Sid Sijbrandij knows a thing or two about building, scaling and even walking away from companies. His current venture is doing over $100 million in revenue and is valued at over $1 billion.
Originally from the Netherlands, Sid Sijbrandiij is now the founder of one of Silicon Valley’s unicorns that is powering the web through developers worldwide. It’s not his first startup rodeo either.
Sid Sijbrandij recently appeared on the DealMakers podcast. During the exclusive interview, he shared his entrepreneurial journey, the process of finding cofounders, bootstrapping versus raising millions, his addiction to fast-growth startups, and many more topics.
Sid Sijbrandi seems to have always had a gift for spotting business opportunities.
During high school, he studied applied physics and management science. He chose a kind of program that blends the benefits of an M.B.A., with getting good at several engineering disciplines.
In his first year at college, he also started his first company.
The idea came from a fellow Ph.D. student that had made an infrared receiver you could use to skip to the next song on your computer (the only thing that played an MP3 song at the time). He started buying these infrared receivers from him and selling them in the U.S. You’d send him an envelope of dollar bills, and he would then send you a printed circuit board.
Ultimately, his two cofounders didn’t agree on growth plans concerning hiring more people. Sid wanted to hire faster, so he didn’t have to spend as much time on it, while his cofounders wanted to optimize for free cash flow. They ended up parting ways amicably.
The Two Most important Things for Launching with Cofounders
Sid has experienced several startups and says his two big takeaways when it comes to cofounding a company are:
1) To be smart with the shares
2) To be sure you and your cofounders are aligned in vision
For example, automatically making everyone an equal cofounder, even if they come in way later in that process, can be a mistake.
Sid says it is important that shares “are aligned with their contribution to the company. It’s very important if you start a company to have vesting of your shares as well.”
This helps avoid the free rides, because if someone leaves with all the equity, then people that need to invest like VCs are going to be like, “Why am I investing for just 50% remaining of the business.”
In the Netherlands, Sid didn’t find the goal of local companies to grow really fast. If you do want to grow a company really fast, he says it is beneficial to be somewhere like the Bay Area, where everyone just assumes that is the goal.
Not just your cofounder, but also your accounts person and your lawyer, and everybody else requires the growth mindset.
Passion for Growth
After graduation, Sid spent a few months at IBM and could have stayed there. He had an interest in strategy consulting, as well as building a recreational submarine.
He made a balanced scorecard of all the different ways to make that decision. One of the criteria being, “Is this a good story to tell in a bar?” He showed his dad who said it was a ridiculous way to decide on your career but was very supportive either way.
So, he called someone interested in a submarine venture. His pitch was, “Look, you should really hire me because I have a job offer from IBM. Otherwise, I’ll start working there, and we both don’t want that.” He got the job.
He built the first onboard computer for the submarine. Today, U-Boat Worx is one of the biggest builders of recreational submarines. If you go on a cruise, and they have a submarine, it’s likely from U-Boat Worx.
Still, after five years, it just wasn’t growing at a pace that kept Sid interested. He then went on to do a part-time stint on an innovation project with the government as a civil servant.
During this time, he really got to know himself, and how fast-growing companies with a continuous string of problems to be solved were what kept him interested.
Funding Your Startup
After starting and selling app store Appappeal, Sid turned open-source software GitLab into a fast-growing venture that is on its way to an IPO in 2020.
He took the proceeds from his previous venture, doubled it in bitcoin, and began bootstrapping GitLab.com.
Sid got the first few hundred signups through an article posted on Hacker News. Then together with his cofounder applied and got into Y Combinator. The race to demo day, where they would present in front of top tier investors, was on.
Compressing their three-month plan into just two weeks, the GitLab team had a highly successful demo day, landing Ashton Kutcher as an investor.
There was so much interest in their seed round, they rolled right into the Series A financing round. They’ve since followed that up with a B, C and D financing rounds, raising a total of $158 million at $1.1 billion valuation.
Today, some of their investors include Khosla Ventures, Google Ventures, August Capital, ICONIQ Capital, 500 Startups, and Sound Ventures to name a few. It doesn’t get much better than that as a hyper-growth startup.
In order to do this, Sid and his team had to master storytelling. This is being able to capture the essence of the business in 15 to 20 slides. For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
Embracing The Remote Work
Sid states they “don’t do in person.“ At Gitlab they encourage having meetings with webcam. They believe there’s something to see in the other person even if it is via video.
To put this into perspective, every day, employees have a company call, and it’s a thing you do with a limited set of people. In this regard, there are about 20 in each group, and they just hangout.
During the group calls there are all types of topics discussed that vary from movies to magazines. Topics are not necessarily work-related.
Sid and his team very much believe that their company is more than just, “Hey your work…”
As part of Gitlab‘s culture, the social interaction plays a key role and they have a lot of ways in which they facilitate this inside the company. Even if this happens remotely.
M&A Made Simple
Recently Sid and GitLab have been very active when it comes to acquisitions on the buy-side. That includes Gitorious in 2015, Gitter in 2017 and Gemnasium in 2018.
When it comes to acquiring companies, they’ve made the process incredibly simple, and are actively looking for more companies to buy.
In this regard, they like to acquire teams that have built a product before. Preferably a team that made a great product, but didn’t get distribution. Especially because typically they shut their existing product down.
To make things easier, they have an acquisition offer page. It even includes a calculator, so you can go online and calculate how much they’re offering.
Listen in to the full podcast episode to find out more, including:
When to pull the plug on your startup
The advantages of SAFE notes for raising money
How GitLab does meetings and culture around the globe
Not yet as rich as you always wanted to be? Don’t worry, because today we’re going to dial you in for some “rich guy” dividend favorites that’ll pay you up to 9.9% every year.
Private equity is a lucrative and secretive world. It’s often limited to accredited investors, which means these funds require you to have $200,000 or more in annual income to qualify.
If you’re living on dividends alone, this might be challenging. Fortunately, there are some private equity plays that you can buy just like individual stocks. They trade for as cheap as $12 per share and they’ll pay you dividends from 8.8% to 9.9% along the way:
Private equity (PE)—funds that can invest in the equity and debt of privately held companies, which we typically can’t get our hands on—is generally touted as outperforming the stock market.
The American Investment Council, which advocates for private investment, points out that research from the 1990s and early 2000s showed that “private equity outperformed public markets by 3 to 4 percent each year,” and a 2019 paper investigating more recent “vintage years” finds that “that private equity continues to generate returns that are 2 to 3 percent above the returns of public markets.”
The downside? Privately held private equity firms aren’t exactly easy to tap, and you typically need to have seven digits to get in.
But here’s a back door that you and I can access. We can buy PE-esque investments just like regular stocks with a single-click! The trick is handful of little-known publicly traded companies called business development companies (BDCs).
Congress created BDCs in the 1980s to spur investment in America’s small and midsize businesses, the same way they created REITs in the ‘60s to help mom ‘n’ pop investors tap the real estate markets. And like REITs, BDCs get a generous tax break—if they dole out 90% or more of their profits as dividends to you and me.
Thus, business development companies not only let us access a big pool of investments you and I otherwise couldn’t otherwise dream of accessing, but also deliver sky-high yields that are among the highest you can find in the stock market. The caveat, of course, is that they do come with heightened risk, and not all BDCs are gems.
Today, I’ll show you three notable BDCs—yielding between 8.8% and 9.9%—that should be on your radar screen.
PennantPark Floating Rate Capital (PFLT)
Dividend Yield: 9.7%
Let’s start out with a yield juggernaut: PennantPark Floating Rate Capital (PFLT), which will get investors awfully close to a double-digit yield at current prices.
