Welcome to VENTUREAPP’s Transparency Series, a weekly blog written by VENTUREAPP CEO Chase Garbarino, providing an honest look into the inner workings of our company every week. We believe increased transparency in the tech and startup community will help more entrepreneurs succeed. We hope this series helps you in growing your business.
Most people tend to write posts about how their company was started well after founding, when they’ve succeeded or shortly after they’ve closed up shop, recapping mistakes and what they would have done differently. I tend to believe time allows people to take some liberties in how they remember certain events, so we want to share our founding story while we are very much still in the founding stages.
In the spring of 2014, I began kicking around a side project on the weekends with Kevin McCarthy and Greg Gomer called HitUp. The three of us have always kicked around random startup ideas since we founded Pinyadda, a failed social news platform. In the past, we would always find some reason why the idea wouldn’t work, and we were always too busy cranking on Streetwise to ever take them anywhere. This idea got us excited though, and we put in a little more work on the nights and weekends to develop the idea more so than other ideas we have riffed on. Despite receiving some investor interest (we weren’t really raising money as it was just a side project), we decided to put the idea to bed due to some developments in the space we were targeting. Don’t worry, I’ll share background on this entire experience in a future post, but for now let’s focus on the topic at hand. HitUp gave us the “founder bug” again and VENTUREAPP was becoming a seed in our mind.
During the summer of 2014, I met with a senior executive at Advance, the holding company that owns the business that acquired Streetwise at the end of 2012. We discussed my interest in getting involved again in operating startups rather than just covering them from a media perspective at Streetwise. We riffed for a couple hours on the concept of a startup studio which was becoming more and more popular from the success of Betaworks and other groups following their model. From that meeting, I began to dig into the concept of developing a startup studio with Kevin and Greg.
At about the same time, I reconnected with Boris Revsin from DailyBreak, which was in the process of being acquired by Connelly Partners. Our teams at Streetwise and DailyBreak had known each other for years, as we founded both companies at similar times and were pitching the same VCs, going to the same events, etc. I mentioned the studio concept to Boris over lunch and he was thinking of developing something similar with his business partner Jared Stenquist. We decided it made sense to combine forces as we developed the concept on nights and weekends.
For a long time, I’ve always been fascinated with startup operations and how VCs add value (or don’t) to their portfolio. I always found it interesting that VCs didn’t model themselves more like movie studios in the sense that there are a lot of pieces of a startup that are relatively replicable, just like movie productions. Studios own key pieces of infrastructure and have access to key resources, aggregating these across their investments (sound stages, props, actors, directors, screenwriters, etc.). Why didn’t VCs model themselves more in this fashion? Fast forward to September 2015 and show me a VC that isn’t hiring for a “head of platform” position…
As we set out to architect what our studio, Fullstack Ventures, should look like and gauge interest from investors, a few things became clear. Studios can be complex from a corporate structure standpoint. Are you a holding company that owns and operates businesses that you found? Are you an investor that takes a majority stake in a very early business? Do you make more traditional seed investments? All of the above? Further, it is very difficult to raise venture capital for a studio because 1) VCs are typically not allowed to invest in anything seen as a pass-through vehicle, i.e. another investor, which most studios are seen as, 2) you need to have a unique angle/access point that makes them think they have some sort of proprietary access or deal flow, 3) you need a lot of cash because you’re not just trying to start one business, but multiple businesses, and 4) because of #2 and #3, the bar for a studio investment from a VC is even higher than the bar for a regular investment.
Ultimately, we soft-circled a number of individuals and two funds for the concept. We had approximately $2M in commitments and we were seeking north of $3M. Further, it felt like each additional investor we received a commitment from was writing us a smaller check than the last. Bluntly, we were fighting an uphill battle.
At this point, during the first half of 2015, it was clear we were going to have trouble bringing the studio to life. However, throughout the process I never questioned the ultimate mission like we did with HitUp and other side projects. I was dead set, along with the rest of the team, on being back in the business of startups and helping other businesses. The art and science of building businesses is easily what I’m most passionate about, so failure to get the studio off the ground wasn’t even a slight deterrent. I think this is a key lesson for anyone considering starting a business, if you’re at all hesitant because of challenges, competition, etc., than you’re not the person to be pursuing the mission.
While we were developing the studio concept, the first product we kicked around happened to be a software platform that would achieve our movie studio analogy – a platform to help aggregate key resources and knowledge across our studio companies. In addition to being core to our original thesis, we thought the platform had multiple monetization strategies.
Over the course of 2014 and early 2015, I had made a handful of angel investments in local Boston startups. We decided to reach out to these companies and a handful of others that we’re close to and asked them to send us any request they might have for their business – help finding a lawyer, help with UI/UX, a deal on travel, etc. It quickly became apparent that companies needed help with a multitude of items. Most of my angel investments were in on-demand consumer companies and we were surprised at how the model was much less prevalent in serving businesses rather than consumers.
Pretty quickly we spun up an email address and a phone number for businesses to send us requests. By June we had multiple businesses sending us requests and multiple solution providers solving those requests. Equally promising was the fact that both sides of this market were joining quickly, with little friction, when there was no software built.
Since the spring, we’ve been heads down solving requests, building our software and growing our founding team (new additions include Dan McCarthy, Katie Sullivan and Caitlin Bolnick). We were able to close a round of funding along the way, but that is another post for another day.
For us, VENTUREAPP was born from our efforts with HitUp and other side projects, but became more because it was easily what we’re most passionate about. I can’t stress how important this is when deciding to make the leap to start a business. Startups are never easy. Sometimes the media likes to retell stories of unstoppable rocket ships, but everyone hits snags along the way. You’ve got to be 110% on the mission you are pursuing to make it through the rough times. VENTUREAPP has a long way to go but this is how we started and we feel good about the mission we’re pursuing.