The crazy new way this start-up raised $153 million in just three hours

For some consumer products businesses, crowdfunding is the best route

Alison Vercruysse has experimented with different sources of funding for her San Francisco-based organic granola company, 18Rabbits since its founding in 2008. Initially, Vercruysse funded her venture with help from her friends and family. She later pitched her idea to to several angel groups, even some who primarily invested in food ventures — but it took her several years for her to tap into their capital. She met one of her biggest investors by chance. While eating at a restaurant in New York City’s SoHo area, Vercruysse struck up a conversation with a stranger next to her, who happened to find her granola venture interesting. He agreed to invest in 18Rabbits on the spot. Vercruysse kept thinking there must be a more receptive audience than the one she found through traditional angel rounds. So she recently decided to pursue “crowdfunding,”a growing practice by which startups can solicit funds from large numbers of contributors online. In search of equity-investments from crowds of investors, Vercruysse approached CircleUp, a platform connecting businesses to accredited investors. The San Francisco-based startup focuses specifically on funding consumer products businesses, and only features companies it considers to have high- growth potential. In approximately seven weeks, 18Rabbits raised $500,000 from 39 investors. Vercruysse plans to seek later rounds of funds through CircleUp. “It took me years to accumulate that kind of network and those contacts before [crowdfunding],” she said. Vercruysse is one of several entrepreneurs raising funds for consumer products via crowdfunding. Kim Walls, chief executive of Episencial, a Los Angeles- based baby skincare company, also found crowdfunding to be a more effective method of raising capital — her company closed a $500,000 in two weeks on CircleUp. Prior to crowdfunding, Walls had bootstrapped her company with funds from previous tech jobs. After asking for investments from friends and family, and gaining limited funding from a couple of angel groups, she felt crowdfunding might better connect her with her clientele, who she thought might be more compelled to fund her venture. “Our consumers are women. They are very active in the social space, and where social media intersects with fundraising,” Walls said. “The fact that women are more social and spending money on consumer products, and more inclined to support other women [makes crowdfunding] a fantastic platform which didn’t exist before.” Consumer products may lend themselves better to crowdfunding investments instead of traditional venture capitalists because “very few VCs actively invest in the consumer products space,” said Sharon Vosmek, chief executive of Astia, a San Francisco-based non-profit helping women-led high-growth ventures which often partners with CircleUp. She added that crowdfunding could also help women entrepreneurs in particular — many of whom develop consumer products — who might not have angel investors in their personal networks. “Men and women are still in separate business networks,” Vosmek said, explaining that traditional angel investors often associate in exclusive circles. A crowdfunding platform, however, allows an entrepreneur to “reach angels, regardless of [your] own personal relationships. _Follow On Small Business onTwitter. _ _ _

Risk-averse India embraces Silicon Valley-style start-ups

NEW DELHI — In a sprawling wholesale market of timber, glass and marble, businessman Amit Gupta supervises workers loading sheets of glass on trucks for builders across India — his family business for five decades. As plumes of sawdust float, Gupta says he wants to play a role in the new economy. For the past year, he has been reading newspaper stories about the booming start-up culture, with millions flowing in from venture capitalists and nerdy graduates of India’s tech universities becoming millionaires overnight. About $6.5 billion has been invested in start-ups this year, up from $2.2 billion last year, according to the National Association of Software and Services Companies, an industry group. Three to four tech start-ups are born every day in India, it says. Gupta’s family has for years invested in land. But this year they decided to take $700,000 and invest in start-ups. “India is going to change in a dramatic way, and start-up companies are going to drive the change,” Gupta, 40, said. Two decades of India’s information-technology success and the large pool of English-speaking engineers have created a fertile ground for e-commerce companies and innovative tech start-ups. Angel investors and venture capital funds are mushrooming. Investment in start-ups is a new trend among affluent Indians, triggered by the Silicon Valley-like successes of a number of start-ups in the past year. Many Indians who traditionally invested in land, art, gold and stock markets are beginning to invest in start-ups, said Sunil Goyal, founder of Your Nest, a venture capital fund in Gurgaon, a suburb of New Delhi. This year, his firm has 140 such new investors, up from 35 in 2012. “Old money, new money — everybody wants a piece of our start-up boom,” Goyal said. It’s also a risky proposition — far more unreliable than a cache of gold or land. Even as Indians are celebrating the new millionaires, there are signs that the country’s fledgling e-commerce companies are overvalued, and the market may be slowing soon. In recent weeks, some restaurant and food delivery start-ups laid off hundreds of employees. “Investment activity in start-ups is at an all-time high now. But it is also risky,” said Arun Natarajan, head of research service Venture Intelligence, in Chennai. Only three of 10 start-ups are likely to be super-successes, he said. But for now, Indian and international investors are tempted by the sheer size of India’s market — with a rising middle class and increasingly global outlook. At over 350 million, India has the third most Internet users in the world, after the United States and China. Most of them are using the Web on mobile devices. That number is expected to grow to 580 million people by 2018. In recent months, India’s government, led by tech-savvy Prime Minister Narendra Modi, has launched an initiative called “Start Up India, Stand Up India.” Authorities have set up a $300 million fund for start-ups and eased restrictions on Indians abroad who want to invest in venture capital funds here. The success in China of companies such as Alibaba has inspired many to say that India is the next big consumer Internet market, said Nandan Nilekani, a leader in India’s IT sector and co-author of the new book “Rebooting India: Realizing a Billion Aspirations.” Players are emerging that are unique to India — such as RailYatri, which helps riders navigate the Indian rail system. Some entrepreneurs are also cashing in on social and cultural changes underway in urban India. One of them, Vishal Gupta, became a parent a few years ago, and noticed urban Indian families were changing. More couples were living far from home instead of in the traditional extended family system — where generations live together. Hoping to tap into that market, Gupta (who is not related to investor Amit Gupta) launched a portal called mycity4kids.com to help parents connect with other parents, schools, nannies and local events. Five years later, the site has 1 million visitors a month. He’s seeking an additional round of venture capital funding — $3 million — to reach 3 million more a month. “This is the best time to scale up,” Gupta, 40, said. The success stories are hard to miss, especially in Bangalore, a fast-growing start-up hub. Entrepreneurs are trading up from apartments to villas, said Harish Bijoor, a brand consultant who surveyed the industry. In the past two years, Indian start-ups have been acquired by Facebook, Twitter, Yahoo and Ibibo. The e-commerce company Flipkart.com, an Indian version of Amazon.com, attracted $1 billion from investors, including the New York-based fund Tiger Global this year. The company is worth $15 billion today, and its two owners are featured in the Forbes India list of billionaires. Another buzz-creator this year was Vijay Shekhar Sharma, 37, the founder of Paytm, a mobile payment company that was funded with $680 million from Alibaba and its affiliate. Sharma said a lot has changed since he launched his first start-up in 2001. Back then, it took him four years to raise $12,000 from a “friend of a friend.” He’s a mini-celebrity now and gets swarmed at restaurants by young people asking for selfies. Yet some investors, fearing an overheated market, have begun to proceed a bit more cautiously. Aditya Misra, co-founder of Focus, a new Mumbai start-up, said he “could sense that pragmatism is setting in” when he last met with investors to pitch his product. The pitch was for new software that lets apps locate and alert customers about deals when they are near a store, kind of “like a Google map when you are indoors” he said. “We thought the whole discussion would be about our innovative ideas,’’ he said, but instead there were many questions about users, clients, revenue and metrics for growth. “They were excited but did not want to be irrational.’’ Gupta, the investor, says he is aware of the risks. “We are not looking to make a quick buck. We want to be part of what’s new,” Gupta said. “As my father said to me last month: ‘I took risks and created this glass business 50 years ago. Now you need to create something new for your children, too.’ ”

D.C. start-up incubator 1776 closes a $12.5 million investment fund

For the better part of three years, D.C. start-up incubator 1776 has tried to nurture infant companies by giving them a pool of mentors, connections to other entrepreneurs and cheap real estate. Now it also has $12.5 million to invest in them. On Tuesday, the incubator announced the closing of a “seed fund” for early-stage start-ups in the District and elsewhere, meaning it is no longer accepting new investors. The fund has already put money into 20 start-ups, including six D.C.-based companies and start-ups based as far away as Germany and Israel. The fund is a reflection of 1776’s growing ambition beyond its beginnings as an organization dedicated to fostering innovation in and around the District. “Even before we launched, we had in mind that we were building a global enterprise,” said co-founder Donna Harris, herself a former technology entrepreneur. The company added an Arlington, Va., location in April when it acquired incubator and venture fund Disruption Corp., and a West Coast location when it bought San Francisco incubator Hattery. Since 2013 the organization has hosted a nationwide March Madness-style competition for start-ups in 16 cities. The fund is targeting start-ups that have developed proven concepts but are too small to interest a typical venture capitalist. Technology start-ups in the earliest stage of development usually get by on small investments from family and friends, or on loans from “angel” investors willing to risk backing an untested enterprise. Most start-ups fail, and investors often lose the money they put in. Harris says the average 1776 investment will be about $100,000, small change for a well-established company. But for an early-stage start-up, an investment that size can go a long way. One such business was RideScout, a transportation-options app that got the seed fund’s first investment — a cash infusion of about $40,000 — in the first half of 2014. Led by four Army veterans who met at West Point, the company moved into 1776 in May 2013, formally launched later that year and was purchased for an undisclosed amount by Daimler, the German automotive company that makes Mercedes-Benz cars. The investment was a small slice of a larger $2 million fundraising round, but RideScout’s leadership team says the capital came at a critical time. “Once 1776 had skin in the game, the incentives were better aligned for them to help us,” said RideScout Vice President John Gossart. “We had a team we were paying, so we were burning money even as we were raising funds from investors.” The start-ups at 1776 tend to work in the health, education, energy and transportation sectors, all heavily regulated industries. The incubator got its start with $200,000 from the D.C. government, along with a mandate to stimulate the local tech scene. “Where other than D.C. would you come up with something like this? If you think about what our city does really well, we’re doing this every day on behalf of global Fortune 1000 companies, but start-ups don’t have the money for a K Street retainer,” Harris said. In RideScout’s case, Harris helped the start-up find the right people within D.C.’s transportation department to test its app and evaluate how best to sell it to other municipalities. Today RideScout has formal partnerships with municipal governments in Chicago, Austin and San Francisco, among others. The fund will be managed by 1776 founders Donna Harris and Evan Burfield, along with 1776 chief financial officer Steve Graubart and Rusty Greiff, a senior adviser with New Markets Venture Partners. Equity stakes in companies that grow from the fund will be held by 1776.