PennantPark provides access to middle market direct lending with, as the name implies, a heavy focus on floating-rate loans, though it’ll invest anywhere across the capital structure (senior secured debt, subordinated debt and others).
Its primary target is private equity sponsor-backed companies with $10 million to $50 million in EBITDA. It avoids capex-heavy businesses, as well as fickle industries such as fashion and restaurants, but it still has plenty of sectors to play with. Portfolio companies include the like of primary-clinic operator Cano Health, marketing services provider InfoGroup, and WalkerEdison, whose furniture can be found online via companies such as Amazon.com (AMZN), Target (TGT) and Home Depot (HD).
PennantPark typically leans toward the low-risk but low-reward end of the BDC spectrum, which historically has served it just fine. However, the BDC’s last earnings report raised some credit-quality concerns. The company reported that four of its portfolio companies were on “non-accrual,” which essentially happens when a payment is more than a month overdue, or there’s some other concern about a company’s ability to make a payment.
The BDC was subsequently nailed in May on the news. That has me wary. And the floating-rate nature of its loans, while attractive during periods of rising rates, isn’t a significant advantage right now.
New Mountain Finance
Dividend Yield: 9.9%
New Mountain Finance (NMFC) targets companies middle-market companies, too, investing between $10 million to $50 million across the debt spectrum in businesses that generate annual EBITDA between $10 million and $200 million.
NMFC likes to say that it invests in “defensive growth” industries. It’s a silly, contradictory term, sure. But the qualities it covets in its portfolio companies are, in fact, pretty attractive: high barriers to competitive entry, recurring revenue, strong free cash flow and niche market dominance.
To be fair, New Mountain, like PennantPark, is heavily weighted toward floating-rate loans, which make up 93% of the portfolio. But NMFC is a few steps in the right direction. Its credit quality is stellar – only eight portfolio companies have gone on non-accrual since inception in 2008, and there were no new non-accruals over this past quarter. Better still, the company is a bastion of consistency when it comes to covering its healthy dividend with net interest income (a core measure of profitability for BDCs).
New Mountain, which trades at only a sliver of a premium to its net asset value right now, still should be fine in the current environment. Keep this BDC in mind should the Fed’s hawks ever take over again.
Ares Capital (ARCC)
Dividend Yield: 8.8%
Ares Capital (ARCC) is a slightly more modest yielder compared to the previous two picks, and you likely won’t snag it for a significant discount. But that’s OK—ARCC is worth a small premium.
I’ve beat the drum on ARCC a few times, including in February 2019, but also going back more than two years, in January 2017. I said at the time that the company’s investment spread, as well as a $3.4 billion merger with American Capital, “should benefit ARCC in just about any market environment,” and that “in short, ARCC is going places.”
Ares Capital, Wall Street’s largest BDC, invests primarily in first and second lien loans and mezzanine debt of middle-market companies. A high priority is placed on “market-leading companies with identifiable growth prospects that can generate significant cash flow.” Its portfolio of roughly 345 companies touches numerous sectors, including business services, food and beverage, healthcare, IT and light manufacturing.
Ares’ core earnings and net realized gains have exceeded dividends every year since 2011, by increasingly wide margins. In fact, the company’s operational performance has been so robust that it has hiked its payout twice since this time last year.
Bottom line: ARCC is a standout in what typically is a difficult industry to invest in.
However, I’m not sure I’d commit capital to this stock right now. Given its recent run up, I’d like to see a pullback for a lower risk entry point.
It sounds like an impossible dream…an ordinary couple launches a blog that become so successful that they’re able to quit their jobs and live lives of freedom and adventure after just three short years.
Kelan and Brittany Kline are such a couple, and they think you can do just what they did: Get out of the rat race, create a successful online business, work from home, have complete control of your time, and live lives of greater freedom and adventure.
Who Are Kelan and Brittany Kline?
In most respects, Kelan and Brittany Kline fit neatly within the definition of an ordinary couple. Not quite 30, they reside in upstate New York with their daughter Kallie and their dog, Charlie.
Brittany is a teacher by trade, the fulfillment of a lifelong career dream. She holds an M.S. degree in education, and began teaching after graduation.
Kelan’s career path has been less settled. After receiving his B.B.A with a concentration in finance, he bounced between several different occupations within a few years including insurance sales, UPS driver, ecommerce, jail deputy, and most recent office manager.
How did their occupations lead them into blogging?
While Brittany was comfortable as a teacher, Kelan was not. With each job change he hoped to find a position that would bring him that elusive combination of happiness and more freedom.
None of it was leading in that direction.
To remedy the situation, he was beginning a home inspection business. That’s when he discovered blogging. It held the prospect of making money online, which is hardly an uncommon desire these days.
And apart from Kelan’s career conundrum, there were other factors in the couple’s lives providing additional motivation. With Brittany working days as a teacher, Kelan worked nights as a jail deputy. They also had more than $40,000 in student loan debts that they couldn’t seem to crack, even with Kelan working overtime shifts.
The combination of all the above – along with the missing sense of control – was what turned them to blogging. The original strategy was to start a blog focusing on personal finance. Specifically living a happy life on a frugal budget. That was something they had experience in and knew they could help others with.
They reckoned if their blog could be a good side hustle and earn them an extra $500 per month it would help them find that better future.
It did that, and more. A whole lot more!
The Road from Start-up Blog to a Six Figure Income
The Klines began their blog, The Savvy Couple, in July of 2016. That means they went from zero to $100,000-plus in barely three years! That’s what makes their story compelling, in addition to the fact that they used blogging as their path out of the rat race.
As you might imagine, the trek toward six figures started off inconspicuously. They made no money at all for the first eight months.
If you’re considering taking the plunge into blogging, this is an outcome you should fully expect. It can be shorter or longer, but going several months – or even a year or more – without earning any income is a big part of what causes so many blogs to fail, and would-be bloggers to quit.
But the Klines didn’t quit. In Month #9, they finally hit paid dirt – $50!
And that’s when Kelan did quit – his job that is. He made the decision to become a full-time blogger.
Risk Reduction and Taking the Dreaded “Leap of Faith”
Now that isn’t advice he’d give to other would-be bloggers, but he made the decision because the couple had “removed most of the risk involved with that decision”. That risk removal included the following:
They had close to a year’s worth of salary saved up.
They cut their living expenses in their budget to a minimum.
Kelan had a back-up plan to revive the home inspection idea in case the blog didn’t work.
He also took freelance work after quitting his job.
That freelance work included a remote digital marketing position that also helped him learn online marketing. He also taught English online every morning. The basic idea was to make sure there was at least some income coming in at all times.
Kelan took that step that all entrepreneurs will eventually face – the leap of faith to make the new venture a full-time occupation. By doing what was necessary to make it work, he replaced the income from his full-time job in just a few short months.
The next goal: to spring Brittany out of her job and into the blogging venture.
That meant the income from the blog would need to be enough to support the entire family. By their reckoning, they needed to hit $10,000 per month – six months in a row – before making the full transition into blogging for Brittany as well.
They hit the $10,000 income mark on the blog for the first time in June, 2018. But as is typical of blogging, that income level didn’t prove consistent.
The Savvy Couple’s Income Pattern
The graph prepared by the Klines below tracks the progress of The Savvy Couple’s income since the blog began, through this past May when it earned more than $43,000:
The Savvy Couple blogging income
The Savvy Couple
The up-and-down nature of the income is a situation nearly all successful bloggers are very familiar with. But notice on the graph the general trend line is moving consistently higher. Though the blog may not earn at least $10,000 each and every month, the higher earning months easily offset the lower ones.
