Tag: Written

Funded in Austin…or Not at SXSW

March 14, 2014 / LauraLorek@gmail.com / 0 Comments

By SUSAN LAHEY
Reporter with Silicon Hills News

Josh Kerr of Written, Cotter Cunningham of RetailMeNot and Utz Baldwin of Plum, photo by Susan Lahey

In many ways, Written’s Josh Kerr was the poster child for how one gets funding in Austin at the Funded in Austin panel at SXSW Tuesday afternoon.

Kerr spoke glowingly of the help, support and advice he got from Capital Factory. He talked about building relationships with various angel investors over coffee, lunch or drinks until he gave them the ask. And he gave interesting tips: For example he suggested telling angels he’d love to have them invest even a small amount just to get them involved, and usually they upped the number because the investment he suggested seemed too small.

And the company wound up with $1 million seed round.

By contrast Utz Baldwin of Plum (formerly Ube) said finding funding for hardware like his lighting system that can be operated by your smart phone has found few Austin funders. It did, however, raise nearly $1 million on Fundable.

Finally, Cotter Cunningham of RetailMeNot explained that funding had been a little bit different for his company because his business model entailed buying existing businesses, which is an easier sell in some ways than getting funding for an idea alone. He got a $30 million round.

The panel, moderated by Shari Wynn Ressler, founder and CEO of Incubation Station, explored the process and hurdles of getting funding in Austin. All the panelists agreed that raising money is pretty much the CEO’s full time job, which can be a challenge.

For one thing, as Baldwin said, there were parts of developing the user experience he really wanted to get more involved with because it’s part of the business he enjoys. But he didn’t have time because he was busy raising money. Kerr said his team initially resented the fact that while they were doing the work of creating the company, he was wining and dining investors. Once he got the money though, they forgave him.

Beware the Soft Yes

“It was a little tricky with our model,” Cunningham said, “because it’s difficult to raise money and do an acquisition at the same time.” On the one hand were the funders doing their due diligence and collecting data and on the other were the selling businesses asking “Are we going to do this or aren’t we?”

Kerr said he kept the amount Written was asking for small, so that it looked like they were close to success. Then as more money came in, he upped the raise amount.

Cunningham and Kerr worked on building their networks, asking “Who do you know?” Baldwin wound up raising money from people he knew might be interested in the idea. After a ten minute phone call to a retired Cisco executive, for example, the exec gave him $150,000.

People who initially say no might change their minds if you make tweaks to the product that they suggest or if someone else takes the lead investment position, panelists said. Cunningham said “You have to be persistent. “Some of the people who gave us money told us ‘Until you called four times we weren’t paying attention.’”

But when making the ask, you have to know exactly how much money you want and exactly what you’re going to do with it. You also need to have practiced your pitch “a million times.” Cunningham said. And it’s best not to shoot for your most likely big funder on the early pitches. Practice on less likely candidates so you have it down when you’re shooting your big gun. That was a mistake Kerr made, going to Austin Ventures with his first pitch.

“In a matter of seconds I became uninvestible when they asked what we were doing with the money,” he said.

All the panelists experienced “the soft yes” which is not a definitive no but a “let’s keep talking” that never results in anything. Entrepreneurs need to guard against the emotional roller coaster of thinking a soft yes is the same as a yes.
Baldwin said that after his company won a People’s Choice award at DEMO, Sandhill Road (investor central in Silicon Valley) opened its doors to them. But one investor would say “You don’t want to be a hardware company, you want to be a software company” and another offered suggestions about the company’s business model. Baldwin was changing up the pitch deck after every meeting and he wound up with a garbled story.

“You have to nail that pitch. Exude absolute confidence in what you’re doing, demonstrate absolute domain knowledge and ask at every meeting if there are any red flags. ‘What do you see in this that would keep you from investing in my company?’”

Know Your Investor

While a hardware product like Plum’s, has trouble finding funding in Austin, the others talked about the difficulty of getting funding from outside Austin because investors often want to be able to keep a close eye on the companies they’ve invested in. But Cunningham said he’s had success pitching the benefits of Austin, such as a much lower attrition rate than that of Silicon Valley.

“In Palo Alto, most of the companies have a 20-to-25 percent turnover rate. Someone will be sitting in the office saying ‘I just got a call from Twitter and they’re willing to offer me 50 percent more than you’re paying me. In Austin that doesn’t happen. Our voluntary attrition is under five percent.”