Bitcoin startup raises a record $25 million. Is this a Bitcoin investment bubble?

People remember the dot-com boom as an era of irrational exuberance and frivolous investment, and there was a lot of that. But it's important to remember that many of the early dot-com stocks succeeded. While Webvan and Pets.com failed, Amazon, eBay, and Yahoo all succeeded. More importantly, the massive rush of investment capital helped build the fundamental infrastructure we all take for granted today. It took thousands of entrepreneurs experimenting with new Internet technologies—and many of them failing—to produce the successful online services that millions of people rely on today. Something similar may be happening in the Bitcoin economy. Eventually speculative excesses may push the value of Bitcoin start-ups, and of bitcoins themselves, up to unsustainable levels. But if Bitcoin succeeds, some of these Bitcoin intermediaries have the potential to be big, profitable companies. And in the process, they may transform Bitcoin into something that's useful to ordinary consumers.

Crowdfunding, from your smartphone

Crowdfunding is poised to be bigger than ever in 2013, with fundraising successes such as the Pebble watch and the Ouya game console both getting ready to launch their long-awaited projects. But crowdfunding is more than just bringing neat products to market. At next month’s Launch startup festival, MicroVentures — a company that vets accredited investors and gives them access to potential deals — will work with the conference and other partners to let startups do some live fundraising as they present their ideas on stage. That will be facilitated through a new mobile app, said Tim Sullivan, chief executive of MicroVentures. The company worked with Launch on the app, Sullivan said, because there was previously “no way through mobile devices that you can adequately see what’s out there in terms of companies that you might want to invest in.” Start-ups are hoping to tap into a fundraising boom sparked by rules that will allow them to sell equity stakes through “crowdfunding” platforms. A handful of European countries allow non-accredited investors to pick up equity in crowdfunding drives, but that practice is on ice in the U.S. pending some new regulations from the Securities and Exchange Commission. Congress passed legislation allowing more investors to take part in equity crowdfunding last year as part of the JOBS Act, but the SEC has been taking its time in crafting regulations about what information companies must provide to their investors. The agency was supposed to have the rules completed by the end of 2012. Sullivan said that he doesn’t expect to see much movement on the matter any time soon. Opening up equity crowdfunding to everyone, he said, raises a lot of concerns about how to make sure that any investor gets the information he or she needs to assess the risks involved in backing a startup. “It’s going to take a while for the JOBS Act legislation to work itself out,” he said. Related stories: In two hours, crowdfunding effort draws $308,000 of interest in 7th Street building Innovation for the ‘one percent’ _Sign up today to receive#thecircuit, a daily roundup of the latest tech policy news from Washington and how it is shaping business, entertainment and science._

How does a start-up with $34 million in orders go out of business?

Lily Drone certainly had some buzz not such a long time ago. Founded in 2013, the venture capital-backed start-up created a really cool, first-of-its-kind “throw and shoot” camera drone. What the heck is that, you ask? It’s a cute little drone about the size of your hand. It’s lightweight, has a high-resolution HD camera and is launched just by throwing it in the air. The really cool thing (in my view) is that it uses sensors to follow you around–so it can take video selfies while you ride your bike or ski down a black diamond trail, all on its own. And best of all…it worked! It worked so well that 60,000 people bought it before it was ready to ship. The $34 million they paid in pre-orders at a special price of $899 allowed the company to move the product through its research and development without the owners needing additional equity capital. Things were going well for the company. It won a Consumer Electronic Show Innovation Award in 2016 and received much media attention. But then the start-up apparently ran out of money.   Tech start-ups have raised billions during the past decade and a few unicorns have emerged from the group. But many have found themselves in similar straits as the entrepreneurs at Lily Drone.

Crowdfunded company takes a cue from Toms shoes

Growing up in a Chinese family, Vincent Ko saw the many uses of bamboo — in kitchen utensils, decorations and even furniture. Years later, as a recent Georgetown University graduate, Ko began to wonder if the trendy Asian grass had a place in fashion — in sunglasses, to be exact. Now, Ko’s D.C.-based Panda sunglasses company is featured in boutiques across the country and just inked a retail deal with Urban Outfitters. Ko used crowdfunding for his initial start-up cash; he is part of a new breed of entrepreneurs who seek tiny amounts from hundreds of small-time investors rather than a lump sum from a single, well-heeled angel. With the recent passage of the federal Jobs Act — a legislative package designed to increase capital formation and help small businesses, start-ups and entrepreneurs — crowdfunding sites may become even more popular, as small investors will now be able to buy equity stakes in companies. Previously, securities laws required equity investors to be “qualified,” meaning they had to show they had the wealth to invest. Ko’s business was born when he was wandering around the Georgetown shopping district one day last year and saw a display of Toms shoes — the footwear company that donates one pair of shoes for each one purchased. Inspiration struck: What if he could create cool-looking sunglasses that also have a charitable mission? Ko and his two co-founders partnered with TOMA, an organization that performs eye examinations and provides other health services to tribal communities. For every pair sold, Panda sunglasses donates an eye exam and a pair of eyeglasses for one person in need in Colombia, Argentina or India. They launched the idea on the crowdfunding platform Kickstarter and raised almost $20,000 — far overshooting their original goal of $3,000. By doing so, they joined scores of other local businesses and projects that have attracted sufficient donations to launch through the site. Recent Washington Kickstarter successes include management consultant Alice Ning, who raised $18,674 to start TapCaps, stickers that make it possible for people wearing gloves to tap on smartphone screens; and Pleasant Pops, a company that sells hand-crafted popsicles, which used its $26,366 to open a brick-and-mortar store in Adams Morgan. “I had already put my car, computer and banjo up for collateral for our bank loan, so Kickstarter was one of our only options,” said Pleasant Pops co-founder Ryan Horowitz. He got the word out about the Kickstarter page on Facebook and Twitter, and the company raised $12,000 in the first 24 hours of the campaign. Though Kickstarter has said it’s not interested in offering equity in exchange for contributions, after the passage last month of the Jobs Act, similar crowdfunding sites will be able to. There are roughly a dozen such services, most of which have whimsical names such as IndieGoGo, Launcht and Crowdcube. Now that their users can get stock in the companies they fund, crowd-backed entrepreneurs like Ko may become more common. In February, Ko took his Kickstarter money and began working with a bamboo shop in China to create the glasses, which come in five styles and sell for about $120 each. “China gets a bad reputation for how well products there are made,” he said. “But when it comes to bamboo, China is the best in the world because they’ve been doing it since the beginning of . . . China.” Panda’s big break came when the company sparked the interest of the retailer Anthropologie, which is introducing Panda in some of its test markets. To date, the company has been responsible for more than 1,000 eye exams, and Ko recently quit his consulting-firm job to work on Panda full time. “It was scary, but it’s now or never,” he said.

Fundrise demonstrates how to use crowdfunding to locate aspiring investors

Crowdfunding is gaining steam as a way to use the Internet to pool individual investors, and a D.C. start-up called Fundrise continues to demonstrate how to use crowdfunding to locate aspiring commercial real estate investors. On Wednesday morning, 130 people logged in to the company’s Web site expressing interest in buying stakes in a two-story building east of Logan Circle totaling $308,000. The company’s owners had been hoping to find interest in a goal of $300,000 in 30 days. Instead, it took about two hours. By Friday afternoon, just three days into the 30-day period, 276 people had registered interest in putting up a collective $703,000 according to the company’s site. Proposed investments were capped at $10,000. “We didn’t think it would go this fast,” said Ben Miller, who owns the investment firm WestMill Capital, with his brother, Daniel. WestMill bought the two-story brick building (using a traditional combination of cash and debt) for $852,000 in October with plans to lease it to a restaurant or retailer. Its search for interested investment partners amounts to a “test-the-waters” communication and required approval by local securities regulators and the Securities and Exchange Commission. Traditionally such opportunities are advertised through newspaper notices and the like; Fundrise used Facebook, Twitter, LinkedIn and an e-mail list of thousands of names. “It’s not something as far as I know that anyone’s ever used over the Internet,” Miller said. The responses are completely non-binding — no one has committed a single cent yet. But the Miller brothers (sons of local real estate magnate Herbert S. Miller of Western Development) tested the model once before, on a property WestMill bought on H Street, and it took weeks to find an equal amount of interest. Fundrise, which WestMill founded along with Popularise (a tool for getting feedback from community residents on development projects), probably needs to be broadly adopted to make it worth the time and expense needed to manage the investments. But the start-up companies have already brought the Millers and WestMill wide exposure — including a lengthy feature on the Atlantic Cities Web site. Last week the D.C. government awarded WestMill and a partner the rights to develop a former library on H Street NE. The next step for the building east of Logan Circle is to receive approval to issue a public offering for the building, something that will require lots more paperwork. Miller said if Congress would ease the regulatory process it would improve the outlook for Fundrise and other crowdfunding platforms considerably. “To me, the biggest problem isn’t so much the efficiency of it … it’s just that it’s slow. It takes months to get through the process with the regulator,” he said. Should WestMill take on dozens or even hundreds of equity partners, a more traditional real estate question will arise: What to do with the property? D.C. residents often complain about developers who lease space to national companies (say Subway or McDonald’s) over local entrepreneurs in the name of scoring higher rents. What will local investors propose when they have a stake in the process and are the ones collecting those rents? “The real trade-off I think between a local [tenant] and a national [one] isn’t the rent … but actually the risk,” Miller said. “There is a much, much higher risk. Do people appreciate that risk? Do they understand risk? If the local guy may not survive, do they realize that they might lose?”