And as you can see from the graph, the couple have clearly made well in excess of $100,000 from their blog in the past 12 months. That income level has enabled them to pay off their remaining student loan debt of $25,000 in just five months, as well is to grow their net worth to over $100,000 before turning 30!
What Blogging Has Done for The Klines, Apart from Money
If you’re at all curious about blogging, the income it can produce is a natural attraction. But like many other successful bloggers, the Klines have discovered the incredible satisfaction that goes beyond income.
“Being a teacher was my dream, but also God put me on this Earth to be a mother,” says Brittany. “I want to be able to teach my daughter and spend as much time as possible together with my family. We only get one life to live. I want to spend mine making unforgettable memories with my family. I did not want to look back on my life and think I gave more to my students than to my own children.”
Kelan adds: “We now have complete control over our lives. We have no one else telling us when to come to work, how long we are going to stay, and how much we are going to make. We get to decide all of that on our own. If we want to take a vacation, we just take it. We get to travel so much more than we used to.”
The couple makes an effort to finish working each day by 3 pm or 4 pm, giving them more family time. This is especially important now they have their daughter, Kallie. They wake up around 5 am to get in a few hours of uninterrupted work, then head to the gym as a family at mid-morning.
They also embrace the idea of being able to use their blog to help families take complete control over their time and money, so they too will find freedom to do more of the things they love in life.
Blogging has been so good for the Klines that they openly share their success and strategies with others.
What Does it Take to Be a Successful Blogger?
By now, you’re probably wondering if you can do what Brittany and Kelan have done by starting your own blog. They believe you can, and in fact they dedicate much of their blog to help you do just that.
We’ve already discussed how the Klines pre-positioned Kelan to transition into blogging full-time by removing risks. That included saving money for living expenses, doing freelance work to generate a steady income, and having a Plan B in case the blog failed.
If you hope to make blogging a full-time venture, you should use a similar strategy.
The Klines also warn that building a successful blog will take a lot of hard work. This is a critical realization going into the venture, since your effort can be short-circuited early if you think it will be easy. It will take months before you begin seeing your first revenue, and several years before it becomes a full-time income.
Choosing the right blogging niche is also mission-critical. There are hundreds of different blogging niches, but it’s important to choose those that will be easiest to monetize.
Kelan recommends the following niches:
How to make money
Health and fitness
Beauty and fashion
The Savvy Couple focuses on how to make money online and personal finance, but adds a solid mix of lifestyle and personal development.
They also recommend reinvesting a significant percentage of your blogging income – as much as 50% early on – back into the blog. Blogging is like any other type of business, where you will need to spend a certain amount of money to make more money.
Specific Strategies Kelan and Brittany Recommend for Would-be Bloggers
The Klines recommend doing plenty of research before launching your blog. Learn the ins and outs of popular blogging tools, like WordPress – a very common blogging dashboard, and learn all you can about social media marketing. Follow other blogs regularly, and carefully study how they create content, what social media platforms they focus on, and how they monetize their blogs.
“A good exercise we have anyone do that is considering starting a blog is have them sit down for 10 minutes and write down as many article ideas as possible,” advises Kelan. “You should be able to come up with at least 100. If you struggle to come up with that many, you might adjust your niche.”
They also recommend the most basic first step of getting started. “Don’t over analyze things,” says Kelan. “Take massive action and make things happen in your life.”
Kelan also recommends surrounding yourself with other bloggers. Follow other successful bloggers on a regular basis. Comment on their websites, swap emails, and join blogger networking groups, especially on Facebook.
Other resources they offer include their step-by-step tutorial on how to start a successful money-making blog and their free Profitable Blog Bootcamp and Workbook.
The bootcamp and workbook will show you how to:
Create a successful mindset
Design an ideal avatar
Develop a workable monetization strategy
Create purposeful content
Drive traffic to your blog
Implement email marketing
Create systems to save time and scale
The Klines are so dedicated to helping others follow their path into income earning blogging that they make all these resources available to their readers for free.
What Not to Do If You Want to Become a Successful Blogger
Kelan warns that you should not think of blogging as a get rich quick scheme. “It’s the most challenging job I’ve ever had in my life,” he warns. “And I used to babysit 53 violent inmates by myself when I was a jail deputy.”
He stresses being ready for a learning curve. If you’ve never had a blog in the past, especially one that generates income, you’ll be learning the business from the ground up. You’ll need to be open and teachable.
The time factor is another hurdle many new bloggers may not be ready for. Kelan stresses it will take a good 6 to 12 months before you even begin to make money, and get a grasp of how to run a successful money-making blog.
Most of all, he stresses the need to treat your blog as a business, not a hobby. That means having a good work ethic, and working on your blog on a daily basis.
Can Anyone Really Create a Money-Making Blog?
If “anyone” includes those who are willing to put in the time and effort to learn the business of blogging, then the answer is a resounding yes! But don’t think it will happen without those important first ingredients of time and effort.
The Klines had very ordinary jobs before going into blogging, and had to learn the whole process from scratch. But now that they’ve been working at for three years, they’ve hit pay dirt with a six-figure income.
They, and many other bloggers, are willing to share their blogging secrets with others. It’s a matter of being ready to commit to a journey that will be difficult at first, but will lead to a life of higher income, more freedom, and options most only dream of.
Each year for the past five, Forbes has searched the country for the 25 fast-growing, venture-backed startups most likely to reach $1 billion in value. Graduates include: food delivery service DoorDash, home seller Opendoor, luggage brand Away and synthetic biology company Ginkgo Bioworks.
This year, with the help of TrueBridge Capital Partners, we scoured the country again for budding unicorns. TrueBridge analyzed the finances of more than 150 startups, then our reporters dug deeper. That research caught problems at San Francisco-based Cleo, a parenting app with a troubled workplace and a CEO who lied about her age and background. The company was removed from consideration after our investigation, and its CEO resigned in mid-June. (The full story is here.)
FOUNDERS: Michael Gronager (CEO), Jonathan Levin, Jan Moller
EQUITY RAISED: $53 million
ESTIMATED 2018 REVENUE: $8 million
LEAD INVESTORS: Accel, Benchmark
New York-based Chainalysis makes cryptocurrency investigation software that can shine light on how people use bitcoin, ethereum, litecoin and more. Financial institutions use the technology to screen customers and comply with regulations designed to prevent money laundering, while government agencies such as the Internal Revenue Service and the Federal Bureau of Investigation can identify illicit transactions and investigate alleged criminals. Before teaming up to found Chainalysis, CEO Michael Gronager, 49, cofounded cryptocurrency exchange Kraken, while CTO Jan Moller, 47, built the Mycelium cryptocurrency wallet.
FOUNDERS: Arshan Dabirsiaghi, Jeff Williams; CEO: Alan Naumann
EQUITY RAISED: $122 million
ESTIMATED 2018 REVENUE: $25 million
LEAD INVESTORS: Acero Capital, Battery Ventures, General Catalyst, Warburg Pincus
In 2010, software security analyst Jeff Williams, 52, started dedicating resources at his consultancy, Aspect, to developing a program that would automate software security analysis. In 2014, he and former Aspect analyst Arshan Dabirsiaghi, 36, founded Los Altos, California-based Contrast Security to monitor the code within running apps and directly notify developers of potential vulnerabilities. “The work that previously had to go through security experts now goes directly to developers,” says Dabirsiaghi, now the company’s chief scientist. In 2016, the company brought in an outside chief executive, Alan Naumann, formerly CEO of online fraud detection startup 41st Parameter, to expand the business.
