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CEO of Riskpulse here. I've been through all of the monetization trenches for weather software and we are now capitalizing on real demand in B2B/enterprise. If either of you guys ever want to connect to talk shop or (in)formally partner or share ideas, let me know: matt@riskpulse.com

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This resonates. We raised just under $2m through a seed round and then were fortunate enough to be able to raise a bridge that deferred any crunch. But then we did 2 other things: we focused our sales, marketing, and product design on the greatest pain within a single industry (instead of 3) and we reduced expenses. Now growth is great and we are very close to being able to say that raising money is completely optional indefinitely, and no matter what investors do or don't decide, we will be fine. A wonderful feeling but the challenge to get to that next level has also been nearly inexplicable. Great post-mortem.

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I think you're underestimating how hard all those non-coding skills are. When you laundry list "UI, branding, PR, etc" I can almost see you doing a hand-wavy motion. The reality is, anyone that's truly awesome at non-technical things deserves some equity for the 10X-100X growth they will help bring to the business. The truth is you can be 8 years in, but only 10% of the way there.

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I say this as a person who has worked as a front end engineer for a fair bit of time that a handsome-looking salary (like, say, ~200k) is more than good enough for great work on the laundry list of non-tech tasks of a startup in the beginning stages. Couple that with the fact that right now this is a tech engineer's market, not the business/frontend person's -- even the great ones are a dime a dozen out there.

> The truth is you can be 8 years in, but only 10% of the way there.

I don't think this is true for tarsnap. tarsnap at this moment is a finished application people can get right now. The technology component of the company is completely solid, not in need of any repair or improvement, it's only the UI and other things that have to be improved. Colin's gotten it more than 80% there.

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> The technology component of the company is completely solid

But the technology component is only ~2/10ths of a company.

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On a related note, we are adding earthquakes to Riskpulse.com this week. It's amazing how much scattered and rich data there is, but it's just that ... scattered.

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Hype is harder to create than a product? For what set of products?

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Or an acquisition.

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If you're interested in building risk-based applications, come talk to me about Pulse OS and Riskpulse - http://riskpulse.com/offerings/

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Is there any way to know with any degree of confidence whether something is a flash in the pan or a viable company? It isn't just about growth is it?

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It helps to know the founders and internal metrics, which nobody here does. I honestly don't know if Snapchat is worth $3B or not, but I certainly wouldn't dismiss them.

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Snapchat isn't being valued on revenues or potential monetization, but rather as a piece of someone else's (eg Facebook's) business model.

In the Steve Blank sense I don't think it's even right to call Snapchat or any of these "growth looking for a home" things "startup"s. They aren't actually searching for a business model. Their plan is to grow until they dock with the Deathstar.

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I don't have the reference handy, but somewhere Steve Blank basically says, "If there's another bubble, ignore all this advice. Building a real business only makes sense when the market is sane."

The only way I could look at SnapChat as a startup is that their market isn't consumers, it's Mark Zuckerberg plus a few people who are trying to compete with Facebook. We know that Facebook is willing to buy things perceived as threats to their business model, or perhaps to buy large sets of users they've failed to capture.

It's a stupid business to go into, in that the odds of success are really bad: low barrier to entry, lots of interest, lots of competitors, a winner-take-all game. But if you win the lottery you can get zillion-dollar offers from Zuck and feel like a genius.

Bubble 1.0 was filled with built-to-flip companies, and one of the things I like best about the Lean Startup movement is that it demands building an actual business. Sad to see that the pendulum might be swinging back some.

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> is that their market isn't consumers, it's Mark Zuckerberg plus a few people who are trying to compete with Facebook.

This.

My take is that SnapChat's valuation is driven mostly by the perception that it's a strong contender for acquisition by Facebook or the like.

Of course it's a separate issue as to whether that buyout makes sense in the long run, because, from what I've heard anyway, a big part of the attraction of SnapChat to teens is that it is NOT part of Facebook (or Twitter or G+). Because they of them not wanting parents/teachers to see stuff, not wanting Facebook intentionally or accidentally exposing their data later, and also just the desire to be "cool" like other cool kids (the temporary fad effect, always churning along with all ages, but at a faster rate with juveniles.), etc. All/most of that gets extinguished immediately, or, eventually after, an acquisition by Facebook.