Chile teaches the world a lesson about innovation

Chile launched a grand innovation experiment in 2010: it paid foreign entrepreneurs to come and visit for six months. It offered them $40,000 plus free office space, Internet access, mentoring, and networking. And, by the way, they would get to live in one of the most beautiful places on this planet, where housing was relatively cheap and corruption and crime were almost nonexistent. All Chile asked in return was that the foreigners interact with local entrepreneurs and consider making the country their permanent home.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday It seems too good to be true, doesn’t it? Indeed, many people thought that the idea was crazy. But Chile was making a bet — that the foreign entrepreneurs would transform its entrepreneurial culture by teaching the locals how to take risks, help each other, and form global connections. The experiment, called Start-Up Chile, was such a runaway success that, in an Oct. 2012 story, The Economist dubbed it “Chilecon Valley.”    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday Santiago is today buzzing with entrepreneurial activity; university students often look to join start-ups rather than big companies; Start-Up Chile has gained brand recognition in innovation circles worldwide; and local entrepreneurs are becoming more ambitious and looking for opportunities abroad. This is what I have personally observed during my trips there. Start-Up Chile has also been flooded with applications—more than 12,268, from 112 countries. According to Start-Up Chile’s executive director, Sebastian Vidal, 810 startups from 65 countries have so far been admitted into the program. The first 199 companies that visited Chile and returned home reported that they had raised a total of $72 million in funding. A batch of 132 companies that chose to stay there reported that they had raised $26 million. Several start-ups have had successful exits, and hundreds of others expect to make it big. This is pretty good by entrepreneurial standards, considering that Chile has invested only about $35 million in this experiment. Other countries have spent hundreds of millions — even billions — of dollars in their efforts to create technology hubs. Legions of consultants have been advising regions to build science parks next to research universities and to offer financial incentives to selected industries to locate there, touting Harvard professor Michael Porter’s cluster theory. Porter had observed that geographic concentrations of interconnected companies, specialized suppliers, and service providers gave certain industries a productivity and cost advantage. His followers postulated that by bringing these ingredients together into a “cluster,” regions could artificially foment innovation.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday They couldn’t. The formula doesn’t work. The top-down industry cluster is a modern-day snake oil. Chile proved that it is people, not industry, who power innovation.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday Tens of billions of dollars have collectively been invested by hundreds of regions all over the world in top-down cluster-development efforts. Consultants have reaped hundreds of millions of dollars in fees. Yet there is not one proven success anywhere in the world. Clusters form naturally on a basis of a region’s inherent geographical and economic advantages — and of entrepreneurs’ hard work. Innovation springs not from industry but from motivated risk-takers — from people. The Start-Up Chile experiment’s purpose was to learn whether a technology hub would follow from importing entrepreneurs and providing them with the right networking support and mentorship. I helped design the Start-Up Chile program and serve on its advisory board. My involvement with Chile began in 2008, when the Chilean government asked my research team at Duke University to review Chile’s engineering-education system and its I.T. outsourcing cluster. I told the government that the cluster would not create the innovation or employment it hoped for, because Chile lacked the numbers of engineering graduates. Instead, I advised it to focus on entrepreneurship and emulate Israel and Finland: small countries with highly skilled, highly motivated innovators.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday The challenge Chile faced, however, was that — like most regions other than Silicon Valley — it didn’t have an entrepreneurial culture that tolerated failure and encouraged information-sharing and experimentation. So I suggested that the country import what it needed; that it take advantage of America’s foolishness in turning away the world’s most innovative entrepreneurs. Because of flawed immigration policies, the U.S. is experiencing an exodus of highly skilled entrepreneurial talent. Chile’s Minister for Economy, Juan Andrés Fontaine, to whom I pitched it, was skeptical of the idea that these foreigners would come to Chile. But he sanctioned an experiment and had his innovation chief, Nicolas Shea, lead it.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday Start-Up Chile has survived two government changes and is going to form the basis of major new innovation initiatives, according to Eduardo Bitran, recently appointed to head Chile’s economic development agency, CORFO. In a Start-Up Chile advisory-board meeting at Stanford University, he said that the project was of national importance and a model for the rest of the world. There surely are lessons for regions all over the world in Start-Up Chile’s success. To foster economic growth and innovation, the focus needs to be on people. They need to be empowered, enabled, and connected.  There is also an important lesson for America: it needs to wake up and fix its immigration policies before Chilecon Valleys sprout up all over the world — powered by the people it has turned away. ![](http://img.washingtonpost.com/rf/image_606w/2010-2019/WashingtonPost/2011/06/29/National- Economy/Images/39894581_H565831.JPG)    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday

Commentary: Why we need a “Startup University” and how it would work

What is America itself if not the original start-up—a risky and jerry-rigged operation spun out of Britain. Our county’s founders risked death to build it. Helping today’s entrepreneurs thrive can’t be harder than that, right? My start-up has hired eight people in the last two months, and we feed work (read: $$) to a hive of contractors. We started with very little, built a product, started getting user traction, raised a little cash and then started hiring. The value of our company grows monthly and we will very likely go on to generate wealth for our founders, early employees and investors. This is a microcosm of how America’s economy can and should grow. But founding and building a successful start-up remains incredibly difficult, and one of the primary barriers preventing people from founding their own businesses is that normal living expenses continue while you are raising initial funding for your venture. It will likely take at least six months to raise a significant seed-funding round. Before that, you must build a minimum viable product that starts to gain user traction. Early-stage start-up founders are typically not able to take a salary until the seed round has been raised. And even after the seed round, founders tend to pay themselves just enough to scrape by. It’s the ultimate catch-22: how does the normal person without a previous exit or trust fund afford to even get past the first six months? **Gallery:The 10 most entrepreneurial colleges in the United States ** Of course, food and rent money for founders is only part of the equation, and raising seed funding for the company is very, very hard. Most seed-stage venture capitalists still amount to a bit of an old boys’ club, angel investors often seem as ethereal as their namesakes, and “Investment Groups,” or paid pitches, typically fill rooms with real estate agents, dentists and insurance salesmen. It can be a bit of a tight rope act trying to find funding. This is not all bad news, in that it creates a culture in which sub-par start-ups fail fast. The thin soil at the bottom means only the most tenacious—and worthwhile—ventures survive. However, a lot of great products fail due simply to a lack of access to sufficient capital. We have a great team, and each founder had successfully exited a start-up in the past. Should have been easy, right? It wasn’t. It took our CEO six months of spending 100 percent of his time fundraising to raise our seed round. There is something to be said for difficult initial conditions, which separate the entrepreneurs from the wantrepreneurs. But the pendulum has swung too far. That’s why I’m proposing “Startup U,” at once a solution to the early problems of early-stage businesses and an attractive alternative to the typical university education – as well as the ever-increasing student loans that come with it. Here’s how it would work: Startup U’s “studentrepreneurs” would be loaned money and released on a two-week basis with sufficient funding for room and board. This loan would be repaid over the course of one to two years. Recipients would repay this loan in small monthly minimum payments, including interest; the same way student loans are repaid. Loans would come from the same sources they do now for regular continued education: a combination of government, banks, and other specialized institutions. Startup U students would spend their first six months working as an apprentice at an existing start-up. The venture must be funded and “accredited” by Startup U. After the six months are up, the student would be connected to Startup Weekend and/or Lean Startup Machine to select an idea, validate a product concept and to build their first start-up. Next comes accelerating the startup. Hopefully, we can connect the student with an accelerator program like 500 Startups, Y Combinator or TechStars. As with the apprenticed start-up, the accelerator program must be accredited by Startup U. Think of both the start-ups they apprentice for and the accelerators they graduate to as “mini-universities”. As with universities, Startup U students must apply to get in; the more impressive their credentials, the better the start-ups and accelerators they will get into. Startup U students will likely fail. This is awesome. We learn from failure, and those failures will make out students better, smarter, and faster. Hopefully the students fail fast and pivot a few times along the way. They will be better off for it. As Startup U students, founders can afford to live while they gain invaluable expertise in starting and growing companies. Through a unique riff on traditional student loans, founders have money for room and board. The loans are less risky for lenders than existing student loans, since the average loan would be much lower than a comparable college loan. Startup U wouldn’t make up for the dearth of angel investors, but it does provide for a way to funnel young people into the highly successful accelerator programs that already exist. Almost every single one of these accelerators has a micro-level mentoring program focused on fundraising, as well as at least one well-attended “demo day” at the program’s conclusion, with a room full of active and accredited investors. One point that needs to be very clear: Startup U does not intend to be a replacement for traditional universities, but rather a complement to them. There are many professions, industries, markets, and careers for which an undergraduate and postgraduate education is key. But by taking the strengths of the university and applying them to the world of start-ups, Startup U creates a powerful alternative to the current start-up system. _Danny Boice is the CTO and co-founder ofSpeek, a Sterling, Va.-based start- up that provides simple conference call services with a visual interface.Previously, Boice founded Jaxara, a global software firm._ **Do you think Startup U would improve the current start-up launch culture? Please share your thoughts in the comments below?** **** _FollowOn Small Business on Twitter._