FOUNDERS: Lior Div (CEO), Yossi Naar, Yonatan Striem-Amit
EQUITY RAISED: $189 million
ESTIMATED 2018 REVENUE: $50 million
LEAD INVESTORS: CRV, Lockheed Martin, Softbank, Spark Capital
Cofounders Lior Div, Yossi Naar, and Yonatan Striem-Amit met during their service in the Israel Defense Forces’ elite intelligence unit, Unit 8200, fertile ground for many high-tech startups. While working on cybersecurity in the military, they came up with the idea for Cybereason, a cloud-based cybersecurity platform specializing in continuous monitoring and response to advanced cybersecurity threats. The company launched in 2012, and relocated from Israel to Boston the next year. “You provide value by helping a big organization not to be in the news as someone that gets hacked,” says Div, 41.
FOUNDERS: Paras Chitrakar, Jason Wilk (CEO), John Wolanin
EQUITY RAISED: $13 million
ESTIMATED 2018 REVENUE: $19 million
LEAD INVESTORS: Mark Cuban, Section 32
As a college student at Loyola Marymount University, Jason Wilk, now 34, blew through his budget, collecting overdraft fees. Wilk, an avid “Redditor,” saw that overdraft fees are a common complaint among users. So in 2016, he founded Dave, short for David, who beat Goliath, which Wilk sees as the big banks. The app tracks expenses and warns when a user’s account is in danger of being overdrawn. It hit a nerve: Dave was Apple’s “app of the day” in April 2017, and has been downloaded nearly 10 million times in two years. “Entrepreneurs can keep their ear to the ground for the next idea,” Wilk says. “Any idea that can be Reddit tested is a good place to start.”
FOUNDERS: Blake Murray (CEO), Alex Bean
EQUITY RAISED: $257 million
ESTIMATED 2018 REVENUE: $8 million
LEAD INVESTORS: Insight Partners, New Enterprise Associates, Pelion Venture Partners
Expense tracking service Divvy is taking on Concur and Expensify by offering its budgeting, fraud detection, and spend management tools for free. Instead of charging per user, Lehi, Utah-based Divvy gives businesses custom Mastercards and takes a cut of merchants’ fees to the bank when people make purchases. Founders (and high school buddies) Alex Bean and Blake Murray, both 35, have won over more than 3,000 corporate customers so far, including WordPress, Evernote and Qualtrics.
FOUNDERS: Luis von Ahn (CEO), Severin Hacker
EQUITY RAISED: $108 million
ESTIMATED 2018 REVENUE: $36 million
LEAD INVESTORS: CapitalG, Kleiner Perkins, Union Square Ventures
The world’s most popular digital language-learning tool, seven-year-old Duolingo has 28 million monthly active users. Most use the free version of its gamified courses. Revenue, largely from subscription fees from ad-free Duolingo Plus, is expected to double this year. CEO Luis von Ahn, 39, is a 2006 winner of a MacArthur “genius” grant and a former Carnegie Mellon computer science professor. Before founding Pittsburgh-based Duolingo, he sold two inventions to Google, including reCAPTCHA, the software that spits out the squiggly lines you type to alert a website that you are not a bot. An immigrant from Guatemala City who says learning English transformed his life, he’s driven to offer free language education to the masses. For our feature on Duolingo, click here.
FOUNDERS: Marcelo Cortes, Daniele Perito, Max Rhodes (CEO)
EQUITY RAISED: $116 million
ESTIMATED 2018 REVENUE: $100 million
LEAD INVESTORS: Forerunner Ventures, Khosla Ventures, Lightspeed Venture Partners, Y Combinator
In a bid to help mom-and-pop stores survive in the age of Amazon, Faire wants to take the risk and hassle out of wholesale purchasing. The San Francisco-based company helps retailers discover and buy new products online, and will accept free returns from them within 60 days for items that don’t sell. Today, it offers 5,000 brands to 35,000 stores. CEO Max Rhodes, a 32-year-old former Square employee, came up with the idea after he started working with a New Zealand-based umbrella brand and spent thousands of dollars to sit at a tradeshow booth to convince U.S. store owners to stock the high-end umbrellas.
FOUNDERS: Dylan Field (CEO), Evan Wallace
EQUITY RAISED: $83 million
ESTIMATED 2018 REVENUE: $3 million
LEAD INVESTORS: Greylock, Index Ventures, Kleiner Perkins, Sequoia
Figma wants to move design online, casting aside the old model of software downloads and siloed creation in favor of a browser-based tool where designers can work and collaborate together. Founders Evan Wallace, 29, and Dylan Field, 27, met at Brown University—Wallace graduated, Field dropped out with a Thiel Fellowship—and launched the San Francisco-based company in 2012. Five years later, Figma started charging professionals to use its product. (Individuals are still free.) Today, professionals pay $12 per editor per month and businesses $45 per editor month to use Figma. More than 5,000 teams, at companies like Microsoft, Volvo, Uber and Square, are users. “Design is like this viral infectant because once your competitor is well-designed, you have to be well-designed, otherwise you’ll be disrupted,” says Field.
FOUNDERS: Arun Chandrasekaran, Matt Elenjickal (CEO)
EQUITY RAISED: $101 million
ESTIMATED 2018 REVENUE: $16 million
LEAD INVESTORS: August Capital, Bain Capital Ventures, Hyde Park Venture Partners
Matt Elenjickal, 37, a logistics geek with an MBA from Northwestern University’s Kellogg School of Management, founded FourKites in 2014 to help companies know where their deliveries are, when they’ll arrive and what’s going on along the way. Its predictive supply-chain management software is now used by more than 260 of the world’s top shippers — and upwards of 500,000 loads per day — including Best Buy, Kraft Heinz, Nestlé and Smithfield Foods. “If you are a shipper, once the truck leaves your facility you have no idea what is happening,” Elenjickal says. “That is how supply chains are run even now without a solution like FourKites. You cannot compete against Amazon.”
FOUNDERS: Mathilde Collin (CEO), Laurent Perrin
EQUITY RAISED: $79 million
ESTIMATED 2018 REVENUE: $16 million
LEAD INVESTORS: Sequoia, Uncork Capital
Mathilde Collin, an alumna of Forbes’ 30 Under 30 list, got the idea for Front while at her first job after graduate school. “I saw how much time was wasted with people sorting through their emails,” she says. So in 2013, she launched the San Francisco-based startup to help companies become more productive with a shared email inbox that incorporates Facebook, Twitter and SMS, and encourages team collaboration. Today, Front has 5,000 customers including Shopify, MailChimp and Stripe.
FOUNDERS: Sung Ho Choi, David Gandler (CEO), Alberto Horihuela
EQUITY RAISED: $145 million
ESTIMATED 2018 REVENUE: $74 million
LEAD INVESTORS: 21st Century Fox, Northzone, Sky
David Gandler, 44, a longtime network sales exec, launched FuboTV in 2015 to tap into pent-up demand in the United States for overseas soccer leagues. FuboTV offered live streams of soccer channels such as GolTV and Benfica TV to start, then expanded programming through deals with beIN Sports and Univision. Today, New York-based FuboTV is generally a cheaper alternative to cable (starting at $54.99 a month) that offers more than 90 channels.
FOUNDERS: Chris Clark, Stuart Landesberg (CEO), Jordan Savage
EQUITY RAISED: $213 million
ESTIMATED 2018 REVENUE: $104 million
LEAD INVESTORS: Bullpen Capital, General Atlantic, Lone Pine Ventures, Mayfield Fund, Norwest Venture Partners, Serious Change
Ask Grove Collaborative CEO Stuart Landesberg, 34, who his typical customer is, and he’ll give you a specific answer: “A 29-year-old mother of two working as a substitute teacher in Lawrence, Kansas.” Even in the age of Amazon, Grove has carved out a $104 million niche in e-commerce by selling natural products, from laundry detergent to sponges, in easy-to-order shipments. Around 60% of its revenue comes from products not sold on Amazon, says Landesberg. But he wants to do more than sell Seventh Generation or Method soaps online. In 2016, Grove started to manufacture its own all-natural products that now make up nearly 50% of its sales. The key? Designing products that are easier to ship. Its glass cleaner, for example, is highly-concentrated and smaller than a tube of toothpaste.