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> "All/most of that gets extinguished immediately, or, eventually after, an acquisition by Facebook."

We think that because we follow the tech news and are savvy about the consequences of an acquisition. However, I'm not sure (anymore) that it necessarily plays out that way for the general public.

For example, I'm not an Instagram user but I do wonder how many of them are aware that it's now a Facebook property. If I look over their website I don't see anything obviously linking it to Facebook so maybe there's a chance that a proportion of their user-base is still treating it as independent (of course, I'm not aware of the in-app experience).

It reminds me of one of those stories I read about an online game (EVE-Online?) where one guy had cornered the entire market for selling a particular power-up/drug but had a number of completely different avatars 'on the ground' so his customers had no-idea they were buying from the same person.

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> We think that because we follow the tech news and are savvy about the consequences of an acquisition. However, I'm not sure (anymore) that it necessarily plays out that way for the general public.

fair point. this is a recurring pattern where there's a kind of profitable arbitrage that occurs between high/early-info groups and low/later-info groups (eg. between Wall Street types and mom-and-pop on Main Street.) This certainly could be partly due to that effect again.

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The only way I could look at SnapChat as a startup is that their market isn't consumers, it's Mark Zuckerberg plus a few people who are trying to compete with Facebook. We know that Facebook is willing to buy things perceived as threats to their business model, or perhaps to buy large sets of users they've failed to capture. It's a stupid business to go into, in that the odds of success are really bad: low barrier to entry, lots of interest, lots of competitors, a winner-take-all game. But if you win the lottery you can get zillion-dollar offers from Zuck and feel like a genius.

I wouldn't be so quick to dismiss the Instagram acquisition as crazy. Isn't Instagram now used by most teenagers, and sometimes preferred over fb?

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I'm not saying it's crazy for Facebook to buy Instagram. I'm saying it's crazy for anybody to try to start companies in the hopes that Facebook will acquire them.

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Nobody is doubting spending 1% of your 100b market cap on your #2 competitor is a dumb idea. And your point is well taken, that empirically the defection from fb is to Ig, which is a lot less of a problem than it otherwise would be for fb stock.

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Dunno, I firmly believe that once you have that many users, you're sitting on a gold-mine just waiting to be exploited.

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The evidence from companies that have that many users certainly points towards high revenues, but not revenues commensurate with a $3billion valuation.

Facebook is a mature advertising platform with far more to offer advertisers than Snapchat is ever likely to, and earns revenues of less than $7 per active user per year. If Snapchat is as effective at monetising at Facebook, which sounds optimistic, it would take them 17 years to make $3billion in revenue off ~25million active users. I don't doubt that Snapchat's user base will continue to rise in the short term, but I also don't think it'll be around in 17 years...

If you compare Snapchat not with the internet's leading repository of user metadata, and more with similarly popular locations for ephemeral meme-sharing amongst teenagers, its current user base more closely resembles that of the Cheezburger Network, whose decision to lay off a third of their workforce earlier this year hardly points towards stratospheric advertising revenues from their own ~25 million users

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Exactly. If there's any lesson people should learn from Facebook, Instagram, and Snapchat, it's that these users are fickle. Valuations based on long-term growth and long-term exploitation of those users are somewhere between very speculative and outright fantasy.

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I don't disagree, but to me, $3 billion dollars is indeed a gold-mine.

I don't know what they're worth, what they will be worth, or whether or not it'll ever end up being super profitable. Apparently, the naysayers were wrong about Groupon, as they're now doing pretty well, and it seems that turning down the acquisition offer wasn't entirely stupid.

That said, $3 billion dollars is a lot of money, and I would pretty much always take it, and move on to executing the next idea.

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Are you sure Steve Blank said that? That doesn't seem like something he would say.