Steve Case, Up Global taking their start-up campaign beyond the United States

Steve Case last month announced plans to travel around the country this summer to highlight — and perhaps accelerate — the rise of start-up ecosystems in cities not commonly mentioned in the same breath as New York, Boston and Silicon Valley. Now, he’s taking that same campaign overseas. One of the founders and former chief executive of America Online, Case and his wife, Jean, will lead a series of visits by successful American entrepreneurs to budding start-up communities in cities around the world under a new program to be announced Monday by Seattle-based nonprofit Up Global. Called Entrepreneurs Across Borders, the initiative plans to kick off with a delegation heading to Barcelona in October. “We’re looking to visit developing entrepreneurial ecosystems, ones that are in the throes of building co-working spaces and business accelerators, and developing angel investment,” Marc Nager, the group’s chief executive, said. “We want to come in and help codify and accelerate those efforts.” Up Global — the result of a merger between nonprofit Startup Weekend and the White House’s Startup America partnership — hosts an array of events around the world, each meant to promote entrepreneurship and start-up ecosystems. The organization has worked with the Case Foundation on multiple occasions of late, recently partnering on Steve Case’s upcoming roadshow to Detroit, Pittsburgh, Cincinnati and Nashville. “I’ve long known that great start-ups can be found everywhere, not just in Silicon Valley,” Case said earlier this year after announcing a $100,000 investment in each of 10 start-ups based in nontraditional tech hubs. Case has long championed the creation of start-up hubs outside of hotbeds such as Silicon Valley — a campaign he has dubbed the “Rise of the Rest.” Under the new international program, Up Global and the Case Foundation will be recruiting entrepreneurs and executives who have raised at least $2 million in funding or grown a start-up’s revenue to at least $1 million. During their trips overseas, they will meet with entrepreneurs, investors and local officials to discuss ways each of them can help build a community in which upstart businesses can thrive. Nager called the program a natural next step for the organization, which already has volunteers working in cities around the globe and will host some type of entrepreneurship event in 126 countries in 2014. _FollowJ.D. Harrison and On Small Business on Twitter._

Start-up that automates charitable donation raises $1.65 million

The ALS icebucket challenge is thought of as one of the first charity campaigns to figure out how to use social media. But imagine if every time someone posted #IceBucketChallenge on Twitter money was automatically pulled from their checking account? Goodworld is aiming to put the Twitter-sphere’s money where its hashtag is – and now investors are taking notice to the tune of $1.65 million.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico Here’s how it works: Once a donor signs up with Goodworld, giving a donation to a charity becomes a one-step process that takes no longer than it takes to compose a tweet or a Facebook post. When a charity registers with GoodWorld, anyone can donate to the cause simply by adding #donate, followed by @[name of charity] on Twitter. On Facebook the donor has to use #donate in a post with the amount they’d like to give, posted on the nonprofit’s Facebook page. Goodworld takes a 4.8 percent cut of each donation and another 2.2 percent goes to the credit card company, but the rest of each donation goes directly to the non-profits. The start-up launched last October with just seven charities, and now there are almost 200 nonprofits in GoodWorld’s system, and almost 4,000 donors have signed up. What started as a team of four has grown to twelve people based out of District start-up incubator 1776, and the company announced Tuesday that it has secured $1.65 million in seed funding. Seeking to “democratize the landscape for donors,” as chief executive Dale Pfeifer puts it, the company says it is attempting to make it easier for donors to contribute to their favorite causes, beating popular crowd-funding sites like Indiegogo by just a few critical clicks. “People hate to click links. They’ll sit there on Facebook and ask questions all day long but they won’t click and follow a link,” said Ryan Moore, vice president of social media fundraising and promotions at the Beagle Freedom Project, an animal protection organization that has piloted Goodworld’s software. Moore says his organization has raised almost $40,000 through Goodworld’s technology after just a few months. And the instantaneous nature of donations makes it easier for nonprofits to conduct rapid-fire fundraising efforts in the event of a crisis. “Since we’re a rescue organization, being able to remind people about a rescue that we’re on, and having people be able to donate simply by posting [on social media] has been revolutionary for us,” said Tim Woodward, chief operations officer at Animal Rescue Corps, a nonprofit organization that advocates against animal cruelty and responds to specific cases of animal cruelty. “It works particularly well for us when we’re on scene in the moment and people feel the urgency.” Woodward’s team tested the fundraising software by asking the Internet for help with patching up some of their response vehicles that needed work. They agreed to be one of Goodworld’s initial product testers in February, and in March they held a “fix up the fleet” campaign that raised $5,000 in under a week. Woodward estimates they have raised over $10,000 in total. The latest round of fundraising was co-led by New York-based Nyca Partners,  a venture capital firm. Chris Liddel, an investor who served as the chief financial officer for both Microsoft and General Motors, also contributed to this round of funding. The raise includes an initial $500,000 round of investment that included Katharine Weymouth, the former publisher of The Washington Post. “The ability to transfer money on social media with just a hashtag is revolutionary for the financial technology sector – a space ripe for disruption,” Hans Morris, managing director of Nyca Partners, which led the latest round of funding, said in a statement. Goodworld executives say their next challenge is figuring out how to turn online donation into a game, coaxing users to donate by finding ways to pit them against one another, such as offering prizes for the top donor on an individual post. “Social media is a very new channel for donations that’s very different from what anyone else has done, this is more of a call-and-response activity,” Goodworld’s chief executive Pfeifer said. “People like to feel like they’re not just giving, they’re also receiving. They want to feel like they’re a part of something.”

Trump campaign alumni launch email fundraising start-up

Last fall, Matt Oczkowski and Parks Bennett were logging 12-hour days in a rented office in San Antonio that smelled of Chick-fil-A and Doritos, focused on one mission: to elect Donald Trump president. As they raced to crunch voter data and build up Trump’s small-donor base, an idea began to jell: Could they apply data science to make email fundraising more effective and transparent? The concept, which the two young GOP digital strategists had begun discussing earlier in the cycle while working for Wisconsin Gov. Scott Walker’s presidential bid, is the heart of a company they’re formally launching this week called Campaign Inbox. “There has to be some innovation in this space,” said Oczkowski, who helped lead the data science efforts for the Trump campaign as head of product for Cambridge Analytica, a company backed by hedge fund magnate Robert Mercer. “We didn’t see a solution in the marketplace that really fit with what we wanted, so we just decided to do it ourselves.” The venture is the first known start-up to emerge from Trump’s White House run — the latest example of how presidential campaigns serve as hothouses for new enterprises, particularly in the technological space. “We always call campaigns the world’s greatest start-ups, because one day you have no money and no entity and the next day you have a million dollars and are ready to go,” said Lee Dunn, who headed Google’s elections advertising team in 2016. Campaigns, she noted, “throw crazy ideas out there, they discard and start anew, they act fast.” President Barack Obama’s two presidential bids, for example, birthed a slew of successful enterprises such as Optimizely, a website optimization company, and Modest, a mobile commerce platform eventually acquired by PayPal. “There is an energy that does push innovation and gives people space to explore it,” said Betsy Hoover, who served as Obama’s national digital organizing director in 2012. Earlier this month, Hoover and other Obama campaign alumni launched a business incubator called Higher Ground Labs that aims to provide investment to early- stage political tech companies on the left. “If we don’t build this ecosystem, we do risk being outpaced by the Republicans,” she said. “They did some things in 2016 that pushed the envelope.” Trump’s tech operation was based in San Antonio, headed by chief digital strategist Brad Parscale. At its peak, the team — which included staff from Parscale’s company, the campaign, the Republican National Committee and contractors — numbered a few hundred. They worked out of an office space near the airport that had been hurriedly fashioned into a campaign-like bullpen. Dunn, who visited occasionally from Washington, said she was impressed with how Oczkowski and Bennett sought to calibrate online messages by testing responses to news developments in real time. “I think they are leaders in a new generation that is starting to emerge in online advertising,” she said. As the head of the RNC’s small donor program, Bennett oversaw an effort that generated millions for the Trump campaign and the party. But he said he thinks the returns could have been even greater if the campaign had a clearer sense of who was receiving their barrage of email solicitations. “The biggest problem for me has been the lack of transparency when deploying an email,” Bennett said. “You’re just loading a list and hitting ‘send’ and crossing your fingers that it’s actually going to make it into your intended user’s inbox.” Unlike Democratic campaigns, which typically build donor lists by running online ads, GOP groups have relied heavily on email list brokers, who pocket commissions in exchange for access to email addresses they control. Campaigns and committees often rent dozens of lists in an effort to hit as many potential donors as possible. In the 2016 campaign, the RNC and one of its joint fundraising committees with the Trump campaign spent more than $38 million on email list rentals, Federal Election Commission reports show. It’s a dynamic that has troubled Oczkowski for some time. “You’re really blind going into this relationship,” Oczkowski said. “This is a big industry, and there are just no protections or watchdogs out there if you’re a buyer.” “If you go out there and rent email lists for $10,000, as long as it yields more than $10,000, you’re happy with the scenario,” he added. “You have no idea if you could have raised double that, or if you’re annoying these people because they are on all these different lists.” After the campaign, Oczkowski and Bennett partnered with a developer they met through the Walker campaign to build a new email service provider that tracks inbox placement. Eventually, the nascent company hopes to acquire enough emails to build a database that will allow clients to better target certain constituencies. The foray into start-up land is a risk, acknowledge the partners, who are financing the company themselves. But, Oczkowski said, “we know this is needed in the market. I’ve sat and watched this for four or five years now, waiting for someone to do this.”

