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Today, Rover announced that Menlo Ventures has led a new $12m round of financing. As is our style, we participated, but we’re excited to have a new partner to join us, Madrona, and Petco in this fast growing adventure.
Lots of VC firms are once again talking about online marketplaces. Some get it; many don’t. Being systematic about what it takes to build and scale a marketplace effectively and make it an enduring enterprise is difficult.
We learned this dynamic in the early 2000’s with our investment in ServiceMagic. We invested in the company in 1999 during the ascension of the Internet bubble. We loved the two founders, Michael Beaudoin and Rodney Rice, but knew very little about marketplace businesses or the home improvement category. But a lot of people were funding marketplaces and other online “things” in this arena – well over $500 million of VC capital went into the home improvement market alone.
It was an unmitigated disaster for almost every company except ServiceMagic. In 2000, Michael and Rodney cut the business drastically, changed the business model to a lead-fee system, which they pioneered online. By 2003 nearly all of their competitors had failed, the companies that went public pre-bubble were trading sub-$1 / share, but ServiceMagic was growing like crazy and was very profitable.
Before ignoring vanity metrics became trendy, ServiceMagic ignored them. Michael and Rodney were data obsessed, getting hourly reports with key metrics. They understood the different dimensions of the business and were laser focused on drivers of supply and demand in each market they operated. They eschewed slick marketing, were systematic about growing headcount, learned how to master local expansion models, and stayed obsessively focused on the quality of transactions, instead of simply the quantity, moving through the marketplace.
We invest early in the life of a company. While we weren’t the first investor in Rover, when Madrona partner Greg Gottesman called and told me that I had to meet Aaron Easterly, the co-founder of Rover, I happily obliged on my next trip to Seattle. In ten minutes I knew I wanted to back Aaron as he had the same characteristics as Michael and Rodney. And, while after 10 minutes I knew nothing about the dog sitting market, as a dog owner I instinctively understood and appreciated the problem.
So – our first order sort in the case of Rover was Aaron and the team. We loved what we saw. No bullshit. Total quants. Deep domain love. Complete lack of interest in marketing nonsense and overpromotion.
And yes – after a little more exploration it was clear that Rover had a huge addressable market. Current commercial solutions are generally despised and the opportunity for a two-sided marketplace is enormous. Best of all, there are very obvious RAM (remnant asset monetization) dynamics to the marketplace.
Sure enough, a year after our initial investment, our premise for the investment in Rover shows clearly in the data. All of the underlying marketplace metrics – including activation, fill rates, and repeat usage – are accelerating rapidly. Dogs owners trying the service now will spend twice as much monthly as those trying the service 18 months ago. Sitters joining the marketplace now will earn 50 times more money in their first three months than those signing up 18 months ago.
Oh – and Michael Beaudoin from ServiceMagic joined the board last year as one of our outside board members.
If you are a dog owner, or want to be a dog sitter, try Rover out today.
I’ve loved being involved in Orbotix from the very beginning. I got to know Adam and Ian, the founders, even before they got into Techstars. Their original company name was GearBox and they probably wouldn’t haven’t gotten into Techstars except that both Nicole Glaros and I said “we love these guys – fuck it – let’s try a hardware company this time.”
Paul Berberian, one of Adam and Ian’s lead mentors during Techstars joined them as the third co-founder before demo day and we led the seed round shortly after. Orbotix is now 40 people, with hundreds of thousands of Sphero’s out in the wild and being played with, and a new product (currently codenamed 2B) coming out this fall.
The company is on the forefront of a new category I like to call “connected play.” It’s not a static toy, like kids have been playing with since the beginning of time. It’s not a game on a pane of glass like an iPhone or iPad. It’s a dynamic toy that you can play with online, via your pane of glass, or in the real world, with friends, connected together online. And it gets upgraded continually, with new software and new games.
I’ve talked in the past about how I love origin stories. I bet you didn’t know that before there was Sphero, Adam and Ian made an iPhone-based garage door opener well before that was cool and trendy. Enjoy the three minute origin story of Orbotix.
Lots of people talk about being transparent. Lots of companies espouse principles of transparency. Lots of statements start out with “I like to be transparent” or “I’m being transparent when I say …” And several years ago the notion of transparency became the new in thing, especially around the VC and startup worlds.
Most of it is bullshit.
If you want to see real transparency, take a look at Moz’s 2013 Year in Review: More Than You Ever Wanted to Know About Moz, and Then Even More.
I love being an investor in this company.
When Rand Fishkin decided to hand the CEO reins over the Sarah Bird, he wrote Swapping Drivers on this Long Road Trip Together. Or if you want to compare how they did in 2012 to 2013, just read Rand’s post Announcing Moz’s 2012 Metrics, Acquisition of AudienceWise, & Opening of Our Portland Office.
And while Sarah and Rand were disappointed in their off-plan performance of 33% revenue growth, GAAP revenue of $29.3 million, and an EBITDA loss of $5.7 million, as an investor I’m delighted. Given all the things in motion, they and their team have done an amazing job of navigating another step function in the growth and development of the company. They are extremely well positioned on all levels for 2014 – product, strategy, infrastructure, financials, cost structure, and team. And they have huge hearts.
I know transparency is hard. Our legal and regulatory system makes it even harder. Having been on public company boards, I’ve been involved in the endless discussions about level of disclosure. I’m not naive about how the system works. And I know how many people view opacity as a competitive advantage, which is some cases it is.
But when you talk about being transparent, it’s often useful to have a standard of “real transparency” to compare yourself too. I’d put Moz at the top of that list in my book.
I love playing offense.
FullContact is officially in this mode and today announced that they have acquired Cobook with Pot, Ski Passes and Dogecoin. Kaspars Dancis – the awesome CEO of Cobook – has a more seriously titled (and equally serious post) up at COBOOK + FULLCONTACT.
One of my basic strategies as an investor is to use targeted small acquisitions throughout the life of a company. In 2005 Fred Wilson called this approach the “venture rollup” and said nice words about me and it in his post when he said “My good friend Brad Feld is up to his old tricks. Brad is the master of the venture rollup.”
We’ve been investors in FullContact for about 18 months. They’ve got a real business at this point, are growing very fast, and working hard on their mission of creating One Address Book To Rule Them All. If you haven’t tried FullContact’s Address Book, you are missing out. The magic feature of “unified contacts” that they’ve been working on for over a year is up, running, and amazing.
Cobook is a perfect acquisition for us. The Cobook team has developed beautiful Mac and iOS address books. We’ve admired them for a while and decided a few months ago to join forces to have them accelerate our development on other platforms. The full team is moving from Latvia to Denver and is already hard at work integrating FullContact and Cobook.
If you’ve been watching what the companies I’m involved are up to, you saw this move in November when Yesware bought Attachments.me. And you’ll see it from companies I’m involved in again, and again, and again.
One of the super crazy fun companies we are investors in is Betabrand. At this point, half of my new wardrobe comes from them.
They are hunting for a new amazing UI/UX developer. But – to show how much they want someone, they’ve designed an incredibly hideous new look for their site.
They’ve got blink tags, Comic Sans, spinning boxes, Nyan cat cursors, Papyrus, an on fire Under Construction prompt, and really bad color overlays. It reminds me of a Geocities page I once created.
Help our friends at Betabrand out. If you are a UI/UX god or goddess, here’s what they are looking for. And – while you are at it – buy some new disco pants.