. We’d been in the market a while, and although we had to overcome a number of setbacks to get out here, that didn’t seem to matter too much to external investors. Bridge rounds just aren’t that sexy. We only had one institutional investor in our previous funding round, and I was so relieved when they told me they wanted to lead this bridge. Boom! It looked like we were going to live to see another day. I sent through the due diligence documents and worked with them to answer all their questions. They were taking longer than anticipated to get back to me so we could get the deal done and move on. Then one Wednesday I got a call from them, and the line was kind of crackly. However, it sounded like they not only wanted to lead, but they actually wanted to fill up the entire round! Relief flooded through my body. I was so nervous. Then I heard a ‘but…’ And the rest of the conversation explained why they would not be doing that. My stomach dropped. I knew they were our best shot of getting the money, and some of the angels who had previously invested were interested in coming in but only if I could get a VC to lead it, probably for some oversight. We now had very little cash left, and very little time to find someone else. Turns out, under closer scrutiny some of the other partners in the firm didn’t like how competitive the market was. 99dresses was squarely focused on trading cheaper fast fashion (fast fashion is really hard to re-sell for cash), but all the competition were mainly focussed on buying & selling designer fashion. Despite our differentiation, the space is crowded and the competitors are well funded to the tune of tens of millions of dollars each. I felt my voice crack whilst I was talking back on the phone. I was trying so hard to hold it together and be professional, but I could barely speak without it being obvious I was crying. Damn emotions! I was embarrassed. Our last attempt It was night time and I walked over to Marcin’s home in tears, fully expecting him to take the safe and responsible route of deciding to get another job. He had a family to support, and I felt an extraordinary amount of guilt for putting him in that position. Instead, Marcin surprised me. He wasn’t willing to give up that easily. None of the team were. I was taking on this massive burden and internalizing everything, when in actual fact my team was prepared to fight to the end alongside me. We made a plan for cutting our costs to extend our runway whilst we tried to get some more cash in the door. The next day I gave notice on our office, and let someone go. We were already a very lean operation, but now the work of 2 was being done by 1 person on operations, and we shifted our focus to only the most essential tasks to buy us more time. I didn’t tell many people about what was happening. You’re not supposed to talk about this shit. If someone asks how your startup is doing, you fire off some kind of positive phrase like a reflex. My friend gave me a hug and told me to go read ‘The Hard Thing About Hard Things’ by Ben Horowitz. I bought the book and sat in a coffee shop that Saturday afternoon reading it through. I identified so much with the struggle — I’d been through it many times before whilst aboard this emotional rollercoaster. I realized something: I was fucking tired — physically and emotionally. I wasn’t sleeping properly. I hadn’t been on a proper holiday since our ‘schoolies’ beach celebration straight after I finished high school in 2009. The holidays I had tried to go on just ended up being long strategy sessions in my head to figure out my next move whilst lying beside a pool. All I could think about was this damn startup and it was completely consuming me. I had no bandwidth for anything else. When someone asked what hobbies I had outside of work, I’d laugh. I’d recently started having mini panic attacks whilst I was doing ordinary things, like taking a shower or doing my hair. I felt like a shitty friend. I couldn’t even contemplate having a relationship (I tried that before, but yet again this startup won out over him). I wasn’t sure how much longer I could do this. My mother told me to trust my gut. If my gut told me that I didn’t have faith in the business, then there is no shame in winding down the company and moving onto something more productive instead of raising more money. I’d learned an awful lot in the past few years. I told my mum I didn’t trust my gut when it came to this. My gut was telling me to quit. Problem was, my gut had told me that before in my darkest hours and I still pulled through. If I had trusted my gut then I would have quit years