$2 million Kickstarter campaign to raise funds for ‘Veronica Mars’ movie sets record

Shortly after 11 a.m. Wednesday, Rob Thomas, creator of the short-lived UPN/CW detective drama “Veronica Mars,” tweeted that if fans would pledge $2 million by 11 p.m. April 12, Warner Bros. would put into production a “Veronica Mars” movie. The film would get a limited theatrical release early next year, and the studio would foot the bills for marketing, promotion and distribution. A Kickstarter campaign was born. “The record time to $1M on Kickstarter is 7 hours. Can we top that? Can we make it there in 5? $80K to go!” Thomas tweeted excitedly Wednesday afternoon. The campaign hit $1 million at 3:06 p.m. Eastern time — just four hours after it was launched, setting a Kickstarter record. “We are so close . . . it has me so jittery! So Im doing the only reasonable thing to calm my nerves. #imonthetredmill-watchinghoarders,” tweeted star Kristen Bell on Wednesday afternoon. Shortly before 9 p.m., about 10 hours after being launched, the campaign passed the $2 million mark. Kickstarter is the company founded in 2009 to raise money for “creative” projects via Web crowd-funding. Among the many film projects that reportedly have benefited are the documentary shorts “Sun Come Up” and “Incident in New Baghdad” — both nominated for an Academy Award. Bret Easton Ellis, Whoopi Goldberg, Ricki Lake, Dan Harmon and Ed Begley Jr. are just handful of the celebrities who reportedly have patronized Kickstarter. Thomas’s fundraiser roared out of the gate Wednesday morning; by 1:45 p.m. more than $720,000 had been pledged by about 9,300 people. That’s an average of about $77 per person. Pledges were pouring in at the rate of about $4,000 per minute. “Veronica Mars” debuted on the now-defunct UPN network in fall 2004; 2.5 million people tuned in to the first season. The show starred Bell as a high-schooler in the town of Neptune, Calif., who moonlights as a detective under the mentorship of her private-eye dad. When the UPN and WB networks went toes up, and the CW network rose from their ashes, the new network took “Veronica Mars” to its prime-time lineup, but the show only lasted one more season. Apparently, “VM” fans — who, sadly, are not called Veronica Martians, but rather “Marshmallows” — have been obsessing ever since. “Best $50 I’ve ever spent. ‘Veronica Mars’ is hands down my favorite TV show of all time!! I know every single line,” gushed pledger Tami Bereznay in the comments section of the fundraising campaign. “I’m an unemployed, broke, recent college graduate, but I’m still willing to donate for this!” wrote the enthused but fiscally challenged Autumn Hayes, who did not say how much she’d tossed in to the kitty. “If I can do it, anybody can,” she added. Many of the comments were made by “VM” fanatics outside the United States, who complained that the campaign had been set up to ship pledge rewards only inside the United States, which was “crippling the campaign.” (Wednesday afternoon, Thomas tweeted they were “working out thorny issues so we can include you.”) Many of the donors said they’d made only a $10 pledge, which entitled them to receive a PDF of the shooting script on the day of the movie’s release, as well as regular updates and behind-the-scenes scoops throughout the fundraising and moviemaking. “The more money we raise, the cooler movie we can make,” Thomas promised fans on the Kickstarter campaign page at the start of the fundraiser. “A $2 million fundraising total probably means cross words are exchanged at the class reunion. $3 million? We can afford a full-on brawl. $10 million? Who knows. . . . For some reason the Neptune High class reunion takes place on a nuclear submarine! A Hobbit shows up! There’s a Bollywood end-credit dance number! “I’ve always wanted to direct Bill Murray . . . if that total goes high enough, I’ll bet the good folks at Warner Bros. will agree a sequel is a good idea.” Speaking of the good folks at Warner Bros., you can imagine how silly they were feeling Wednesday afternoon for having set the greenlight threshold at a mere $2 million. You know who else was probably feeling pretty silly? Mitch Hurwitz, who has been trying, unsuccessfully, to get an “Arrested Development” movie off the ground for, like, forever. Ditto Shawn Ryan, who about six months ago said in interviews that he was mulling a Kickstarter campaign to make a movie version of his failed “Terriers” series for FX — while tweeting that he would “need Fox approval (no gimme). Who’d be in?” (On Wednesday afternoon, Ryan tweeted: “Very interested to see how ‘Veronica Mars’ kickstarter goes. Could be a model for a ‘Terriers’ wrap up film.”) Anyway, less than a half-hour after Thomas first tweeted the news of the campaign, someone had already pledged $10,000, which entitled the winner to a speaking role in the flick — playing a waiter/waitress who would say the single line, “Your check, sir.” With the caveat, Thomas explained, that if the actor “goes all hammy and ruins the scene,” that actor will be cut. Another rabid fan pledged $6,500, which entitled that donor to name a character whose name would be spoken by an actor at least once in the movie — so long as the name can be cleared by Warner Bros. legal suits. Poor Bell is on the hook to record 44 15-second personalized voice-mail messages, because that’s how many people contributed $500 to the movie fund. She’ll also have to make 50 20-second personalized video greetings — the number of people who ponied up $600. And late in the afternoon, as the $2 million goal drew near, Thomas announced a “stretch goal”: “$3 Million or Logan Echolls doesn’t survive the movie!” Echolls is Veronica’s bad-boy love interest. Minutes later, he amended that challenge and promised that Logan would live — after he was accosted by Marshmallows at his local Starbucks. “Instead,” he amended, “[Mars’s dog] Backup won’t survive unless we get $3M.” Moments after the $1 million threshold, Cardinal Jorge Mario Bergoglio of Argentina was unveiled as Pope Francis. “Wow. A new pope and a Veronica Mars movie all in one day!” marveled “VM” fan Jess Zimmerman.

Former LivingSocial employees kick off sock company

One day last year, Phil Moldavski took a walk on the wild side: He logged onto Zappos.com and bought the funkiest socks he could find — a pair with multicolored arrows for about $20. “I went off the deep end,” said Moldavski, 25, who worked in LivingSocial’s marketing department at the time. “It was kind of a game-changing experience. I wore them to work and couldn’t believe how many compliments I got.” One co-worker impressed by Moldavski’s socks: Ricky Choi, 26, a self-proclaimed “sock guy” who has a drawer full of 150 pairs. The two decided to join forces. Both quit their jobs at LivingSocial last summer, and spent three months learning coding in San Francisco. Then they got to work in Choi’s Logan Circle apartment, designing socks in different patterns (stripes, camouflage, polka dots) and colors (orange, purple, tan). In all, they have invested a few thousand dollars in the venture. “We were literally just creating the socks we always wished we had,” said Moldavski, who majored in finance and marketing at Georgetown University. Last Wednesday, Nice Laundry made its debut on crowdfunding Web site KickStarter. Once the company secures $30,000 in pre-orders — each six-pack of socks costs $39 — Moldavski and Choi will begin mass producing their merchandise at a factory in South Korea. (By the end of the first day, the company had raised more than $15,000.) “Since we’re launching a brand from the ground-up, we just want to make sure people get behind this idea from the beginning,” Moldavski said. Novelty men’s socks have gained popularity in recent years with the rise of companies such as Happy Socks. Even Rob Kardashian, the brother of socialite Kim Kardashian, has entered into the business with his new line of Arthur George socks, which are sold at Nieman Marcus for $30 a pair. The biggest appeal of Nice Laundry, Moldavski said, is its price. Socks cost about $6.50 a pop, much lower than the $12 to $40 they generally sell for at department and specialty stores. Plus, he said, the company’s six packs offers a one-stop shop for men who want to update their entire sock drawer without much thought. “It doesn’t make sense to buy just one pair,” he said. "Like, I’m a guy. Why do I need to spend time on that stuff?” The company will send customers prepaid shipping labels with each order, asking them to send in old socks that will be recycled into textiles and home insulation. “I think it’s time that small businesses like ours begin thinking about social consciousness from the beginning — not just once they get to be [big],” Moldavski said. Will bright, bold socks catch on in Washington, where many are wary of deviating from the city’s uniform of dark suits and conservative ties? Of course, the co-founders say. “I think a city like D.C. is the perfect place for crazy, colorful socks,” Moldavski said. “It’s like having that cool, hidden tattoo that makes you really happy but isn’t seen by everybody.”

This trend brought to you by…nostalgia! Spinning tops are cool again.