FOUNDERS: Augusto Marietti (CEO), Marco Palladino
EQUITY RAISED: $71 million
ESTIMATED 2018 REVENUE: $5 million
LEAD INVESTORS: Andreessen Horowitz, CRV, Index Ventures, New Enterprise Associates
Kong acts as a gatekeeper to companies’ APIs (code developers use to build apps) and monitors how often they’re used. Augusto Marietti, 31, and Marco Palladino, 30, launched the company out of a garage in Milan, where they both attended university, and were constantly flying back and forth to Silicon Valley to fundraise. “At this stage, we barely had enough money to eat,” Marietti says. “We definitely lost a few pounds when we were first starting up.” Now based in San Francisco, Kong has successfully penetrated the enterprise market with 130 customers that include SoulCycle, Yahoo Japan and WeWork.
FOUNDERS: Jack Altman (CEO), Eric Koslow
EQUITY RAISED: $27 million
ESTIMATED 2018 REVENUE: $7 million
LEAD INVESTORS: Shasta Ventures, Thrive Capital
Lattice founders Jack Altman, 30, and Eric Koslow, 28, learned first-hand the impact of work culture while working at startup Teespring, which sells custom t-shirts. In 2015, they decided to do something about it, starting Lattice. The San Francisco-based company’s human resources software uses surveys to shift the focus of performance management from employee evaluation to career development. Today, Lattice works with 1,300 customers, including Coinbase, Instacart, Slack and WeWork. “Employees are looking for more meaning from work than ever before, and have more visibility into and access to other jobs than ever before,” Altman says. Lattice helps their employers step up.
FOUNDERS: Elton Chung, Lidia Yan (CEO)
EQUITY RAISED: $125 million
ESTIMATED 2018 REVENUE: $46 million
LEAD INVESTORS: Brookfield Ventures, China Energy Group, Sequoia
Cofounded by husband and wife team Elton Chung and Lidia Yan in 2015, Los Angeles-based Next Trucking is moving freight brokerage online. While other startups like Convoy and Uber Freight move cargo from point A to point B, Next Trucking focuses on drayage, or the “first-mile” of transferring goods from port to warehouse. “Drayage is a lot more complicated because it involves terminals and ports,” says Yan, 38. As a result, Next Trucking has doubled revenue every year since 2016, reaching $46 million in 2018. Yan forecasts revenue will hit $120 million this year, helped by large contracts with retailers Dollar General, Rite Aid and Steve Madden. For our feature on Next Trucking, click here.
FOUNDERS: Jack Conte (CEO), Sam Yam
EQUITY RAISED: $166 million
ESTIMATED 2018 REVENUE: $35 million
LEAD INVESTORS: Freestyle Capital, Glade Brook Capital Partners, Index Ventures, Thrive Capital
Musician turned entrepreneur, Jack Conte, 35, wants to break the “starving artist” archetype by helping creators earn a regular income. “Deciding to be an artist shouldn’t have to be a difficult conversation,” says Conte. “It should feel like a viable career choice.” Using Patreon, artists offer exclusive experiences in return for contributions from their subscribers or “patrons.” HBO’s Issa Rae, Humans of New York founder Brandon Stanton and comedian Heather McDonald are some of the creators currently using Patreon and by 2019, the company expects to pay out more than $1 billion to its users.
FOUNDERS: Denis Mars (CEO), Simon Ratner
EQUITY RAISED: $14 million
ESTIMATED 2018 REVENUE: $1 million
LEAD INVESTOR: Kleiner Perkins
The Proxy app is like having a set of keys on your smartphone: Your profile’s signal gives you access to any building where you’re registered, eliminating the need for traditional ID cards and keys. It’s a straightforward idea, but Australian-expat founders Denis Mars, 42, and Simon Ratner, 39, are confident that they’ve just scratched the surface of its potential. So far, San Francisco-based Proxy has proven popular with commercial real estate clients like WeWork. Mars and Ratner now hope to expand their technology (which includes the app, management platform and signal-reading hardware) to identity verification for ride-sharing and event check-in.
FOUNDERS: Ofer Bengal (CEO), Yiftach Shoolman
EQUITY RAISED: $147 million
ESTIMATED 2018 REVENUE: $50 million
LEAD INVESTORS: Bain Capital Ventures, Francisco Partners, Goldman Sachs, Viola Ventures
Israeli tech veterans Ofer Bengal and Yiftach Shoolman set up a fast-database service, in 2011, to help businesses looking to speed up responses on their apps. Redis Labs relies on what’s known as NoSQL, an alternative form of compiling data that is faster than traditional models. That lightening-fast processing speed has helped it sign on FedEx, Mastercard and other corporate behemoths. To scale up quickly, the Mountain View, California-based company offered a free, open-source version to hook developers. In 2013, it rolled out a paid version with costs starting at $5 per month per gigabyte. “You can’t do without open source if you want rapid adoption,” says Bengal.
FOUNDERS: Shivaas Gulati, Josh Hug, Matt Oppenheimer (CEO)
EQUITY RAISED: $312 million
ESTIMATED 2018 REVENUE: $80 million
LEAD INVESTORS: Bezos Expeditions, DFJ Venture Capital (now Threshold Ventures), Generation Investment Management, Naspers’ PayU, QED Investors, Stripes Group
Remitly is taking on Western Union with lower fees — estimated 1.5% on average vs. the money-transfer giant’s 5%. Matt Oppenheimer, who had worked for Barclays in Kenya, and his cofounders launched the business in 2011 to help people in developed nations like the U.S. and Australia send money cheaply to relatives in developing countries like Mexico and the Philippines. Today, Remitly serves 60 countries and processes $6 billion a year in money transfers, about 1% of the nearly $700 billion remittance market. Already one of the largest fintech firms targeting immigrants, the Seattle startup’s long-term goal is to branch out into other financial services, potentially including credit cards, personal loans and auto loans.
FOUNDERS: Xuan Yong (CEO), Mike Witte
EQUITY RAISED: $94 million
ESTIMATED 2018 REVENUE: $21 million
LEAD INVESTORS: Bedrock Capital, Founders Fund, Quantum Energy Partners
There are nearly 1,000 rigs drilling for oil and gas in the U.S. Each well requires the input of dozens of service companies and workers — everything from high-horsepower compressors for fracking, to miles of steel pipe, and millions of gallons of water and truckloads of sand. Cofounder Xuan Yong, formerly of Citadel and D.E. Shaw, believes RigUp can improve on the good ol’ boy network by more efficiently connecting the “hyperfragmented” market of roughnecks, engineers and business owners with the big oil companies that call the shots. RigUp pre-vets workers and vendors, and creams an estimated 4% off every contract made via its online platform. Yong isn’t worried about machines invading the oilpatch. “Even with A.I. there will be demand growth for labor,” he says. “Field tickets are still signed on paper and stamped.” For now.
FOUNDERS: Stephen Hawthornthwaite, Roth Martin (interim CEO)
EQUITY RAISED: $42 million
ESTIMATED 2018 REVENUE: $140 million
LEAD INVESTORS: Goldman Sachs, Lightspeed Venture Partners
Founders Roth Martin, a former art gallery owner, and Stephen Hawthornthwaite (aka “Hawthy”), a former investment banker, launched the footwear brand after listening to their wives complain about the lack of stylish, comfortable shoes. Rothy’s 3D-knitted round-toe and point-toe flats, made from recycled plastic water bottles, have gained cult status. In just three years, it expanded rapidly with direct-to-consumer sales online, reaching revenue of $140 million last year. For our feature on Rothy’s, click here.