Any form of investment takes a lot of investigation, panelists said. Friends and family may cough up the money but they’ll call every week and ask how their money is doing or require reports you wouldn’t normally have to generate, which is a time suck. There are numerous angels in Austin who go to all the meetings but invest very little. And there are some investors who are more trouble than they’re worth. It’s important to call their references and find out if they’re the kind who like to call you up at midnight with a question.

Entrepreneurs structure deals differently as well. Baldwin said his Fundable investors were happy with uncapped convertible notes and responded to discounts for early investors. Kerr, though, said all his early investors expected caps.
All the panelists said it was crucial to hire the best attorney available, not to scrimp or hire a relative. Kerr suggested finding an attorney who would work for equity.

At the end of the session, one audience participant asked where a new Austin startup could go to find more information about funding and Kerr recommended Capital Factory, which he had mentioned several times through the session. Claire England of Tech Ranch stood and asked a question, prefaced by the comment: “There are a lot of resources out there besides Capital Factory” to which Kerr responded that he wasn’t trying to be an advertisement for the incubator/accelerator.
Baldwin leaned over, looked at Kerr’s Capital Factory t-shirt and said “Nice shirt.”

Written.com Wants to Bring Content and Companies Together

March 5, 2014 / LauraLorek@gmail.com / 0 Comments

By TIM GREEN
Reporter with Silicon Hills News

The team behind Written.com

As advertising becomes more pervasive (is that even possible?), it’s harder for companies to find ways to make their brands stand out.

One way is to associate the brand with authoritative and objective content that makes the reader more knowledgeable about what the company sells. But getting the content that attracts the right audience is an endeavor fraught with uncertainty.

“It’s really challenging to create something that’s successful, that drives a consistent audience, that ranks really well in Google,” said Josh Kerr, chief executive and one of four co-founders of Written.com, in laying out the problem.

The company proposes to provide a company with subject-appropriate content weighted with a built-in audience and seamlessly place it on the company’s website. The result is an interested audience with a predisposition to buy what the company is selling.

“We can go to a brand and say we can bring you proven engagement and that’s totally different from traditional products that are out there,” said Marc Smookler, the co-founder who heads marketing.

Written.com

Written finds the content not by commissioning bloggers to write custom-made posts, but by scouring the Web for already-written blog posts that have large and loyal followings.

For bloggers, the arrangement enables them to get paid for work they’ve done – even if it’s old.

“The stuff you wrote a long time ago, it’s still valuable,” said Connor Hood, the founder who heads technology. “As long as it had an audience. That’s the key.”

John Price, CEO of Vast.com, is one of Written’s early customers and he likes what the company delivered.

“It was both in content and in targeting the exact type of content I needed and that Google has already ranked as super high quality,” he said. “You can’t beat it. It is such a powerful value prop they have.”

Price posts the content on the blog on Carstory.com, a Big Data-based mobile app that Vast developed for sales people at automobile dealerships. Sales people use it during face-to-face selling with customers.

“We’re getting all kinds of traffic as a result of the content,” Price said. “And it’s beyond that because it makes it seem that we’re actually an authority on the subject.”

The Written founders, Kerr, Hood, Smookler and Jeremy Bencken, who heads product development, are entrepreneurs who bring complementary expertise to the operation. They each have started, developed and successfully exited previous companies.

They knew each other from working around the Capital Factory and found they had common interests in blogging and marketing and the technology that could bring the two together.

Bencken said he and Kerr talked about how to move content from a blog to a website.

“Then we hit on this idea,” he said. “You could take a piece of existing content, move it over to a site that is interested in having that content, but also all the traffic.”

They tested the concept with their own blogs and it worked, he said. And it’s continued to work as they’ve expanded.

The four founders formally started the company in January 2013. They landed seed round of investment of $1.1 million in October from LiveOak Venture Partners of Austin, Floodgate Fund of Palo Alto, Calif., and Austin-area angel investors.

Telling their story in their Brazos Street office, the founders pick up on each other’s threads, filling in thoughts and deferring to each other for additional comments.

The Written process begins working with the client company to identify the audience the company wants to attract. Written starts with keywords and other factors such as identifying thought leaders the audience follows and whether the blog carries advertisements.

“We take all that intelligence and data and then we kick off a search to go identify articles that fit that criteria and are ranking really well,” Kerr said.

Beyond finding appropriate subject matter, Written makes sure the blog articles will bring an involved audience with them. It looks at a variety of factors such as page views, bounce rate, time spent on the site and more, Bencken said.

“The trick to bring an engaged audience is to start with content that is engaging,” he said. “So that’s what we’re looking for when we’re analyzing how much we can offer a blogger.”

With Written’s software, Google understands that the article, now on the company’s website, was written by the blogger so he maintains his Google Author Rank.