Oh, nostalgic revivalism. We have so much to thank you for. The fashion: big glasses, mustaches, high-waisted pants. The trinkets: typewriters, record players ($98 at Urban Outfitters this Christmas!), single-speed bicycles. The chance to capitalize on a generation that longs for a time they never actually lived in went mainstream years ago. And yet, it’s a gift that just keeps on giving. (Re-)Introducing: the spinning top. Two entrepreneurs from Toronto have sold more than 10,000 tops since starting their company ForeverSpin in January. They began with a goal of raising 1,500 Canadian dollars through Kickstarter. That campaign alone raised more than $130,000 (about $115,000 in U.S. currency)    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico The demand is so high that on Oct. 29, they introduced “ForeverSpin 2.0.” In an hour, they met their goal of $5,000 in Canadian money. In a day, $20,000. On Sunday, they broke $140,000, and there’s still 25 days of the campaign to go.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico “Now people are playing with iPads instead of spinning tops, but everyone used to have them,” founder Cristobal Rosales said. “It’s really the oldest toy out there.” The spinning top, the initial iteration of the dreidel, Beyblade and Weeble, is a toy so old that Rosales’s version was inspired by a design from 3000 B.C. Traditionally they were made of wood, but most on the market today are plastic. ForeverSpin tops, however, are made of high-quality metal that is precision-cut using a “computer numerical control” machine, better known as CNC. Meeting their first Kickstarter goal by 8,696 percent allowed Rosales to make his spinning top in 10 different metals. The lightest, sterling silver and aluminum, cost less than $40 and spin for about two minutes. For five- minute spins, there’s Tungsten ($195) and 24-karat plated gold ($65).    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico So who is buying these things? The 25-year-old Rosales’s pitch via phone interview goes like this: “It makes for a perfect gift, for a birthday, an anniversary, an engagement, a wedding, even a funeral!” A spinning top for a funeral? The demographics he has to offer are a bit more informative. ForeverSpin has shipped to 50 countries, and the tops have been especially popular in Japan, Indonesia and Germany, where he says there is a strong interest in CNC manufacturing. His other large market is the United States, where he’s selling predominantly to (surprise!) 18- to 35-year-old males. Rosales credits nostalgia, the high- quality materials, and (at least a little) Leonardo DiCaprio’s spinning top in “Inception.”    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico So get over yourselves, Polaroid cameras and Rubik’s cubes. This year’s hipster stocking stuffer — the ForeverSpin 2.0 will ship out in December — was cool before there even was a Christmas. P.S.: If the gee-haw whammy diddle makes a comeback, you know where you heard it first.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico

New Zealand decided it was in the public interest to make Peter Thiel a citizen

TOKYO — An angry backlash is brewing in New Zealand after it emerged Wednesday that Peter Thiel, the controversial Silicon Valley venture capitalist, was granted citizenship after only four visits to the country, and didn’t even travel there for his citizenship ceremony. Opposition politicians and commentators are raising questions about the process that allowed Thiel, the 49-year-old billionaire co-founder of PayPal, to circumvent normal residency requirements and effectively buy his passport. “This is all about money,” said Iain Lees-Galloway, the immigration spokesman for the main opposition Labour party. “And that is not acceptable in New Zealand. We pride ourselves on having an open and transparent system of government, so this situation feels very uncomfortable for most New Zealanders.” While some Americans had voiced an interest in escaping to New Zealand, at the bottom of the Pacific and with six times as many sheep as people, if Donald Trump became president, Thiel doesn’t fit into that category. He was a prominent supporter of Trump’s candidacy and a member of his transition team. Thiel, who was born in Germany and already holds German and American citizenship, applied for a New Zealand passport in 2011, several months after he donated just over $800,000 to an earthquake relief fund there. New Zealand offers visas for investors and entrepreneurs that come with residency, and issues about 250 of these visas each year. But to apply for full citizenship, visa holders are supposed to meet a residency requirement: spending at least 70 percent of the preceding five years in New Zealand.  They showed that Thiel did not meet this requirement and declared that he did not intend to live in New Zealand. But Thiel submitted that his entrepreneurial and philanthropic skills made granting him citizenship a matter of public interest in New Zealand, according to a summary of his application released by the department, part of a 145-page file. As well as co-founding PayPal and being the first outside investor in Facebook, Thiel had started a venture capital fund in New Zealand, investing $4 million in an online accounting company — a stake currently worth $110 million — and a fiber optic company. “Mr Thiel has demonstrated his philanthropy through making a million dollar donation to the Christchurch earthquake relief fund,” the head of the department wrote in a summary of Thiel’s application. At the time, 1 million New Zealand dollars was equivalent to U.S. $823,000. The department head recommended the New Zealand government grant Thiel citizenship based on “public interest due to exceptional circumstances.” Thiel had contended “being a New Zealand citizen would enable him to represent the country on the international stage and give him greater confidence in mobilizing New Zealand's talented entrepreneurs,” the summary of his application read. “It would give him great pride to let it be known that he is a New Zealand citizen.” Furthermore, his attorney said that Thiel would “embrace and contribute to the life, history and culture of New Zealand.” Thiel, who had visited New Zealand only four times, according to the documents, was awarded New Zealand citizenship in a private ceremony at the consulate in Los Angeles in August 2011 — a highly unusual arrangement.  Thiel bought a $10 million, 500-acre block of lakefront land in Wanaka, one of the most sought-after spots in New Zealand's South Island. Foreigners must get government approval before buying such sensitive pieces of land, and the Herald had asked authorities if Thiel, believed only to have permanent residency, had been granted this permission. It turned out that because he was a citizen, he didn't need it. Prime Minister Bill English has defended the decision to grant the billionaire a passport, saying “a little bit of flexibility” was useful when it came to citizenship laws. “New Zealand is a better place with Mr Thiel as a citizen,” he said. But opposition politicians like Lees-Galloway have sharply criticized the decision and are demanding a full review. “What did New Zealand get out of this?” he told The Washington Post. “His two main investments were made before he became a citizen and there’s no evidence that he’s been active in terms of investment or philanthropy since.” Toby Manhire, a columnist for the New Zealand Herald, said that the lack of transparency in the whole process was concerning.  Thiel has already been the subject of a significant amount of controversy in the United States. He is Trump's most prominent supporter in the overwhelming-liberal Silicon Valley and was a member of his transition team. Although he has not been given a formal role in the Trump administration, Thiel has been a vocal supporter of the president's first steps, including his controversial travel ban on visitors from seven predominantly Muslim countries.

Big-data venture lab opens in Silicon Valley

SiliconValley data scientists are launching a new venture fund for data-centric start-ups, backed by some of tech’s most prominent investors. Called Data Elite, the fund’s backers include Andreessen Horowitz, early Google and PayPal investor Ron Conway, and venture firm the Social+Capital Partnership, founded by Facebook executive Chamath Palihapitiya. Data Elite will choose between five and 10 businesses, each with at least five years of experience in the data science field, to comprise its inaugural class. Each will receive a minimum of $150,000 in funding and will work from Data Elite’s office space in San Francisco for three months, according to founder Stamos Venios. Venios and his co-founder Tasso Argyros, whose start-up Aster Data was acquired by Teradata in 2011, created Data Elite to connect entrepreneurs to advisers with data science expertise. Data entrepreneurs at start-up incubators without a data-focus told Venios “funding was not an issue ... but it was to find really good advice that could help them build and scale their products,” he said. Venios and Argyros recruited data specialists such as Facebook’s analytics head Ken Rudin, Zynga’s platform and analytics manager Daniel McCaffrey, and Netfelix’s data science platform general manager Jeff Magnusson to serve as Data Elite partners and start-up advisers. Partners are required to spend a minimum of five hours a week at the Data Elite office, Venios said. Data Elite is accepting applications until Dec. 15 and is particularly looking for entrepreneurs with at least five years experience in the field. The program will start in January.

An American’s mission: teach Syrian teens how to start-up a business

The Syrian war, so far, has claimed the lives of 470,000 people and turned five million others into refugees. The country’s economy is in ruins, unemployment is skyrocketing and many are suffering. But one American believes that entrepreneurship can help turn things around there. And he’s just left for the region to prove it.  Lehman is currently the assistant director of a $20 million fund at the University of Chicago’s Polsky Center for Entrepreneurship and Innovation (his trip is not affiliated with the center). Working with a local youth center, Lehman left recently to stay for two weeks in the Turkish border town of Reyhanli–a short bike ride from the Syrian border–to conduct an entrepreneurial boot camp for 15 previously selected teenagers who applied for the opportunity. The teens will come ready with a business idea and will focus on customer engagement and prototyping products. The aim is to get them on the streets selling “within the first few hours,” so they can begin to shape their business. Many Syrian refugees have already embraced entrepreneurship. One research group found that those who settled in Turkey have started more than 6,000 companies and invested more than $334 million in the local economy. But both current and prospective business owners there still have an enormous need for developing the necessary business know-how. “Often times, people have an idea or they have a skill, but they don’t necessarily know how to take that idea to market,” Gayle Tzemach Lemmon, a senior fellow at the Council of Foreign Relations that specializes in entrepreneurship in conflict zones told the Tribune. “An even small intervention by our standards can be a big difference.” In the U.S., starting a business and becoming an entrepreneur is considered a dream for many. But for refugees of the Syrian conflict, it could be the only way to survive.

It’s a bird. It’s a plane. It’s a flying car!

Move over George Jetson, Google’s co-founder will be flying his car right by you. A Silicon Valley start-up named Kitty Hawk (in homage to the Wright Brothers) has finally unveiled its flagship product: the Flyer. It’s a flying car. Oh, and you can buy it by the end of the year.    “We’ve all had dreams of flying effortlessly. I’m excited that one day very soon I’ll be able to climb onto my Kitty Hawk Flyer for a quick and easy personal flight,” Larry Page, Google’s co-founder who invested more than $100 million into the company and other flying car start-ups said in a statement provided to The New York Times and reported by CNN.

