Dharmesh Shah

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6 Y Combinator Startups I Would Have Invested In Back Then

By Dharmesh Shah on August 1, 2008

I have been tracking Y Combinator (a new kind of venture firm for early, early stage startups) for several years.  They have a distinctive approach to the early-stage funding process and have funded some interesting companies.  YC is in the news again because of Google's recent acquisition of Omnisio, a YC investment. 

Thinking back on several years of YC history, I dervied the below list of companies that I would have funded had I had the opportunity to do so.  I tried not to cloud my judgement with hindsight (that is, I'm not just picking the ones that ended up being successful).  Also, note that these are not what I think to be the best YC companies — just the ones that I’ve thought about in the past.

1.  Reddit:  I remember the day I first encountered Reddit.  They were presenting the product at one of the early Web Innovators Group meetings.  I was still a grad student at MIT at the time, and went to the meetup with a few of my classmates (we were working on a paper about “Web 2.0” for one of our classes).  Interestingly, Kiko (remember them?) was one of the other companies presenting that evening.  I’ll be honest and admit that on the first evening, I didn’t quite “get reddit” (the category of social news was very new at the time).  But, reddit showed up on my radar pretty quickly a little while later.  I noticed a bunch of traffic coming to OnStartups.com (this blog) through reddit.com.  It caused me to take a second look, and I’ve been following them ever since.  I don’t know Steve Huffman that well (he might actually be even quieter than I am), but Alexis is about as nice a guy as you can find and has a weird, quirky creativity that is magnetic.  To build a successful startup, it helps a lot if people actually like you. 

2.  Xobni:  I met Adam Smith for lunch at a Thai place in Coolidge Corner (Brookline) a long, long time ago.  Long enough that it was before the exceptionally talented Matt Brezina joined as co-founder.  Even back then, I liked Xobni for one simple reason.  It complies with my notion of “the problem you solve should be ugly, the solution should be beautiful.”  There are few things less fun to develop these days than desktop applications for Windows.  It’s ugly.  What’s even uglier is developing desktop software that has to integrate as a plug-in to something else — like Outlook.  That’s one ugly problem.  Further, the fact that millions of people still use Outlook made it in an interesting commercial opportunity.  Plus, I really like Adam.  He’s super-smart and listens.  [Matt, I like you a lot too, but I didn’t know you back then and I’m trying to talk about my early, early thoughts on the company].

3.  Pairwise:  I saw the pairwise guys present at the YC Demo Day (the big day following months of furious coding that is the core of the YC experience).  Of all the companies in that cohort that presented, I liked Pairwise the most.  It appealed to my data-driven nature and they had something that I felt had commercial opportunity.  More importantly, unlike many startups, it seemed they were actually thinking about the “how do we make money” part very early in the process.  I haven’t kept up with Pairwise much since then, and they haven’t written on their blog since November, 2007 — so I’m guessing things didn’t take off like they had hoped.  Regardless, I thought the guys were great and the idea was a good one.

4.  Wufoo:  I’ve been dealing with the frustration of web-based forms for a long, long time.  It’s a common enough problem that lots of people try to solve it by creating a “form builder” of some sort.  It’s an appealing problem to try and solve (unlike what Xobni is doing, it’s a fun problem to work on).  We even built one as a part of our landing page application at HubSpot (not because it is fun, but because it is a necessary part of what we do).  Back to Wufoo.  The thing I like about them is that they are exceptionally good at the UI/UX thing.  I’m not a designer myself, and don’t play one on TV, but I know great design when I see it.  I also know how hard it is to do right and how rare it is to find people that have that gift.  What’s even rarer is the notion of great UI/UX design talent intersected with a strong business sense — which the Wufoo folks seem to have. 

5.  Disqus:  Of all the startups from YC that I’ve seen, I feel like I understand Disqus the best.  Having been a blogger myself for some time, I get the notion of centralized comments and the tradeoffs therein.  This is why I met with Daniel Ha — coincidentally, at the same Thai restaurant in Coolidge Corner where I met Adam Smith.  (Yes, I’m a creature of convenience and the place is 2 minutes from where I live).  Daniel’s one of those entrepreneurs that makes a great early impression.  He’s clearly smart, but also recognizes there’s stuff he needs to learn that’s going to increase his odds of success.  I like the general notion of Disqus (always have) and even back then, there was some early evidence that folks were going to use it.  Disqus is also one of those companies that likely benefits most from an association with YC and Paul Graham. 

