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He Sold His First Business To Google And Just Raised $120 Million For His Next Startup

Ray Reddy

Ray Reddy has raised millions of dollars in startup funds, sold a company to Google and is taking on the local business gauntlet in an innovative new way. Yet, he chose to exit Google and Silicon Valley to launch his latest venture.

In his exclusive interview on the DealMakers Podcast, Ray Reddy shared the pros and cons of the valley and his fundraising strategies.

The Art of Business

Always curious, Ray wondered if business was like math and science.  He attended the University of Waterloo to study computer science, then a Masters of Business and Entrepreneurship and Technology.

He says he learned some good foundational principles, how to approach complicated problems, and how to learn quickly. Yet, when entering the business world he found that very little of what he learned had any practical knowledge of applicability. He says “it’s much more about common sense and experience than it is about definitive approaches and how to solve some of these problems.”

After school he went straight into corporate strategy at BlackBerry, doing M&A and venture investments. Yet, he has always not only had a lifelong craving for learning, but a passion for building something and building something that he found had a purpose.

What Google Gets about M&A

The mobile phone was starting to consume other portable electronics. It quickly began to absorb portable navigation, portable GPS, handheld units, and portable media players. Yet, no one seemed to be addressing it. Ray Reddy decided to go solve it himself and built a team of people to go after it.

That startup became PushLife.

Prior to the iPhone, they focused on building an experience that made it very easy for people to move content back and forth between their phone and their computers, specifically music. It took normal phones, and it gave them an iPod-like experience on Android, BlackBerry, and Nokia. PushLife ended up licensing software to major carriers.

It was so successful it was acquired by Google. After the acquisition, he was at Google for four years. First in the Canadian Google office in Waterloo. Then out in Mountain View at Google‘s headquarters.

He ended up running the mobile commerce team for one of their products. Then towards the end, Ray was actually part of the launch team for Google Shopping Express, which was their same-day delivery effort in retail.

The difference with companies like Google, according to Ray, is that they do hundreds of acquisitions a year. They really turn it into a mass production factory. It’s very organized. There are no games. They are very straight-up. From Ray‘s perspective, it doesn’t feel like anyone is trying to overly optimize a negotiation. It makes a lot of sense because the transaction is the beginning of the relationship.

Ray‘s opinion is that Google‘s M&A process is designed in a way to get a group of people that are energized and that deliver a lot of value over the upcoming years. Contrast that with some other acquisition approaches and the result is quite different.

Eventually, Ray found a big new problem to solve. He ultimately concluded that structurally, a big company wasn’t set up to solve this problem, even with all the resources a company like Google has.

Toronto vs. The Valley

Ray moved his founding team to Toronto. Not that the Valley isn’t a really interesting place. He says “On one hand, it is the capital of technology worldwide, but I think there’s also some really weird dynamics there.” The biggest one being that you’ve got a very high concentration of very wealthy people, and they’re all early adopters.

He points to the collapse of the entire on-demand space, everything from on-demand valets to cleaning services several years ago, and a massive false-positive from the Valley.

Because when you have places like Palo Alto where average household incomes are north of $2 million, you can fool yourself into thinking that there are enough people who will pay a big premium for convenience.

As Ray states, “the types of investors living in the Valley are not at all sensitive to paying a $10 delivery fee for having a $10 item brought to them.“ That doesn’t seem weird to them. When you look across average neighborhoods and cities in North America, that’s not necessarily true. You lose sight of that in the Valley. You lose sight of the average person.

Ray says “So, if you’re trying to build a mass market consumer product, you just have to be very careful of false-positives that can come from something working in the Valley“

Then the team went and looked at the reality of building talent there, and hiring, and cost, and a lot of those other things. They decided to move to Toronto instead.

Fundraising Strategy

Ray’s latest startup is Ritual which is a social ordering app that taps into networks of co-workers and colleagues for fast and easy pick-up and pay at a wide variety of local restaurants and coffee shops.

He has already raised $120 million in capital. Greylock led the Series A out of the Valley. Insight did the Series B out of New York. Georgian Partners led the C round out of Toronto.

Rather than waiting until funds are imminently needed to close a round, he says “I think about it differently which is you should always be talking to investors. Always having an ongoing conversation with investors.”

He’s always talking to the next stage of investors and trying to build that relationship. Fundraising comes down to trust, and do they trust your judgment? Do they trust that you can do what you say you’re going to do?

For Ritual, it’s never been about the investor that gives the highest valuation. It has been about who do you want to work with and who do you want to build this company with and spend time with.

He’s had a relationship with each one of those investors for about 9 to 12 months before the round. When it came time for fundraising, it was a no-brainer each time.