Crowdfunding by day, cleaning by night

The bottom of a public toilet is an unlikely place to find inspiration. But that is where Briana Mercedes Weidner finds it, week after week, as she cleans 21 toilets and four urinals at the Cecil County Health Department in Elkton, Md. The 25-year-old puts in her earbuds, pulls on stretchy, blue gloves and sprays toilet seats with Lysol. It’s mindless work, she says, and so she lets her mind wander: to her next sketch, her next business venture and the Kickstarter campaign that’s given her a taste of small-time entrepreneurship. In many ways, working as a janitor is the easier of her two pursuits. The other, starting her own illustration business, seems fraught with uncertainty. “It’s about not putting all your eggs in one basket,” she says, about pulling in $12 an hour in a small but steady janitorial paycheck as she works to get her business off the ground. “Having multiple streams of income as an artist is really important. If you don’t get enough work one month, you still need to be able to pay your bills.” As with millions of small-business owners, Weidner’s big obstacle is finding the money to get started. She isn’t independently wealthy. And a bank loan, should she get one, would just add to her debt. Sites such as Kickstarter and Indiegogo — which allow people to give small amounts of money to projects — have helped thousands of entrepreneurs like Weidner raise a few hundred dollars, or more, for personal pursuits. Whereas bank loans and venture capital are largely the purview of high-tech start-ups and well-known restauranteurs, crowdfunding has ballooned into a $34 billion-a-year industry in part because it holds the promise that anyone can break through with the next big thing. The Oculus Rift virtual reality headset, snapped up by Facebook for $2 billion, got its start on Kickstarter, as did the the Pebble smartwatch, which drummed up more than $20 million on the site. But mostly, crowdfunding platforms specialize in the small and novel, and Weidner’s experience is no exception. She has sold her work since college, but money comes in fits and starts — $30 for a cat portrait or $200 for a restaurant logo. About a year ago, Weidner cut back on her cleaning job, from five shifts a week to one, in hopes of building up her art into a full-time venture. It has been a rocky slog, but she is seeing signs of promise. She got a small taste of success when she raised $2,539 to fund a line of stickers and pins printed with her drawings. She got that idea, like many others, while cleaning bathrooms. *** On the first of the year, Weidner sat down at her iMac to test her spark of an idea. A few weeks earlier, she had come up with a plan to sketch animal puns, like “dust bunny” and “dragon roll.” Her first drawing was of a “cat loaf,” a term for when a cat sits with all four paws tucked underneath, making it look like a loaf of bread. Her rendition, based on her cat Oswald, had a cat head and tail poking out of a block of sandwich bread. She uploaded it onto Kickstarter and set a goal of $250, enough to print 200 vinyl stickers and pins. She met the goal within 18 hours. By the time her month-long campaign ended Feb. 1, she had raised more than 10 times that. “I was blown away,” she said. “I didn’t expect this many people would get excited about stickers.” Women and minority entrepreneurs have found particular success on crowdfunding sites, where demographics and connections are less important than in traditional fundraising networks, **** said Ethan Mollick, an assistant professor at the University of Pennsylvania’s Wharton School. “There are a lot fewer biases in crowdfunding,” Mollick said. “You don’t have to rely on peoples’ conventional wisdom of what will be successful and what won’t. You are no longer bound by your location or your social networks.” For Weidner, who grew up in Elkton and has lived there most of her life, Kickstarter has helped attract an audience beyond her nearly 1,400 Twitter followers. It has also given her the cash she needed to order a big batch of stickers — in this case, 1,600 for about $900. The hope, she says, is to create other merchandise, whether T-shirts or phone cases, that will help pad her profit. “If you can design something once and sell it over and over again, that can be really helpful,” she says. “Even if it’s just $10 a month from selling a few stickers, that can buy you groceries for a few days.” *** One of Weidner’s earliest memories is of drawing on the walls with crayon. Instead of reprimanding her, her mother encouraged her to keep going. “I realized I couldn’t stop her, so I told her, ‘This is your canvas,’ ” Joy Blasier said. “She was a very quiet, introverted child. Her world was in her head, and art became something that was very therapeutic for her.” Weidner drew whenever she could. At school, she turned in quizzes with Pokemon doodles in the margins and carried a clipboard filled with sketches of cats. During lunch, she drew while she ate. “Art was a coping mechanism for me, especially in middle school,” she said. “I didn’t have friends. I didn’t fit in. And my home life wasn’t too great.” She was partial to drawing animals. Weidner says she always knew she wanted to be an artist, although she wasn’t sure what kind of work she would do. She experimented with digital art, using programs like Adobe Photoshop to create more of her sketches. Sometime during her junior year of high school, she decided to go to college. She applied to three art schools and chose the Pennsylvania College of Art and Design. Was it the right decision? She’s not sure anymore. Weidner learned to live on her own there and self-published a childrens’ book, Bird Boy, about a winged protagonist who struggles to make friends. But now she has $35,000 in debt that she worries she will never pay off. Other expenses keep piling up: A $100,000 mortgage and medical bills to treat her husband’s kidney disease. Her 1999 Ford Escort recently broke down, leaving her little choice but to take out a $5,000 bank loan. “I’m trying to find creative ways to pay the bills,” Weidner said. “That’s the great thing — and the scary thing — about working for yourself: There is no cap on how much money you can make.” Although drawing and painting are instinctive for Weidner, running a business hasn’t come easily. After she sold her first piece, a $16 drawing of a Dungeons and Dragons character, she couldn’t sleep for days. “I had almost-crippling anxiety about taking people’s money,” Weidner said. “I started off undervaluing myself. There is a lot of self-doubt there: Are people going to like my art? What if it’s not good enough?” Slowly, she’s getting better at it. She has amassed a small but loyal following of clients, including authors, small-business owners and a rocket scientist who regularly commissions drawings of birds. “She has a unique style,” said Rachel Knecht, 27, a fellow artist from Gambrills, Md., who has bought more than 20 cat sketches from Weidner. “It’s very fantasy-esque and has a stylized quality like you’d find in childrens’ books.” Most of Weidner’s work these days comes from Twitter, where she polls her 1,400 followers for feedback on new ideas. Other projects originate at events like Anthrocon, an annual convention devoted to human-like animal characters, where she sets up booths and takes commissions. She makes about $700 a month from her art, enough to cover credit card bills and part of her mortgage. Until now, she has been keeping all of her money, business and personal, in the same checking account. But maybe it’s time to think about separating those, she says. She is also thinking about advancing her business in other ways, by creating a company and taking marketing and accounting classes at Cecil College. “I’ve been learning as I go, and that’s been okay so far because it’s just me as a sole proprietor,” she said. “But if this is going to get bigger, I need to take the necessary steps to legitimize myself.” One thing she has learned is about setting realistic expectations. A few years ago, hoping to drum up her following, Weidner tweeted out an idea: Anybody who re-tweeted her would receive a digital illustration of his or her avatar reimagined as a fat bird. She was expecting a dozen or so retweets. She got nearly 800. It was great — and awful. “I got maybe 50 drawings in before I got totally burnt out,” she said, adding that she’s still working to catch up. “I’ve realized that if I overpromise, I’m going to burn out very quickly.” Weidner says she was so burnt out for a year after college that she stayed away from art altogether. She took on odd jobs instead, including one selling prints for a Little League photographer. (“That,” she says, “was really the pits. I had to try to sell photos of peoples’ children while they were screaming at the umpire.”) The janitor gig began six years ago, while she was still in college. Over the years, she has cleaned bathrooms in public libraries, banks and private schools. They are all basically the same, shes says: A toilet is a toilet. “It doesn’t really bother me,” she said. “If something is really smelly, I’ll hold my breath and then go into the bathroom. But I just do what I have to do. I don’t really think about it.” She likes the quiet and the solitude that comes with cleaning. She comes up with ideas for how to further her business. Next, she’d like to buy a wide- format **** printer so she can make archival-quality prints at home. Maybe that will be her next Kickstarter project. “All that time when I’m cleaning, my brain is going and going,” she said. “Sometimes when I get a really good idea, I’ll sit for a minute and write it down.”