ago. I knew the only way this was going to die was if we were killed. I am not a quitter. I owed it to myself, my team, my investors and the 99dresses community to see this through. I continued approaching investors without luck. I’d be invited to cocktail parties full of VCs where I’d don my painful sky-high heels because I’d split tested heels vs. flats, and for some reason a 5'11 woman in 7 inch heels commands more talking time and attention from investors than one in the comfy flat booties I wear to work. Apparently height gives you presence. Once or twice I’d have an investor asking if I knew what an angel was, or if I also modelled because of my height, or some other unintentionally patronizing comment that I doubt any guy would be subjected to. I learned to take it all in my high-heeled stride. I kept hearing the same thing from these investors. “That’s a very interesting business, but we’ll either put in the first money or a series A. We don’t do in between. I’d love to keep in touch though, and see you progress to a series A where we might be able to help. Oh, and why aren’t you getting this bridge from your current investors?” I remember one day Marcin joked that I was a control freak, and I was really surprised. I’d never perceived myself that way — I just liked things done a certain way and to a certain standard that matched the vision in my head. When it came to non-99dresses related stuff, I thought I was pretty chill. Over the past few weeks leading up to this event I did start to get a sense for what he was talking about, though. I wasn’t a control freak in that I was obsessed with controlling outcomes — I was a control freak who just needed to be in control of the inputs. This became more obvious as everything started looking more and more hopeless at work. I started eating much healthier, strictly cutting out wheat, sugar and anything processed. To take a mental break I would read about bio-hacking, which is incidentally all about understanding and controlling how inputs effect your body. I told myself this would give me more energy to hustle, but really I think I just had to feel like I had control over something — anything — when my startup’s fate felt so out of my control. Closing down With a few weeks of cash left, Marcin and I agreed to use our remaining time to shut down the app gracefully for the sake of ourselves and the community. I came into the office that day prepared to have a hard conversation with him, but we both looked at each other and knew it was over. There were some tears, and I was grateful to have a curtain of long dark hair to hide my bloodshot eyes behind as I walked through our co-working space. I felt physically sick all day, and my stomach wouldn’t let me keep any food down. I lost my appetite for the rest of the week. My first instinct was to apologize — to Marcin, to my team, to my investors, to the loyal community we’d built. I felt shame, guilt, embarrassment — like a shepherd who’d led her sheep off a cliff when it was my responsibility to keep them safe. I logically knew that I shouldn’t feel these things, but emotions aren’t always logical. In fact, I didn’t really know what I should be feeling. I’d been working on this company ever since I finished high school, so 99dresses was all I’d ever known. It was a huge part of my identity — I was “that 99dresses girl”. Who was I without this startup? I had no idea. Just an ordinary girl, I guess. My friends invited me out to drink away my sorrows and get my mind off things, but I just didn’t feel like it. I was scared I’d meet someone new and they’d ask me what I do, and I wouldn’t know how to answer. I was also embarrassed because I couldn’t afford to pay for anything superfluous anymore — I still don’t know how I’m going to pay rent at the end of the month. As a woman going out in NYC my nights were normally cheap because cute guys would buy me drinks, but I am not the kind of woman who expects that. I’m independent. If I couldn’t pay for myself then I wasn’t going out at all. I wasn’t depressed so much as disappointed. I tried so fucking hard, and I still couldn’t make it work. There are many things I would have done differently were I to do this all again, but Marcin and I agreed not to get sucked into the ‘shoulda woulda coulda’ trap. “No regrets”, he said. We both learned some hard lessons from our mistakes, but it also made me realize how much luck and timing are often huge factors in success and failure. The next day a report came out by a startup with a very similar model to us, but in a different vertical. We’d traded 3x more items than them in our first 8 months