Once it identifies an appropriate blogger and article, Written runs it by the company. If the company likes it, Written takes care of the rest, moving the content to the company website and handling the pricing, the payments and the licensing.

“We deliver to the brand great content that will engage readers, that will drive new audiences to the brand and these people won’t just read that one article, they’ll read, two, three, four articles on your site,” Kerr said. “And that’s what we’re seeing.”

Price said the content Written delivered to Carstory.com brought with it a target audience that wants to take the action of downloading the Carstory app.

“And it’s working,” he said. “It’s generating leads while we’re asleep. It’s just unbelievable.”

Written’s concept seems custom made for the era of content marketing, but the founders and its investors say there is more to it.

“Audience development extends to every part of the marketing mix, and that’s our big picture,” Kerr said. “Connecting brands with an interested and engaged audience is our focus, so while the content marketing space may be the most direct way into those discussions, our value proposition really reaches much further than that.”

Krishna Srinivasan, a principal at LiveOak, shares that take.

“This is a platform that consolidates spending a brand would do over search, social media, Internet,” he said. “All of this is discoverable using this platform. So it is a much broader play.”

As for competition, Kerr said Written has seen no other company with a similar offering.

He said Written offers an alternative to the competition of the status quo – companies hiring journalists and bloggers to provide high quality content.

“Frankly, we’d rather let those great journalists and bloggers do what they do best and what their readers and audiences respect them for, and find a way to support them doing it,” he said. “That’s really the value of Written.com to bloggers out there.“

Written’s goal, he said, is to develop a marketplace where writers create successful content on one side and brands that need the writers’ audiences on the other side.

“That’s really how to maximize the value proposition between both so we can make those matches and in some way solve that problem,” he said.

To which writers might say: Write on.

VCs and Founders Give Advice on Funding a Startup

October 10, 2013 / LauraLorek@gmail.com / 0 Comments

By LAURA LOREK
Founder of Silicon Hills News

Funded companies, which are performing well, get nice offices and free lunches for their employees, said Mike Dodd, partner with Austin Ventures.
Mass Relevance is one of its portfolio companies performing quite well. And on Wednesday, the company hosted a panel discussion about successfully raising capital for a startup company as part of Austin Startup Week.
The two-year-old company has grown from four employees to more than 120 employees and raised $5.5 million in a Series A round of funding and it already has millions in revenue from customers like NBC, MTV Networks and CNN. Its partners include Facebook and Twitter. Mass Relevance, formerly known as TweetRiver, aggregates social media content for its customers.
Claire England, executive director of RISE Austin, moderated the discussion, which paired two successful startup Co-founders with their lead investors. Eric Falcao, founder and Chief Technology Officer of Mass Relevance joined Dodd of Austin Ventures and Josh Kerr, Co-founder and CEO of Written teamed with Krishna Srinivasan, general partner at Live Oak Venture Partners.
Mass Relevance got early traction by landing a six-figure deal with MTV, said Falcao. And then the Co-founders brought on Sam Decker, formerly of BazaarVoice, as its CEO. He had connections with Austin Ventures. Mass Relevance got seed funding easily and raised its first round without a lot of trouble, Falcao said. Mass Relevance also went to California and received funding from Mike Maples Jr.’s Floodgate Partners, an early investor in Twitter.
Kerr bootstrapped his first two companies, but he wanted to build a really big company with Written, which markets bloggers’ content to brands, so he saw the need to get funding from the start. He was able to get a seed round from Live Oak Venture Partners.
“I wanted the structure that comes from raising money and the acceleration that comes with it,” Kerr said.

Signs of a successful startup

Next, England asked the venture capital investors to talk about the signs they look for when evaluating a startup investment, the warning signs of bad investments and top signs of good investments.
“This is such a people business,” said Srinivasan with Live Oak Partners. “I think that is the most important factor. We’re looking for people who have an insight from what they have done before.”
Live Oak Partners also looks for people they can work with and collaborate, Srinivasan said. The ones that don’t work out are entrepreneurs who are not collaborative and those that don’t want to be great partners, he said.
“It’s obviously team, team, team,” Dodd said.
But Mass Relevance had a really great product and they were solving a problem of aggregating real-time Tweets for companies early on, Dodd said.
“What we try to do is look around the corner at the early markets,” Dodd said.
Austin Ventures saw Mass Relevance as being one of the big players in social media for television, Dodd said.