Today Ritual has a team of about 300 people globally.

Listen in to the full podcast episode to find out more, including:

  • The process of selling your company to Google
  • Benefits of launching in cities outside of Silicon Valley
  • Ways to build relationships with investors
  • Success factors behind marketplaces
  • Retention as the critical factor for ultimate success in business

Alejandro Cremades is a serial entrepreneur and author of best-seller The Art of Startup Fundraising, a book that offers a step-by-step guide to today‘s way of raising money for entrepreneurs.

I am a serial entrepreneur and the author of the The Art of Startup Fundraising. With a foreword by ‘Shark Tank‘ star Barbara Corcoran, and published by John Wiley

Source: He Sold His First Business To Google And Just Raised $120 Million For His Next Startup

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DoorDash Is Now Worth Nearly As Much As Grubhub After $400 Million Funding Infusion

Investor appetite in food delivery companies is growing, notwithstanding a rash of customer complaints about how these startups pay contract workers. On Thursday, DoorDash announced it had raised another $400 million in a Series F funding round led by Temasek and Dragoneer Investment Group. The cash infusion brings DoorDash’s total capital raised to $1.4 billion, of which $978 million came from funding rounds in the last year.

Source: https://www.forbes.com/sites/bizcarson/2019/02/21/doordash-funding-400-million-grubhub-7-billion-valuation/#3df12b267e10

60% of Small Business Owners Never Apply for Funding to Support Innovation

60% of Small Business Owners Never Apply for Innovation Funding

The Creating Wealth through Business Improvements report from BMO Wealth Management reveals 60 percent of small business owners never apply for funding to support innovation.

With the development of digital technology and advances in smartphones, apps, artificial intelligence, and social media to name a few, small businesses have to support and implement the latest innovation as quickly as possible. According to the report, innovation drives financial success for businesses of any size.

This is especially true for small businesses because the right innovation allows for the creation of new products, services and marketing as well as ways to reach consumers. In addition to the improved external capabilities, it also makes internal teams more productive.

Innovation Funding is Important

Even if small business owners would like to innovate, they are often either unaware or not capable of accessing the funds they need. In a press release announcing the results, Tania Slade, National Head of Wealth Planning at BMO Wealth Management (U.S.) explained the importance of access to information for small businesses.

Slade said, “Having access to information about funding options and support networks is essential to the continued success of a small business, particularly in its early stages. Business owners who take advantage of the numerous resources at their disposal have an immediate advantage, and a far greater chance of seeing their innovation initiatives realized.” The challenge is funding, but small business loan numbers are looking much better today.

The report comes from a survey conducted with the participation of 1,021 small business owners across the US. They were asked about keys to innovation success, experiences funding their innovation through business loans and grants, and knowledge of and participation in accelerator and incubator networks.



Key Findings

As to the 60 percent of small businesses which never applied for funding, owners gave a number of explanations for never seeking the capital they needed. More than a third or 36 percent said they didn’t want to incur additional debt, while 22 percent believed they would be rejected. Another 21 percent stated the process was too complicated.

Alternative sources of funding were also explored in the survey, including government grants and incubator and accelerator networks.

When it came to government grants, 34 percent of responding small business owners said they were not aware grants were available. Of a reported 44 percent who did know, they didn’t know where to apply.

The number of small businesses who were not aware of incubator and accelerator networks was high — 63 percent. And there was also a gap in this knowledge between men and women. Specifically, 72 percent of women entrepreneurs said they weren’t aware of funding options  from incubator and accelerator networks while only 54 percent of male entrepreneurs seemed unaware.

Why is Innovation Important?

The number one reason given by small business owners for implementing innovations in their organization was to meet the needs of clients. Sixty-nine percent of respondents gave this as the reason for innovating. Meanwhile, 61 percent said innovation was important  for maintaining growth while 60 percent said it was necessary to create a better product.



The report further indicates older entrepreneurs looked to improve the client side of the business, while their younger counterparts were focused on creating better products or services.

Key to Innovation

In the survey, business owners identified four keys to innovation. Sixty-six percent of respondents indicated funding was most important, while 64 percent said it was networking. Another 61 percent said partnerships with staff were the key to successful innovation while 40 percent identified mentoring programs as most important.

So how do small business owners continue to innovate? In the report, BMO makes the following suggestions:

  • Join a local Chamber of Commerce and attend monthly events.
  • Seek counsel from local banks to get an overview of potential loan options.
  • Read small business blogs which often highlight local, state and federal funding programs.

Conclusion

In today’s highly competitive and technologically evolving economy, small business owners can’t stop innovating. As the report rightly points out, “Innovation should be a never-ending process.” And getting informed is the best way to do it.

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