of the US app being live, had 2.5x more members and had a business model in place — all with a team half their size. They’d gone on to raise a sizable series A; we’d failed. Our investors said we did a lot with the money we had. It’s easier to accept defeat if you try and try and try but don’t get anywhere. You call it a failed experiment. The failure is easy to justify. It’s incredibly frustrating to try and try and try, and when you finally start to get some good traction you fall off a cliff. Our business still had problems, sure, but so does every other startup. Moving on So this is where the story comes to a close. My friends all ask me if I’m fine, and I honestly think that I am. It’s been a wild ride, but its time to move on. A cruel consequence of my failure is losing the US visa I worked so hard to obtain. Once I stop being the CEO of 99dresses I technically have 10 days to sell all my possessions, pack my bags, say goodbye to my amazing team, my friends and the life I’ve been building here, and leave. That being said, I’m excited to start a new chapter. As much as I love startups, its somewhat liberating to have no responsibilities to anyone but myself — no team, no investors, no customers to look after. Maybe now I can be a normal 22 year old for a while: indulge my wanderlust, make some bad decisions, try something new. I’ll be taking some time out to recharge whilst living with my parents in a country town of 2,000 people where the internet is slow and there is no Seamless. I hope I survive. Honestly, I’ll probably get bored within a week and start working on a new idea. I already have a few. When I started 99dresses I was going to go big or go home. It’s been a great adventure, but now I’m going home. The end So that’s it. That’s my story of what failure feels like. I hope reading it was as helpful to you as writing it was cathartic to me. Most startups fail, and yet this industry doesn’t talk about failure nearly enough. I’d encourage anyone who has failed to write about how it felt, as I can’t tell you how much that would have helped me in those final months & weeks. I just wanted someone to relate to. Instead, I was left feeling isolated and ashamed. In fact, I thought it might be therapeutic to curate a collection of stories from founders who have failed and put them together in a book. It might be a little project for me whilst I take some time off, and I’m sure it would be helpful to someone in my current position. If you want to get involved or contribute your story then shoot me an email. My email address is nikki @ 99dresses dot com (yep, I’m going to need a new email too — still haven’t sorted that out yet). Thank You I thought I’d end this post by publicly thanking everyone who has been a part of the 99dresses journey. To my co-founder, Marcin — there is no one I would have rather had by my side through this experience. The sacrifices you made to make this all happen are nothing short of inspiring. If Zoe was old enough to say anything other than “this!”, I’m sure she’d tell you how proud she is of her dad. I’m going to miss your terrible jokes. To the team, past and present — thank you so much for all of your hard work, perseverance and loyalty. Chandra and Oguz, you guys are amazing. I loved coming in to work every day because you always made it fun. I’m going to miss you all immensely. When I do another startup I’ll be coming after you guys again :p To the wives, Natalie & Semiha — I’m sure its not easy having your husband involved in a startup. You were both so supportive of the long hours, sacrifices and emotional ups and downs, so thank you. To my family — you guys have always been my #1 supporters. A special thanks to my mum for putting up with me, even when I was a stressed out and horrible daughter. You’re the strongest woman I know, and I hope one day to be as bad-ass as you. To my friends — I couldn’t have done this without your support. You celebrated my highs and comforted me in my lows, and for that I’ll always be grateful. To Matt — You’re the reason I got this far in the first place. If it weren’t for you I probably would have failed in 2011. To my investors — thank you for believing in my vision and trusting me to fulfill it, even through the rough patches. I really do appreciate it. To our community — without you, we’d be nothing. Thank you for loving 99dresses, and spreading the word. Many of you I now consider friends, and I’m so grateful for your support and loyalty. Ok, that’s it. It’s over. Now its time for a nice long sleep. Nikki Durkin is the Founder & CEO of 99dresses. This post originally appeared on Medium.