The importance of relationships

Next, England asked how often the companies and funders met and interacted with each other.
Falcao said he sees Dodd once every quarter, but that Dodd met with other executives, like Decker, on a more regular basis.
Dodd said he talked to Decker about once or twice a week. He joked he visited the Mass Relevance office often because they have free lunch for employees. His firm also helped in hiring some of the senior executives and helped to recruit people.
“We can get six head of sales literally almost over night,” he said.
Kerr said Srinivasan gives his seed stage company sage advice.
A good investor helps in team building and scaling the company much more aggressively, Srinivasan said.
England also asked if there was a downside in partnering with investors. The question was met with laughter and then a bit of awkward silence before Falcao answered.
“When things are going well, things are going well,” said Falcao. “VCs are good. They come with checks and advice and more checks. When things work, they work. So far, we haven’t gone through hardship. So it’s tough to point to anything.”
The downside is companies start to rely on them, Kerr said.
“They are bringing this really great value to the business. It’s not just money,” Kerr said. “It’s your buddy. It’s much, much more than that. But you’re not the only company they are invested in and you’re not getting 100 percent of their time. So the only downside is you might want more and not get it.”

What happens when things are not going well? England asked.

“I have plenty that are not doing well,” Dodd said. “They don’t have offices like this. They don’t have free lunches. We focus on burn.”
Austin Ventures works to make sure they are focused on maximizing profit and minimizing losses and working to get market share in their industries, Dodd said. The relationship between the investor and the entrepreneur doesn’t change, he said. In a few cases, though, it has, he said.
“I still believe in what they are doing, it’s just taking longer than expected,” Dodd said.
Venture capitalists like to chase trends but it’s good to keep focused on the main business and not get distracted by whacky ideas and the latest trends, Falcao said.
“You need to ask yourself are we just chasing something new?” Falcao said. “You shouldn’t always do exactly what your customers want you to do. There’s something about staying on a mission and staying focused rather than chasing X.”
When a firm makes an investment and things don’t go as planned, the investors work to salvage the value and help hold the ship together to find an acquirer or to get some modest outcome, Srinivasan said.
“Those things take a lot of hard work,” he said.

Making the pitch to investors

England then asked the entrepreneurs how they marketed themselves to potential investors.
Kerr said when he pitched his company to Live Oak, Srinivasan sent him three really challenging questions in an e-mail message. He had time to think about the answers, but he couldn’t come up with the answers.
“Ultimately I ended up going back to him and saying these questions are too hard,” Kerr said.
At an early stage, the investment in the company is more about the people than the idea, and it’s better to be honest and admit when you don’t know something, Kerr said.
“If you don’t know the answer, you don’t know the answer,” he said.
Srinivasan said that he liked the honesty that Kerr displayed. He was able to evaluate the risk of investing in them and to gauge how much it would take to get the company to the next level, he said.
Startups should know how to answer basic questions from investors about customer acquisition costs and know how to scale, Falcao said.
“If you haven’t thought about that, you’re not thinking about how hard it is to scale a SMB (Small to Medium-Sized Business) company,” Falcao said.
How much money should startups ask for and how much time should they spend doing it?
The size of a check should be reflective of the stage of the company and issues it is facing, Srinivasan said.
“Just getting out of the gate, you’re going to raise a little bit of money,” Dodd said.
Typically, seed stage companies raise money from angel investors ranging from $350,000 to $1.2 million, Dodd said. A Series A round receives between $2.5 million and $7 million and a Series B round can get up to $20 million, he said.
Kerr said he spends 90 percent of his time raising money. His other partners focus on running the business.

The startup ecosystem in Austin

England asked if Austin had a strong enough funding ecosystem to support startups.
Both Kerr and Falcao raised money from California from Floodgate Investments.
“More firms. We need more firms here,” Dodd said.
The ecosystem needs more sophisticated seed stage investors, he said. He said he wished there were three or four more firms like Live Oak to increase competition for funding, he said.
Raising second and third round funding is easy if a company is doing well, he said. But it’s harder to get people in the valley to invest in early stage companies, he said.
Austin needs more firms focused on early stage, Dodd said. More investment firms are good for Austin, he said.
“A rising tide floats all boats,” he said. “The more money that is in town, the better everyone will do.”
In the 30 years he has been in the market, this is the most vibrant and most exciting time, Srinivasan said. The quality of the ideas is really good, he said.
“Clearly this place can have more early stage companies,” he said.
The overall maturing of Austin’s startup ecosystem has contributed to Austin’s vibrant startup community, Srinivasan said. People who have been through the process a few times and transplants from California now populate it, he said.
“It’s a genealogy effect,” Dodd said. Successful companies spin out successful startups, he said.
Austin Ventures has funded three or four startups by people who left BazaarVoice, a company Austin Ventures backed that went public, Dodd said.