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I am very sure. A quick Google search doesn't turn it up, so I think it must have been in the early part of Four Steps to the Epiphany. My copy of that is in storage, though, so I can't find the quote. You can see similar sentiments here: http://steveblank.com/2010/10/04/why-pioneers-are-the-ones-w...

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I wouldn't say that's a similar sentiment. He's not saying you should throw good fundamentals out the window.

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Sorry, I'm referring to this paragraph: "They guess at their business model and then do premature, loud and aggressive Public Relations hype and early company launches and quickly burn through their cash. This is a great strategy if there’s a bubble occuring in your market or you are going to bet it all on flipping your company for a sale."

That's a very similar sentiment.

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This still doesn't say "ignore all the Lean startup advice during a bubble". That's what you claimed, and this sentence doesn't say anything of that sort.

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He is saying that in a bubble it is a great strategy if you "guess at their business model and then do premature, loud and aggressive Public Relations hype and early company launches and quickly burn through their cash."

That is precisely the opposite of the Lean Startup approach. So I believe the sentiment is, as I said, similar. If you aren't seeing that, I'm happy to disagree.

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I look at this from the angle of FB and GOOG, and seriously question if Snapchat is worth the acquisition. My gut tells me that patience will be rewarded.

The value to FB/GOOG is the audience -- the users they're trying to reach. It's not as if they couldn't replicate the technology to drive that type of service. The defensibility of Snapchat against competitors is the demographics of the user base.

I don't use Snapchat, nor does my wife. Or any other set of parents I know. But my kids do, as do their kids. Right now, for any teen/tween in our community, it's Snapchat and Instagram.

And if I acquire Snapchat, that gets me.......what? A service with no revenue and a user base that's naturally fickle. The only way I can justify this acquisition for FB or GOOG is if there is some long-term value from the user base. And I don't think the value is there.

If I'm GOOG or FB, I think I sit on Snapchat for as long as possible. I'm betting that Snapchat's value will never be more than it is right now.

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> And if I acquire Snapchat, that gets me.......what?

It gets you solid 3-7 years of billions of eyeballs to monetize from, and nobody is better at monetizing than Google or Facebook.

There are 2 reasons why GOOG/FB are interested in picking Snapchat up. #1 user base #2 traffic. No other reasons.

#1. When FB strategist comes to Zuckerberg, he tells him: "listen this company is making dent in our traffic. If its continue the kids that abandon FB for Snaptchat will create $XX billions (sum A) of a hole in ads sales. So you need to go out and offer X% of sum A and pray they accept it.

#2. When FB ads vp come to Zuckerberg, he tells him: "listen, here are my ideas how we can serve ads to those billions of eyeballs. This will create $XX billions (sum B) of profits for Facebook. So you need to go out and offer X% of sum B and pray they accept it.

Thats it.

As of whether its a "startup" or not, I say it is exactly for the reasons other says its not: revenue (or lack of it). I don't think you can call a company "startup" only when they have a business model and or revenues. Snapchat through millions of uniques proved to the world they do solve some kind of problem, even if its as silly as flashing photos of a drunk teen for 5 seconds.

Edit: so the wisdom of the day would be: build a service for a huge user base that is important to facebook (youngsters), preferably on mobile (that is a future of computing/socializing).

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Revenue (or lack thereof) doesn't determine "startup" status and I never said it did.

A startup according to Blank is a group if people in search of a business model. I am making the claim that SnapChat is not searching for a business model, but rather an exit -- by being a juicy component to someone else's model.

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> I am making the claim that SnapChat is not searching for a business model, but rather an exit.

And you base that on the fact that they just declined $3B from FB, and presumably $4B from Google.

Sure, they built all that service to decline both offers and close down the doors. Sure, Snapchats owners and VC are mentally ill and they declined buyouts because they are not searching for a business model themselves.

/sarcasm.

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There's no reason to think that they're planning to build a real business. People build companies to flip all the time. Sometimes they turn down offers because they think they can get a better deal later. Sometimes they're wrong, and end up deeply fucked. The stakes here are higher than normal, but the patterns are the same.

Note that they don't have to be mentally ill to turn down a big offer. They could just be young, foolish, and arrogant. College-age entrepreneurs are known for many things, but humility and wisdom are not items typically mentioned.