Whilst it’s common to look at depression as being the “dark side” of startup life, and to caution people that stress and illness is one of the risks, that hasn’t exactly been my experience. As of the past few months I consider myself “depression-free”. I really have no black moods anymore, and my confidence and self-belief is the best it’s ever been, and continues to grow. The good state I’m in now is the culmination of a long journey that led me to some rather unconventional health treatments. But it’s only through being persistent, open-minded and willing to try anything - just like you need to be in startups - that I’ve been able to take control of my mental health and get my life on track. Regardless of what commercial success I end up achieving in business, I already know that the challenges of startup life have made me a much healthier and happier person than I’d otherwise have been. The low times We’d received our initial Y Combinator funding and follow-on angel funding in 2009 and 2010, and naively thought it was going to be smooth sailing from there. Things had been relatively easy for us to get the funding and start building a team and an early-adopter audience. What we weren’t prepared for was that once that first round of funding runs out, unless you’ve hit some big milestones, your next round of funding is really, really hard to get. By early 2011 we had this sudden horrific realisation that everything we’d built and all the hard work we’d done over the previous few years was all about to go up in smoke. What did we do? For a start, we heeded the advice of Paul Graham: just don’t die. We knew that the thing that was going to kill the company was not running out of money, but if we stopped working on our product. So, we tried our best to not panic, and not to be too affected by the emotionally charged advice we were getting from some investors and advisors. We just realised we needed to step back for a bit find a way to get some money to keep ourselves fed and housed. We picked up some contracting work, claimed the ATO’s R & D tax concession, and attracted some small investments from family and friends who still believed in us. We also started seeking new team members who were willing to work for us for sweat equity, and put together a new plan for what we’d need to do to be fundable. Though the first few months of 2012 we were immersed in the gruelling process of building out our new technology platform, as we kept raising small amounts of funding to keep us going month to month. As we went, we were very public in telling our story, with frequent updates to our investors and network of acquaintances, as well as telling the story of our journey via my personal blog. Though it was hard, the funds steadily trickled in. By August 2012, we were still on the precipice, and even though we’d finally completed the tech platform, we hadn’t yet been able to show investors or the world just how this technology could translate into major growth or commercial success. It was a grim time. I knew, and our team knew that we had something amazing, that we deeply believed could profoundly change the travel industry and lead to huge commercial success. The lowest point My most difficult memory was of this one gloomy July afternoon, when my co-founder Fenn and I went for a coffee near our Richmond office. I was wrung out from having gone without good sleep for quite a while. Our team members who’d been working with us for sweat equity were all sweated out; they needed cash. We had investors that were interested, but they were slow to move, and we didn’t have any rabbits to pull out of the hat to convey momentum. I remember both of us sitting there, staring into our coffees, staring at walls, staring out into the street, just not having much to say to each other that was going to make anything any better. Around the same time I remember these nights where I’d be out with my girlfriend for dinner, or at the movies, but just completely disengaged, in this paralysed state, waiting for some email bearing good news and constantly running the permutations through my head to try and figure out a way through. It’s fair to say I wasn’t particularly good company as a boyfriend or family member in those days. However, I had reason to believe I could get through it. My long journey to understand and master my health had led me to an obscure emotional therapy called Neuro Emotional Technique; a treatment that uses physical therapy to improve the nervous system’s ability to process emotional stress. For someone who had previously been a somewhat militant, Dawkins-inspired anti-quackery zealot, this had been a pretty big leap. But for me it was effective in a way that more mainstream treatments hadn’t been. I was happy to go with what worked. So, despite the hardship, we kept building our technology and improving the product and testing a whole lot of methods for growing our audience. And we kept telling our story to our investor and advisor network. Bit by bit, growth started happening, and investments started coming in in larger and larger amounts. Last year we were able to recruit a new CEO with an impressive airline background, who’s been able to open the doors we needed to get into the travel industry and get the company running much more smoothly. Cut to today Things are good. Our technology is working well, we’re building solid commercial traction, we have a team of 8 people all on decent salaries, and we’re ready to take our next big step forward. On a personal level, I just don’t get depression any more. We still have a lot of big challenges in our business, but I know I’m equipped to deal with whatever life throws up next. The Lessons It’s common in startup life to embrace our misery, wear it as a badge of honour, and console ourselves that if you suffer for long enough, success will eventually arrive and life will become good; that if you can just get to that big win and achieve fame and riches, then life will be great. In fact, that has it precisely the wrong way around. Only by having your shit together emotionally can you achieve success. The successful people are the people who can confront any challenge that comes their way, and remain stoic and centered. Emotional hardship and some level of depression can be valuable in startup life, to the extent that it signals to yourself and others that things are going wrong and you need to make changes. Depression needn’t spell the end of your startup journey, but you need to be careful. You needn’t try to be a hero. When you’re in trouble, be honest with yourself and your network, and find help and treatment that works for you, whatever form that takes. Tom Howard is co-founder of travel discovery app Adioso.