FOUNDERS: Phillip Liu, Karthik Rau (CEO)
EQUITY RAISED: $179 million
ESTIMATED 2018 REVENUE: $25 million
LEAD INVESTORS: Andreessen Horowitz, CRV, General Catalyst, Tiger Global Management
SignalFx monitors cloud infrastructure in real time for companies like Yelp, Shutterfly and HubSpot. In 2013, Karthik Rau, 41, who previously worked at tech startups LoudCloud and VMware, founded the company with ex-Facebook software architect Phillip Liu, 51. While competitors collect and query data in batches every two to three minutes, SignalFx evaluates and alerts users to anomalies in two to five seconds. “The difference between getting reliable alerts within seconds and getting them in minutes is the difference of seamlessly dealing with an issue,” says Rau. “Or having all of your users on Twitter complaining.”
FOUNDERS: Paul Dabrowski (CEO), Michael Dabrowski
EQUITY RAISED: $157 million
ESTIMATED 2018 REVENUE: $20 million
LEAD INVESTORS: Founders Fund, 8VC
Gene-editing tool Crispr has unleashed a gold rush for new products made possible by cheaply and easily editing DNA. Synthego is cashing in by selling the genomic equivalent of pickaxes, shovels, maps and other tools. Its ready-made and custom kits allow researchers in academia and the private sector to rapidly develop gene-edited products, including new medical treatments. Its founders, brothers Paul and Michael Dabrowski, 34 and 38, previously worked at SpaceX as engineers and drew on that experience to bring a new way of thinking to biotech.
FOUNDERS: Umar Afridi (CEO), Sid Viswanathan
EQUITY RAISED: $13 million
ESTIMATED 2018 REVENUE: $48 million
LEAD INVESTOR: Initialized Capital
If you buy birth control from Nurx or hair-loss products from Hims, behind-the-scenes pharmacy Truepill will actually fill and deliver your prescription. The three-year-old startup’s founders Umar Afridi, 37, a former retail pharmacist, and Sid Viswanathan, 35, who previously worked at Johnson & Johnson and LinkedIn, see a growing market in bringing technology and efficiency to pharmacy. Although Truepill started with direct-to-consumer brands, it’s now making a bigger play to bring on corporate customers with pricey, specialty medications.
FOUNDERS: Benjamin Bercovitz, Filip Kaliszan (CEO), James Ren, Hans Robertson
EQUITY RAISED: $59 million
ESTIMATED 2018 REVENUE: $20 million
LEAD INVESTORS: First Round, Meritech, Next47, Sequoia
While many startups have tackled the “smart home” with varying degrees of success, Verkada has exploded in shy of two years on the market by offering big businesses, municipalities and schools a cloud-based system that combines hardware and software to detect movement and easily store and share surveillance streams. In 2019, the company founded by three Stanford graduates and the former cofounder of Meraki (a cloud startup since acquired by Cisco) signed on the city of Memphis — a nearly 1,000-camera contract — Juul Labs and Newtown Public School District, the district of the 2012 Sandy Hook Elementary School shooting tragedy.
Additional reporting by Susan Adams, Elisabeth Brier, Dawn Chmielewski, Lauren Debter, Michael del Castillo, Jillian D’Onfro, Christopher Helman, Jeff Kauflin, Alex Knapp, Alex Konrad, Christian Kreznar and Monica Melton
Cover Photographs by Tim Pannell for Forbes | Illustrations by David Wilson
Australian casino mogul James Packer agreed to sell nearly 50% of his remaining stake in Crown Resorts Limited to Macau billionaire Lawrence Ho’s Melco on Thursday. The deal will close in two tranches—one in early June and the other in late September.
Melco also said that it’ll pursue a larger stake in Crown as well as board seats, pending regulatory approvals. The $1.22 billion (A$1.75 billion) purchase price is a tiny premium—not even 1%—over Crown’s closing price Thursday. On Friday, Crown’s stock dropped 3% on the Australian Securities Exchange from the previous day.
Forbes calculates Packer’s net worth at about $3 billion, based on the $850 million he’ll likely receive (net of taxes), and Friday’s closing stock price. That’s a drop of $600 million since January when we published our ranks of Australia’s Richest. At the time he was the nation’s ninth richest person, worth $3.6 billion.
It’s quite a comedown for Packer, whose father was considered one of Australia’s most successful entrepreneurs. Kerry Packer, who died in 2005, owned Australia’s leading television network and the country’s biggest swath of magazines. Kerry had inherited a media company from his father, Sir Frank, and grew it into a broadcasting and publishing empire worth $5 billion. James Packer seemed up for the job, and was initially lauded for reinventing his father’s empire by selling most of the Packer family media assets to a Hong Kong-based private equity firm for $4 billion across two deals in 2006 and 2007 and moving into casinos. A decade ago, James Packer was the nation’s richest person. Five years ago, his net worth peaked at $6.6 billion. Today he’s worth less than half that.
This is not the first time Melco and Crown have done business. The two companies partnered in 2004 to develop and operate casinos in Macau. The partnership ended in 2017 when Packer sold his Macau assets back to Melco to focus on his Australia-based casinos.
Lawrence Ho, CEO of Melco, who like Packer is the son of a powerful, legendary entrepreneur (97 year old Stanley Ho, who retired last year), is currently worth $2.1 billion, according to Forbes. Most of his net worth is tied up in Melco, in which he owns an approximate 54% stake.
Currently, the biggest project for Crown is its $1.5 billion casino in Sydney, which is slated to open in 2020.
Earlier this year Packer tried to cash out of Crown. In April, Wynn Resorts, which was founded by billionaires Steve and Elaine Wynn, explored taking over Crown for $7 billion. But hours after Crown announced the proposed deal, Wynn Resorts issued a statement saying it was off due to “premature disclosure.”
Packer stepped down from Crown Resorts’ board in March 2018. Four months later, he resigned from the board of his family company Consolidated Press, which he and his sister inherited from their father.
According to the Sydney Morning Herald, Packer has been seeking a lower-profile life since stepping down from Crown’s board. “He definitely wants an easier life, and a less-stress life,” one colleague told the paper. “No doubt about that.”
Packer’s board exits were reportedly due in part to mental health issues, following a tough year when Crown exited its Macau and U.S. gambling investments.
Packer, who has three children living in Los Angeles with his ex-wife, Erica Packer, also finances Hollywood films via his RatPac Entertainment, which he cofounded with Brett Ratner, who directed the Rush Hour film series and X-Men 3: The Last Stand.
If you want to know the best place to keep up with technology for your business, follow my weekly tech roundups for entrepreneurs each week. You’ll learn because I’m always learning.
So what have I learned? Businesses that invest in the right technologies are assuring future growth and success. I’ve also learned that there are a few apps, services and technologies – about ten categories in all – that are critical for small businesses in 2019. So in honor of National Small Business Week, I thought it would be helpful to share.
Customer Relationship Management
Don’t be fooled by CRM. People like to complicate this stuff and it’s not that complicated. It’s just a database of every person and company who you do business with – from prospects and customers to vendors, suppliers and partners. A great CRM system will integrate with your email and calendars and ensure that nothing falls the cracks and everyone in your company is sharing the right information. It will be mobile, include workflows and automation and integrates with tons of other great apps to do marketing and other functions. If implemented the right way (which is easier said than done) it will be an instrumental asset to your organization. There are many great CRMs for small businesses. I recommend looking at Salesforce.com, Microsoft Dynamics and Zoho CRM.