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You aren't taking into account the value of money to people that are already rich.

Also, they have the scale to start testing monetization, but they are not, because they'd rather increase the value of their exit to an acquirer by growing users.

They want a larger exit.

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@wpietri

> People build companies to flip all the time.

This doesnt seem to apply to SnapChat as they just decline huge exit offer. I mean what bigger proof you need than $3B ?

> They could just be young, foolish, and arrogant

you mean VCs with hundreds of years of experience (combined) that do VCiing for living? Don't think so.

@wensing

> They want a larger exit.

Most likely not. Did Facebook look for "a larger exit" ?

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It gets you solid 1+ years of billions of eyeballs to monetize from, and nobody is better at monetizing than Google.

I updated the statement to reflect what I think would be a best-case scenario for any acquisition. I think Google could monetize it the best, but then they would put the Google-plus-kiss-of-death on the service, and that would be that.

The strategy of rolling yet another billion-dollar-picture-based-app into the fold at FB would be a tired story. They've been ineffective in monetizing FB, they haven't yet monetized Instagram, but they'll be good at monetizing Snapchat? I don't think that's a good bet.

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> Their plan is to grow until they dock with the Deathstar.

If that was their plan, then I would think that $3B would be enough for them to drop anchor.

As a zero-revenue company, I would only deny that payday if either:

1) I believed that my company had the potential to be its own Deathstar. 2) I disliked the company that made the offer so much that I had nightmares about them owning my company. 3) I cared more about my company than the money.

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4) he lost control and the board won't let him sell. Founder surely wants to sell. Unfortunately snapchat took $800M vc money, and his new VC bosses have completely different incentives to go for a long tail outcome. Which sucks because the founder is probably a lot more likely to get nothing than he is to get a huge exit and he knows it. Though as wengsing says he probably got a bunch of cash in prior rounds so maybe he doesn't really care.

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The founder is surely already rich. The real losers in these cases are the employees with options. The outcome for them is very binary.

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How about "4 - they think they can get a better offer"?

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Pigs get fat. Hogs get slaughtered.

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By this argument I would have sold at 10 million.

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Or

4) I'm already so wealthy as a founder that's sold stock through multiple rounds of funding that I might as well wait for the $5B offer.

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Spot on. I provided another analogy to this concept in a comment awhile back:

> It's not particularly strange if you break down the business models that dominate the SV ecosystem. These companies you speak of are merely procurement channels. Think of them as oil drills that suck up as many attention spans as physically possible. And largely they are all competing with each other to strike the next big oil well. Not unlike the oil industry they put massive amounts of capital into the discovery and refinement of such oil wells. The likes of Facebook, Google, etc are simply refineries who sell this attention (refined by analytics and insight) off to the Fords, Coca-Colas, etc of the world.[1]

[1]https://news.ycombinator.com/item?id=6400714

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I'm thinking that if Spamchat is worth 3+ billion, then Instagram sold too cheap.

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> Their plan is to grow until they dock with the Deathstar.

many chased that model in 2002-2007, with google in mind

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Most web apps are not that difficult to program. What needs the most innovation in a startup is the business model. Communicating that locally is hard enough. Remote? No thank you.

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When I said "best" programmer, I meant it more holistically. That's algorithm skills, architecture skills, communication, ability to pick up new things, culture fit, etc etc.

Put that all into an imaginary 1-100 rating: you can get a 60-70 programmer in the bay area, or an 80-90 programmer remote. How many points does being local make up for? That's a question specific to your company, but if it's less than that difference in overall developer quality, remote may be a good call.

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Which kind of web apps? Not everyone writes todo apps these days. One of our devs retired last week. There are probably less than 20 devs in the world with his skill set (very specialized geospatial analytics). Even todo apps can require extremely talented developers to work at scale.

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Just a couple of points:

First, web apps aren't that difficult, it is true. But that doesn't stop web app startup founders from demanding only the best of the best data structure/algorithmic programmers.

Second, web apps are not even close to being the only kind of programming, suitable for remote work or not.

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