After two years of hustling, hacking and scrambling to make their new take on searching for travel data work, the Adioso team were running out of cash fast when they realised the time had come to face the facts and try not to panic. Co-founder Tom Howard told StartupSmart they felt they were onto a great thing when they launched in 2008, but they had underestimated the challenges they’d face. They had received lots of positive customer validation, raised $350,000 in angel funding and even secured a coveted spot in the Y Combinator Accelerator program, in the early 2009 cohort that transformed Airbnb from a great idea into a booming start-up. “It was in 2009 after battling away at the idea for a bit that we realised we were in over our heads,” Howard says. “We’d tried everything, trying to trick ourselves and investors that we were building something that was really working.” Adioso lets people search for flights more naturally, searching using more flexible categories such as regions and seasons. “We realised there was a reason products like ours didn’t exist. Our product was completely at odds with how the travel industry worked so we couldn’t get the data in the form we needed,” Howard says. “We realised we’d have to overcome the huge industry barrier. The more we looked at it, the more we understood why no one else had. And here we were, just a few scruffy guys from Australia.” Howard says this realisation was terrifying, and hung over his head for months as they tried to work out how to overcome it. “As the head of our little team, I felt really lonely. We had nothing but tough decisions and only slow possible progress ahead of us,” Howard says. He adds the situation was made even more difficult because they had several investors who were increasingly concerned about their investment. “It was tough because we’d had investors and supporters who were really encouraging when it was going well, but when times got tough some withdrew their support, some became hostile and some were very aggressive and full on with advice that we knew was wrong,” Howard says. Howard says they received a lot of advice to invest in a business development person to bring airlines on the platform. “We knew chasing the airlines wasn’t the best idea then. The technology wasn’t ready for the airlines to want to come on board, and the market wasn’t ready so even if we got them, we wouldn’t be able to keep them,” Howard says. The Adioso team had been focused building their tech platform, but the fact they couldn’t wrangle the available data into the structure they needed was crippling how many options they could offer, a make or break factor in the hyper-competitive travel industry. Howard says their enthusiasm and commitment mingled with their panic, and they invested way too much time and money trying to grow the demand for their limited offer with marketing gimmicks. “It didn’t work. So we were at the crossroads: do we give up and shut down, and try something new and do we hold out?” Howard says. “We had no money left. We seemed like damaged goods so new investors wouldn’t touch us and our old investors didn’t want to chip in anymore.” He adds many advisors suggested they pursue a deals model, as Groupon was “the biggest thing in start-up land” at the time. He adds it was tempting, but they knew they had to stop investing in gimmicks and start fixing the core issue. Through the panic, they realised several larger companies were beginning to seek travel data in new ways, so they decided to hold out for a little bit longer. “We completely overhauled the product but kept building as if we had everything we needed, because as soon as we had it, we’d be in prime position to make it work,” Howard says. The wait and see play paid off. Flight data continues to become increasingly manageable. The Adioso team now have three online travel agencies on board and over 35,000 active signed up users. They’ve doubled the team and Howard says their first and hopefully biggest hurdle is behind them. “We’re integrating new data and negotiating with airlines. It was certainly tempting to chuck it in, but now we can see the best thing which was to watch the industry, and decide to chill and wait it out,” Howard says. “We’re not huge yet, but we’re growing again, this time probably for the long haul!” This story is part of our Start-ups are Scary series. If you've survived a tough and terrifying moment in your start-up's journey and want to share what you've learned with the wider community, we'd love to hear from you: rpowell at startupsmart dot com dot au
Early stage venture capital investment has boomed globally over the past five years, according to investment tracking group Preqin, but follow-up series A funding has dropped slightly. A Preqin report shows that the number of annual angel/seed venture capital investments has increased 375% between 2008 and 2012, while the number of annual series A financings has fallen by 5% across the same period. Ignatius Fogarty, Preqin’s head of private equity products, says in a statement: “With an increased level of angel and seed funding in recent years, the pool of companies aiming to raise the next round of funding, Series A, has grown significantly.” “Series A investment activity has failed to keep pace with the volume of angel/seed funding, resulting in an environment in which it is increasingly difficult for companies to progress seamlessly to the next round of investment and causing concern in the industry over a `series A’ crunch,” Fogarty says. The Preqin report says that in the year to November there were 1313 seed/angel deals worth US$1.1 billion, up from 788 deals worth US$633 million in the same period in 2011. It also says the aggregate value of series A financing has fallen to 872 deals worth US$4.9 billion in the year to November, down from 896 deals worth US$5.5 billion in the same period in 2011. The report says 62% of seed and angel investment funding in the year to November has gone to companies in the internet or software industry. The most active early stage venture capital firms in the last five years have been leading American incubator and accelerator programs 500 Startups, Y Combinator and SV Angel. These three funds made up 14% of the activity.