6.  RescueTime:  Tony Wright (the founder of RescueTime) probably doesn’t even recall this, but he and I first had online contact years ago.  He reached out to me way back then as a reader of my blog and reported a problem with the commenting system.  Since then, Tony and I interact sporadically (mostly through each other’s blogs).  Tony’s one of those guys that I’d bet on simply because he has an uncanny knack for how the startup game is played.  Intersect that with an interesting idea that could get massive appeal, and you have a great startup.

So, there you have it.  6 Y Combinator startups that I probably should have been more aggressive about investing in.  But, that’s not my style.

My best wishes to all the Y Combinator founders.  Particularly those that are working away furiously on their products in preparation for demo day coming up soon.  I hope to see/meet many of you there.

By the way, if you're not in YC, but you're a superstar web developer (take 5 minute quiz) and looking for a fantastically fun startup gig, I'm recruiting for HubSpot.  Just drop me an email.  I'm easy to find.

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Spending Like Its 1999: Startup Burns $50k of VC Money on Crazy Contest

By Dharmesh Shah on July 29, 2008

You remember 1999, right?  It was the day of the sock puppet and crazy, CRAZY marketing strategies.  By the way, before going too much further, I will confess that I actually bought pets.com shares back in the hey day.  Why?  Because everyone was doing it, and my wife and I thought the commercials was creative and funny.  Granted, my "due diligence" bar was lower back then, but I'd understand if many of my colleagues would revoke my angel investor license just for that.

But I digress.  Today's article is about new ways startups are using to try and attract attention and -- wait for it -- eyeballs!  A software company in Cambridge, MA is running a "viral marketing contest" whereby they are giving away a total of $50,000 for bloggers, videographers (basically anyone with a video camera) and others into the "new, new marketing". 

Here's the article: 

Insanely Brilliant or Just Insane?  The HubSpot $50,000 Viral Marketing Contest

Now normally, I'd be having a jolly old time making fun of this startup with references back to every lame attempt at "marketing" we saw out of dot-com startups back in 1999.  There's just one problem.  It's my startup that's doing the crazy stuff!  Yep, that's right, my startup HubSpot, which recently raised $12 million in venture funding is giving away $50,000 of that in a viral marketing contest. 

I figured once people get wind of this, many of my friends, colleagues and bloggers are going to send me emails saying, "Dharmesh, what the hell?".  Actually, I might get an email from an investor or too as well, because we haven't run this by them yet.  I figured I'd try and pre-emptively answer some of the inevitable questions.

1.  Why do it?  Well, it's kind of simple.  We've been having great success with attracting leads (and closing customers) through our blog and other online channels.  Some of our most successful marketing efforts have been blog articles that went viral on social media sites like digg and reddit.  Last week, we tried to do a rough economic analysis and estimated the value to us of leads generated from these successful pieces.  It was high.  So, there's opportunity here.  Plus, we don't like spending too much money on AdWords.  It pains us.

2.  Why not just do it ourselves?  Well, frankly, because developing viral content that spreads like wildfire is a tricky business.  We have a team of great folks writing content all the time for our blog (including me), and sometimes we hit it out of the park.  But our guess is that there are folks much more talented than us that are capable of producing remarkable content (as Seth Godin would say).  We figured it's worth a shot trying to draw those people out.

3.  If it works, it could work big.  We're at a stage now where experimentation is reasonably cheap.  Instead of getting stuck in the rut of turn this dial a bit, flip this switch a bit, and crank out the customers -- we'd like to look for some non-linear growth opportunities. 

Oh, and if you're a VC reading this (particularly one of our VCs), we're doing the same thing in marketing that you do when looking for investments:  Pick projects that have potentially huge impact, even if they are a bit whacky and high-risk.  If we do a dozen of these crazy projects, if just one wins, we're golden!  Champagne and chocolate-covered strawberries for everyone! 

So, what are your thoughts?  Is this genius or desperation?  Would love to hear your comments.

Topics: marketing
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