Managed Service Providers
If your inventory, order entry or other business critical application is older or located on your internal server you need to move it out of your office and into the hands of a managed service provider. Well-managed service providers will ensure that your data is secured as best possible and will likely have better security tools that you have internally. Your applications can be accessed by your team from anywhere and on any device. Many of them rely on public cloud services from Amazon, Google and Microsoft and that’s fine. With internet speeds hitting 5G, a well-managed service provider will deliver the performance, reliability and accessibility of your data at a cost that makes sense. Recommended providers include Right Networks, CloudJumper or any number of information technology firms.
If your accounting application is located on your server, it won’t be for long. That’s because most accounting vendors are moving quickly to the cloud. It makes sense for them, and for you. You pay a monthly fee and they get a revenue stream. In return, the software provider can provide faster support, upgrades and technical services. Cloud applications are also much easier to integrate with each other. Today’s cloud accounting apps provide the added benefit of doing invoicing, cash receipts or retrieving reports from any device, anywhere. It’s a crowded field of cloud accounting options so do your due diligence and lean towards good companies with big communities. I see QuickBooks Online, Xero, and FreshBooks being used often by business owners.
Back in the day, there wasn’t much you could do with a scanned invoice or document other than file it away. But with today’s Optical Character Recognition technology there’s a growing crop of applications that can extract data from any scanned document – from vendor invoices to airline receipts – and put it in a format so that someone in your office can easily review and then import into most popular accounting applications. This saves time, improves accuracy and cuts overhead. Recommended applications: Bill.com,EntryLess, Expensify.
HR platforms are exploding and, in my opinion, any company with more than five employees should have one. Why? Because they’re affordable and with a good HR platform your employees will be able to – usually through a mobile app – track payroll, update forms, schedule vacation, alert for sick days and even manage their performance reviews. The more your employees use the application, the less administrative time will be needed by your office staff – and that means less overhead and more productivity. Check out: Paychex, Gusto and BambooHR.
Back in the day, there were telephone calls, instant messaging, text messaging, emailing and lots and lots of yelling. Yes, we’re still yelling. But the good news is that today’s office applications have brought all those other things together under one umbrella so that your employees can conduct their communication, document management and collaboration activities – including video calls, file storage and sharing, messaging as well as alerting and reminders – from any device and wherever they are. Not only that, but today’s collaboration and communication systems have powerful searching tools to find old conversations and exchanges. The systems can even be configured for outsiders to access too. Applications that focus on collaboration include Microsoft Office 365, Google G-Suite, Box.
Our company, like many small businesses, uses contractors and employees who frequently work out of the office. The thought of maintaining an on-premise phone system seems expensive…because it is. That’s why, for the past ten years, we’ve been using a virtual phone service. Our service provides a toll-free number, dial by name directory, voicemail for all users including transcription and archive recordings and…well, you get it: a total phone system (even hardware) that makes my small business look like a big business. I pay by the mailbox (about $12 per month) and love it. Recommended applications: Grasshopper, VirtualPBX and Ooma.
E-Commerce and Payment
If you’re in retail then please pay attention to this word: convergence. It means getting a point of sale system that not only works in your store but works online too. That’s because you want to sell your products both from your store and over the web because that’s what successful retailers are doing to thrive. The best point of sale systems not only use tablets (a must for good customer service) and integrate with popular payment services, but they also provide the ability of setting up an ecommerce site that relies on the very same database you’re using in-store. Recommended applications: Paypal,Square, Shopify,Magento.
Yeah, yeah, I’m leaving some stuff out. Like email apps (but don’t we all have them by now?) and project management solutions such as Basecamp and Asana.
There was once a time when everyone in my company would be saving multiple versions of multiple documents and spreadsheets on their laptops, desktops and our servers. That…was a mess. But not today. Today, we all save to a cloud storage service which synchronizes the files (that we choose) to our respective devices. Everything is updated and I no longer fear what happens if someone leaves their device on the subway. To me, a business without a cloud storage service is a business that’s losing money. Applications that focus on this space: Dropbox,Microsoft OneDrive, Google Drive.
Ransomware has become a billion-dollar business and that makes sense: it’s finally a way for clever hackers to actually make money with their malware. We read about the stories of hotels, transit systems and city governments brought to their knees by security breaches like this, but we don’t hear of the thousands of small businesses that are also affected. To protect yourself you need to use a good cloud backup service, keep your operating systems updated and use a good security application in your company. Recommended applications: Carbonite (for backup), Malware Bytes,Barracuda.
What else am I missing? You tell me and maybe I can expand this list in a future column. In the meantime, take a moment to review the techs, services and apps you’re using in your business. Have you got all the bases covered?
Author’s Note: I have not been compensated by any of the companies listed above to be mentioned in this article.
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.
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.
Anthony Martin, 36, has created financial freedom for himself that many people can only dream of.
He generates $1 million in annual revenue at Choice Mutual, a one-man insurance agency he founded, by selling a very specialized niche product: final expense insurance. It covers burial expenses, so someone’s family doesn’t have to pay the costs, with a payout that is typically in the range of $10,000 to $30,000.
Six years ago, Martin’s life was very different. Working as a manager at an insurance agency in Roseville, Calif., Martin wished he had more control over how things were done. He eventually realized what he really wanted was to be his own boss. In 2013, he took a leap of faith and started the agency from his home.
Martin is one of a fast-growing cohort of entrepreneurs who are breaking $1 million in non-employer businesses, the government’s term for those that have no full-time employees except the owners.
The number of nonemployer firms that generate $1 million to $2.49 million in revenue rose to 36,161 in 2016, up 1.6 percent from 35,584 in 2015, according to the U.S. Census Bureau. That number is up 35.2% from 26,744 in 2011.
So how did Martin grow his agency to $1 million? Recently, he shared his strategies with me. Many of his approaches are instructive for anyone who is selling a consumer product or service online.
Here’s how he pulled it off.
Focus on an area you already know well. It’s easiest to get a running start in a new business if you have already worked in the same industry. By the time he went into business, Martin had already racked up years of experience selling final expense insurance, so there was no need to get a crash course. It was easy for him to explain his product to customers because of that. “I have a very thorough understanding of all of the options out there,” he says.
Find an efficient way to attract customers. Although Martin knew his product well, he didn’t have experience in marketing, so he sought outside help. He hired a company called SellTermLife.com to build a website for him that would rank well in Google and help him get leads, through a customized marketing plan. He put up the website in June 2016.
Even with expert assistance, it was slow going at first. “It took me six months before I got a single lead from Google,” he says. Nonetheless, Martin kept showing up at his desk every day to build up his website. “You’re really going for a long-term play,” he says.
It took stamina to stay committed during those early months. The battle to get market share wasn’t the only one he was waging. For entrepreneurs, he believes, the real fight is to keep showing up for your business, even when it would be easy to slack off. “The majority of the fighting you’re doing is completely against yourself,” he says.
After Martin got his first lead, his momentum accelerated. Two months after that, he started getting daily leads through his site—and now it brings in many more. “It feeds me a never-ending flow of ready-to-buy customers,” says Martin.
Offer top-quality content. In working on his marketing plan,Martin had learned from the team at SellTermLife.com that it was important to publish high-quality, informative content to attract people to his site. As readers clicked on practical articles he wrote on topics such as state-regulated life insurance, life insurance for 89-year-olds and buying insurance for your parents, the site gradually built a strong organic rank in Google.
Here again, sticking with a niche subject he knew served Martin well. “You cannot find another website that sells this type of insurance that has anywhere near the level of in-depth, accurate information about this product,” says Martin.