Two Australian start-ups, Adioso and Rome2Rio, have made British newspaper The Independent’s Top 50 Travel Websites list. Rome2Rio is a trip-planning software that combines planes, trains, cars, buses and ferries to get users wherever in the world they want to go, while Adioso is a flight information search engine. Rod Cuthbert, chief executive of Rome2Rio, told StartupSmart the site’s popularity is taking off. “We have half a million visitors each month and that number just keeps growing,” he says. Cuthbert’s team of five has been working on the site for just over two years. The original tech founders, Bernhard Tschirren and Michael Cameron, were working together at Microsoft in Seattle when they realised an opportunity to develop the software. “We don’t call it a problem, because the travel industry works. But it was an opportunity to present travellers with significant additional functionality to travellers,” Cuthbert says. “People are often not even aware of the options they should Google in the first place.” Rome2Rio is focused on growing the business by partnering with airlines and major travel suppliers. “We’re focused on licensing the platform, the technology that underpins our site to partners,” Cuthbert says. “We expect to have half a dozen really big brand names up and running by the end of the year.” Adioso co-founder Tom Howard told StartupSmart the site lets people research travel “the way we think about it”. “You’ll have a thought like ‘I might want to go to Asia in March next year, for maybe 10 to 15 days’, so we built a new flight search infrastructure for that,” he says. Howard and business partner Fenn Bailey, who did the original coding, have been building the Adioso search engine for five years. “It works pretty differently to how the travel industry has worked for the last 10 to 15 years, since it’s (the online self-search function) been computerised,” Howard says. “It pulls in flights from all over the world into our database, and needs to be able to search with complete flexibility and return fast results.” Adioso has been running in beta form since 2008. Towards the end of 2008, Howard and Bailey took part in the Y Combinator accelerator in Silicon Valley. They’ve recently overcome the major hurdle of getting access to expensive flight data in a way that works with their systems and is cost-effective. “It’s a bit of chicken and egg problem for us. The technology works really well but the issue with travel start-ups is you can’t provide a flight search product without buying the flight data, and that’s really costly,” Howard says, adding they’re currently seeking funding for this. “It’s been a beta product until a couple of months ago, as we’ve been getting the underlying structure working properly. Only in the last few months has it been about commercialising it.” Howard says they’ve started negotiations with investors in Australia and Silicon Valley. “We’re planning a very aggressive growth strategy, and will be rolling out in selected cities around the world,” he says. “We hope to start rolling out in three to six months.” Rome2Rio and Adioso are both based in Melbourne and residents of start-up co-working space Inspire9.
The directors of Gold Coast incubator Silicon Lakes are flying to the United States tomorrow (Wednesday) to build relationships with the start-up community there and provide a future pathway for Queensland start-ups. Greg Burnett told StartupSmart the 12-day trip was aimed at “planting seeds” and to “acclimatize” themselves with the start-up sector in the U.S. “It’s a `soft landing’ into starting to build some relationships with a couple of accelerators with the goal to building a pathway as we graduate start-ups out of the Gold Coast,” he says. Burnett says one of the main stumbling blocks for start-ups on the Gold Coast has been access to early seed funding. He says while Silicon Lakes does not provide seed funding, it is building relationships with angel investors on the Gold Coast and hopes to learn more about seed funding opportunities while in the US. Burnett, who is being joined on the trip by fellow directors Bill Bass and Aaron Birkby, says they’ve had little trouble finding people willing to meet them following Twitter’s acquisition of the Brisbane-based We Are Hunted music app earlier this year. He says they plan to visit the Microsoft Innovation Center and seed funders TechStars in Seattle, and hope to spend time with funder Y Combinator and accelerator KickLabs. They also plan to meet the people behind the Startup Weekend event in preparation for a Startup Weekend on the Gold Coast as well as Australian start-ups that have moved to the U.S. Silicon Lakes officially launched in February and is a not-for-profit incubator working closely with the Gold Coast City Council. Burnett says they are working with 12 start-ups at the moment, with half of those in the app space.
Mobile platforms accounted for 30% of Facebook’s advertising revenue for the first quarter, according to new figures, as the social media giant to snaps up a number of mobile-based start-ups. According to Facebook’s latest earnings results, approximately $375 million of the company’s $1.25 billion in advertising revenue came from mobile ads in the first quarter. In the previous quarter, Facebook made 23%, or $305.9 million, from mobile advertisements. That represents a 22.5% quarter-over-quarter increase in mobile advertising revenue. The company saw its first-quarter profit soar 58% from a year ago to $217 million. Monthly active users rose 23% on a year ago to 1.11 billion, including 751 million who accessed the platform via mobile. Here’s a few of the mobile start-ups set to drive Facebook’s revenue even higher. Parse Just a few days ago, Facebook acquired mobile development tool start-up Parse for a reported $85 million. Parse, based in San Francisco, was founded in 2011 by Y Combinator graduates Ilya Sukhar, James Yu and Kevin Lacker, who raised about $7 million in funding. According to Facebook, the acquisition of Parse will make it easier for developers to build mobile apps with Facebook Platform. “We want to enable developers to rapidly build apps that span mobile platforms and devices,” company spokesperson Douglas Purdy wrote in a post on Facebook’s developer blog. “Parse makes this possible by allowing developers to work with native objects that provide backend services for data storage, notifications, user management and more. “This removes the need to manage servers and a complex infrastructure, so you can simply focus on building great user experiences.” Osmeta Last month, Facebook acquired Mountain View-based mobile software start-up Osmeta, which has also been around since 2011. It was founded by Amit Singh and Mark Smith. Osmeta describes itself as a 19-person engineering team consisting of “world-renowned hackers and highly accomplished researchers” capable of “herculean” software engineering. Neither Osmeta nor Facebook have commented on the acquisition, so it’s hard to know what Facebook’s motives are. However, Osmeta is yet to launch a commercial product, suggesting the deal is primarily a talent buyout as Facebook looks to strengthen its mobile presence. Karma In May last year, following its disappointing IPO, Facebook acquired San Francisco-based start-up Karma, which lets users send gifts to their friends from their smartphones. Founded by Lee Linden and Ben Lewis, the Karma app allows users to browse through a virtual storefront. Karma has partnered with providers such as Spotify, so the gift range is impressive. Once the user has found a gift, they can create a virtual card and send the gift to the recipient via text, email or a message on their Facebook wall. The app’s Facebook integration is a key part of its appeal. Karma reads through messages on users’ Facebook walls and alerts them to specific events for which they might want to buy a gift. “This acquisition combines Karma’s passion and innovative mobile app with Facebook’s platform to help people connect and share in new and meaningful ways,” Facebook said.
Newly launched accelerator Slingshot plans to invest in around 100 start-ups over the next five years, investing as much as $100,000 in each start-up via a $10 million venture fund.
A number of new start-ups have likened themselves to US-based company Airbnb, the leader in travel rentals, which has booked more than 10 million nights of accommodation worldwide.
According to Paul Graham, investor and founder of Y Combinator, the best way to get a winning business idea is to not think of any. Instead, you should be looking at which problems you can solve.