Creating robust content took a serious investment of time, given that Martin did not have a writer on retainer. Every day during the week and for five to eight hours on the weekends, he’d create articles that address commonly-asked questions about final expense insurance. The articles attracted people who were already seriously interested in his product and also helped him to “own” certain search-term keywords, including “long-tail” phrases—such as questions customers might type into a search engine.
To figure out which keywords mattered most, Martin researched which ones were most commonly used, relying on tools such as Google’s keyword planner and SEM Rush. He also tapped his own knowledge of the field. “After selling this type of insurance for so long, I know the words people use,” says Martin.
Automate your leads. Martin’s site enables people to “request to apply” for the insurance by filling out a form. By the time a prospect has filled out the form, Martin knows he or she is serious.
To avoid losing track of these leads, Martin set up his site so the leads automatically go to his customer relationship management (CRM) system. Once it feeds him their contact information, he reaches out by phone, prioritizing the newest leads. “The person who has submitted a lead most recently is always the best person to call,” he says.
Thanks to this system, Martin never has to chase anyone down to get them to listen to a sales presentation. “I’m in a really unique situation in the world of selling insurance,” says Martin. “I actually don’t really sell anymore. For all intents and purposes, I’m more of a cashier. I just take orders.”
Embrace remote work. Many insurance agents spend a good part of their day driving to and from appointments with customers. Not Martin.
When customers decide to buy, Martin guides them by phone through a remote application process that the insurance companies have put in place. Sometimes customers sign documents using a program such as DocuSign. Other times, they use a voice signature on the phone.
Working virtually in this way helps Martin make the most of his time every day. “I’ve never met a person face to face to process the deals,” he says. “It’s all done remotely.”
Stay focused. Some of Martin’s contacts have recommended that he sell Medicare supplements or cancer plans. He always says no. “The reason I’m really successful in this space is I have been hyper-focused at being the most expert authority you can imagine on this type of insurance,” says Martin. When he gets an inquiry from someone who wants to buy insurance outside of his niche, he refers the prospect to a trusted industry colleague.
Martin does not look for reciprocal referrals, finding that leads that arrive this way are generally not as inclined to buy as the prospects who come in through his own website. “Right now if I had to choose between serving a customer who has said ‘I’m ready to apply. Please sign me up,” or a referral who has a question, I’m not going to make as much money from a referral,” he says. “That’s why I tell people ‘Don’t refer people to me.’ I allocate my working hours to people who are ready to sign up.”
One thing that helps Martin attract business is having a large number of positive online reviews. He requests reviews from customers automatically using TrustPilot’s automated system.
Keep overhead low Martin started out working from home in Roseville, Calif., but when his website traffic started to increase dramatically in March 2017 and he saw the business’s full growth potential, he realized there would be tax advantages to locating to Nevada, which has no state income tax. Licensing costs were also lower. He rented an office there for $2,500 a month.
Having the space is important because soon, Martin believes, he’ll need to hire other agents. “I have so much web traffic and so many leads that if I want to continue to monetize a lot of what is possible, I will have to hire agents to process those deals as well,” he says.
In the meantime, Martin keeps the rest of his overhead to about $500 a month. That covers his errors & omissions insurance, licensing fees and CRM subscription.
Protect your most precious resource. In a one-person business, where you have no one to back you up, staying healthy is essential.
Although Martin works long hours as he grows his business, he always finds time to work out. Rising at 4:30 a.m. every morning, he goes to a gym where he can do strength training and play basketball. Then he heads home for breakfast and starts making phone calls from his office around 7:30 a.m.
On the weekends, Martin and his wife, Christelle, love to enjoy the outdoors with their German Shepherds, Bear, and his new adopted sibling, eight-week-old Olive. “I could definitely sleep more,” Martin says—but his life is too full of good things at the moment to spend much time hitting the snooze button.
(Update 10.16 a.m., ET) – France’s leading billionaires and companies have rallied to pledge $670 million (€600 million) to restore Paris’ Notre Dame Cathedral following a devastating fire on Monday evening.
Francois-Henri Pinault, chairman of Kering (the parent company of Gucci), and his billionaire father, Francois Pinault, announced on Tuesday they would donate $113 million (€100 million) via their family investment company, Artemis. The Arnault family, owners of luxury goods group LVMH, also pledged $226 million (€200 million) after French President Emmanuel Macron called for donations to rebuild the French national icon.
“The Arnault family and the LVMH Group, in solidarity with this national tragedy, are committed to assist with the reconstruction of this extraordinary cathedral, symbol of France, its heritage and its unity,” the family said in a statement.
“This tragedy is striking all the French people, and beyond that, all those attached to spiritual values,” Francois-Henri Pinault said in a statement. “Faced with this tragedy, everyone wishes to give life back to this jewel of our heritage as soon as possible.”
French charity Fondation du Patrimoine has launched an international appeal to raise funds for the UNESCO World Heritage site that was partially destroyed in Monday’s fire. Patrick Pouyanné, chief executive of Total, tweeted the French oil giant would contribute $113 million (€100 million) to the fund.
Billionaire Henry Kravis, cofounder of private equity group KKR, and his wife, Marie-Josée Kravis, also announced on Tuesday that they planned to donate $10 million towards the rebuilding.
Paris Mayor Anne Hidalgo thanked firefighters for their work saving the cathedral’s famous bell towers and announced plans for a “major international conference of donors” to raise funds for the rebuilding work. Hidalgo also said Paris already had $90 million (€80 million fund) for the restoration of the city’s churches
Capital Today founding partner Kathy Xu laughs when she talks about her career-making early investment in Chinese e-commerce company JD.com, which began with a late-night meeting with founder Richard Qiangdong in 2006:
“We met at 10 p.m. and we talked until 2 a.m.!” she tells Forbes. “I gave him five times the amount of money that he asked for — I was so worried that otherwise he’d meet with other investors.”
Capital Today managed to become the startup’s sole Series A investor and Xu’s check — $18 million USD — paid off royally as JD swelled into an ecommerce giant, with Xu working closely with Qiangdong along the way, advising him on key hires and company branding. Two years after JD went public in 2015, her firm cashed out returns of $2.9 billion.
A couple years and a handful of new deals later, Xu is making her bold debut on the Forbes 2019 Midas List, ranking in the top 10 venture capitalists in the world in her first year of inclusion (her work has previously been highlighted on Forbes China’s list of top 25 women venture capitalists in China).
This year’s list features 21 investors who are either of Chinese nationality or work for a firm based in China, the largest number ever on the list and a tribute to the growing power of China’s startup and venture capital ecosystems.
Xu says that Capital Today, which manages approximately $2.5 billion, focuses all its energy on companies based in and serving China and has zero interest in looking outside the country.
“It’s a big enough market, the economy is doing well, the entrepreneurship is great, and we’re starting to see real innovation booming for the first time,” she says. “It’s a lucrative market to focus on.”
Xu says that her team disciplines itself to only five or six deals a year in business-to-consumer companies and spends a lot of time with founders that it invests in.
“There’s more and more money here now, so building a connection with the entrepreneur and spending a lot of time with them is more important than ever,” she says, citing proximity as an advantage over out-of-country investors who only make occasional business trips.
Beyond JD.com, other Capital Today portfolio highlights include Chinese gaming company NetEase, discount e-commerce site Meituan-Dianping, classified listings site Ganji.com (which merged with 58.com in 2015), Yifeng Pharmacy, which went public in 2015, and hot snack company Three Squirrels Snack Food.
Other Chinese investors who made this year’s Midas list are Sequoia China partner Neil Shen, who topped the rankings for the second year running, Qiming Venture Partners’ managing partner J.P. Gan, No. 5, and Hans Tung from GGV Capital, No. 7.