What Oculus’s $2 billion payday teaches us about innovation

Tuesday’s announcement that Facebook is buying the virtual-reality start-up Oculus for $2 billion no doubt left many people scratching their heads. It was only a month ago the social network giant shocked everyone by paying as much as $19 billion for WhatsApp, an Internet-based text messaging start-up which had amassed an eye-popping 400 million users in only a few years.    *[WSU]: Wayne State University Have Silicon Valley companies and investors been transported to some alternate universe in which start-ups become irresistible targets before they’ve made any profits or, in the case of Oculus, before they’ve even made any products? In a word, yes.  Whether Facebook ultimately has the last laugh on skeptics who snort that it is speculating with its investors’ money, the logic behind these and other billion dollar deals is all too rational. Thanks to a combination of better, cheaper and smaller digital technologies and fanatic consumers who have new ways of networking with each other all the time, the nature of disruptive innovation has changed utterly in the last decade. When success comes, it often comes all at once, in a process my colleagues and I call “Big Bang Disruption.”    *[WSU]: Wayne State University The back story on Oculus highlights just how much the process of change has itself been transformed. I first came across the company a little over a year ago, at the 2013 International Consumer Electronics Show. Oculus had already attracted attention through a Kickstarter campaign a few months earlier that asked donors to help the company create state-of-the-art virtual reality goggles, the Oculus Rift, which would allow players to immerse themselves in 3D environments for increasingly elaborate digital games.    *[WSU]: Wayne State University The campaign was looking for $250,000 in funding to build a $300 developer’s kit that game developers could use to integrate their products with Oculus Rift. But thanks in part to enthusiastic endorsements from respected gaming icons, within a month nearly 10,000 enthusiastic donors had pledged $2.5 million.    *[WSU]: Wayne State University The company hadn’t even had time to arrange a booth at CES.  I had my demo of their prototype in a Las Vegas hotel room, where the entire development team was giving interviews, continuing to work on the product and, occasionally, sleeping.  Everyone who tried on the prototype Oculus Rift was stunned by how easily flat game environments suddenly became real.  (Personally, I got a little dizzy, but I am not the target demographic.) Beyond the technology’s visceral promise, what had proven so irresistible — first to 10,000 Kickstarter backers — and a year later to Facebook?  In part it was the story of founder Palmer Luckey, a former community college student obsessed with both gaming and virtual reality. Until Oculus, most virtual reality gear had been built for high-end simulations, many for military applications, and cost thousands of dollars.  Palmer had been buying used equipment off eBay, convinced that virtual reality products could be made that would work with increasingly sophisticated game consoles, such as Microsoft’s Xbox One and Sony’s PS4. The problem, he discovered, was that the specialized gear was too specialized to be adapted.  And even after only a year or two, thanks to exponential improvements in digital technology, the military-grade equipment had grown obsolete. Like many practitioners of Big Bang Disruption, Luckey ditched the high-end components and went in the opposite direction.  Thanks to the worldwide explosion of smartphones, vast global markers now exist for cheap component parts, including displays, processors, cameras and sensors.  Luckey’s first prototype for Oculus combined two used cell phone screens with a pair of ski goggles.  A little bit of software and, voila, a $2 billion company was born. At this year’s International CES in January, Oculus had an actual booth, but still no product. It did, however, have a more advanced prototype, codenamed Crystal Cove, that was so impressive it actually won the official “Best of the Best” Award — the top prize at the biggest consumer electronics show in the world. For a prototype.    *[WSU]: Wayne State University And while consumers still can’t get their hands on a finished products, developers are embracing the Oculus prototypes.  Thanks to an open interface and a focus on providing third-party developers with the tools they need to take advantage of the Oculus Rift’s features, a rich ecosystem is already developing for innovative uses for the company’s gear. Intel and others, for example, are already working with the Oculus technology for non-gaming applications. One company, SoftKinetic, had added motion sensors to the goggles, making it possible for natural gestures to be translated to manipulations inside the virtual environment. In the near- future, Oculus devices may be used in virtual reality product design environments, and possibly medical applications.    *[WSU]: Wayne State University Facebook is betting that immersive display technology will help it become an even bigger part of its users’ social lives, keeping them on the site if only to play even more addictive games.  It’s far too soon to know whether or not that strategy will succeed, or whether $2 billion will prove to be too high — or too low — a price. But the lessons of the Oculus acquisition for entrepreneurs and incumbents alike are clear.   In the upside-down world of big bang innovation, combining readily-available off the shelf parts means better and cheaper products.  And customers don’t just buy your product, they fund its development, promote it better than any marketing professional ever could, and even collaborate with you to find new applications for it before you’ve even manufactured a single unit. In the fully immersive world of exponential innovation, a passion to satisfy an unmet market other think is too small or too expensive to serve profitably can translate, for one community college student and a small team of believers, into a $2 billion payout and access to hundreds of millions of potential new users. _Downes is co-author with Paul Nunes of “Big Bang Disruption: Strategy in the Age of Devastating Innovation” (Portfolio 2014)._ ****    *[WSU]: Wayne State University

Gene Marks: How about an illuminated toilet seat?

There’s no shortage of bright ideas among American entrepreneurs  And this one is…well…pretty illuminating. Actually, it’s called Illumibowl and it’s an illuminated toilet seat. It’s motion activated. It sells for about $25. And it’ll light up your bathroom bowl in any one of nine brilliant colors.   And there is a market need. So much so that that the two young inventors were featured this year on “Shark Tank” and received funding from Kevin O’Leary. Before that, the company raised a round of successful crowdfunding on Kickstarter and now you can find their products on eBay, Ace True Value, Bed Bath & Beyond and Amazon (where there are also a bunch of knock-off products, to the founders’ dismay). Alexander and Kannely claims to have sold $7 million of product to date. Lots of entrepreneurs come up with “bright” ideas. But these two guys from Utah have spent the past two years raising interest online, getting media attention, signing up distributors and retailers and, when finally making some sales, nabbed a “shark” to help put them over the top. Sure, they’ll face plenty of competition in the future. But my money’s on them. Because these are two businessmen, not kids, that don’t just invent – they sell.

Fundrise lands $31 million in financing, led by Chinese social media firm

Fundrise has gone from an ambitious Dupont Circle start-up to probably the country’s leading real estate crowd-funding platform, and now it has money to grow. Ben Miller, the company’s co-founder, said Tuesday that Fundrise had received $31 million in financing from tech and real estate investors led by Chinese social media giant Renren and executives from New York developer Silverstein Properties. Other investors include Scott Plank, formerly of Under Armour, and Rich Boyle, former chairman and chief executive of Loopnet.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday Fundrise, which allows individuals to invest as little as $100 in commercial real estate projects that use the platform, has led to the investment of more than $15 million in projects in D.C., San Francisco, Seattle and elsewhere. Miller has been spreading the idea behind his company at real estate and tech conferences across the country since co-founding Fundrise with his brother Daniel in 2010. He said he is now seeing widespread notice from the real estate industry, recognition that is cemented by new investors like Martin Burger and Tal Kerret, the chief executive and chief investment officer of Silverstein Properties, developer of the new World Trade Center.  Los Angeles developer Christopher Rising and New York’s Ackman-Ziff Real Estate Group are also investing. “We invented it,” he said. “No one had ever crowd funded real estate before and now it’s become a phenomenon. People talk about it as if it’s a thing. There are studies about it. There’s this Power Point about how big crowd funding could be. Now I walk into the room and people say, ‘Yeah I’ve heard all about this.’ ”    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday Miller said he only began raising money in earnest this spring and quickly agreed to the majority of the money after being contacted on LinkenIn by Renren. Led by founder Joseph Chen, chairman and chief executive, Renren has more than 210 million active users and earned $24.9 million of revenue in the first quarter. It put up the majority of the $31 million, though Miller declined to share the exact amount.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday “We were talking about going out to market, we were self-funding primarily, looking at Silicon Valley players mostly. Renren reached out to us, we spent some time with them and they’re better than I could have ever imagined as partners,” Miller said.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday Investors have yet to make (or lose) much money through Miller’s company. But one of the first projects to use Fundrise, a Dupont Circle condominium project by Lock 7 Development, has nearly sold all of its units. Miller said he expected investors in it to make about 12 percent. A retail project the Millers are developing themselves, on H Street NE, has been delayed but should open this summer, Miller said.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday The new investment should allow Fundrise to reach more developers, institutional investors and government agencies in more parts of the country. Miller said he is currently hiring people in real estate, software engineering and finance. With so many jobs to fill, Miller said he is also mulling whether to keep the company in the District or not.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday “That’s currently our plan,” he said. “There are more software professionals Silicon Valley, more investment professionals in New York. Lots of real estate people in D.C.” Follow Jonathan O’Connell on Twitter: @oconnellpostbiz    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday

Start-up advice: How to raise money through equity crowdfunding (seven tips)

Start-up founders are often looking for new ways to raise capital for their ventures. Until now, my primary sources of funding were venture capitalists and angel investors, and while they are well suited for early stage start-ups, finding them can be very difficult, especially if you are not based in a start-up hub such as New York City, San Francisco or Tel Aviv. Thanks to Title II of the Jumpstart Our Business Startups Act, which was signed by President Obama in 2012, finding investors is now a little easier. That provision of the law lifts an 80-year-old ban on private companies from publicly advertising their fundraising efforts. My company was among the first to take advantage of the new laws, and thinking back on our experience, there are some lessons I learned in trying to raise funds through this new equity crowdfunding process. Here are some pointers. **1. **Zero in on your lead investor.** ** By lead investor, I mean the one who’s going to contribute at least 25 percent of your funding round. If you’re lucky, some of your early investors are either well known or their credentials will establish some social proof when recruiting additional investors. Move on to lesser-known investors only after you have your lead investor locked down. Crowdfunding platforms can bring you investors who you otherwise would not have uncovered on your own, but typically, the platform comes into play once there’s already some momentum. This means you often have to first engage with potential investors that you already know or use traditional off-line methods first before relying on the crowdfunding platform to send you leads. Campaigns have higher rates of success after hitting a tipping point of around 30 percent of the round filled. It’s important to put in the work on your own first to close the first lead investor, then have several follow-on investors lined up to capitalize on the momentum. **2. **Don’t give up too much.** ** Just because you’re new to the process doesn’t mean you have to comply with unfamiliar requests. For example, some investors may ask for board seats. Unless the investor is hugely strategic or invests 75 percent of your target amount, I would think long and hard about requests to be on the board. One potential compromise is to offer an “observer” seat. This provides the visibility the investor is mostly after, but they don’t get the voting rights of an actual board member. **3. **Don’t wade into trouble.** ** Crowdfunding is still a highly nuanced and regulated space. If you’re raising money by offering equity through one of these portals, you’re required by law to verify that the investor is accredited. We used a company called Rock the Post, which offers that certification service, but there are others available. This is a huge time saver and can steer you clear of hot water with the Securities and Exchange Commission. **4. **Be efficient.** ** Manage your leads based on this simple formula: after a couple of e-mails and conversations, estimate the chance your prospective investor will invest as a percentage. Multiply that percentage by the amount you expect they would invest. Prioritize your time and focus on the investors with the highest scores based on that formula. I once spent a lot of time, for instance, with an investor who said he would invest $15,000 and ended up not investing at all. In hindsight he had a lot of red flags, but I wasn’t experienced enough to pick up on them at the time. Don’t get me wrong, I was thankful for his interest, but I could have spent more time on someone who may have scored higher using this prioritization method because they had a higher propensity to invest, even if their likely investment wasn’t as large. And by higher propensity to invest, I mean people who have invested in start-ups before and buy into your vision. Avoid investors who are overly focused on near-term profitability rather than investing in building a brand and capturing market-share. **5. Send updates showing new developments and committed investments. ** Investors are like sheep. I sent out news about major endorsements and customers acquisitions whenever I could. Most crowdfunding platforms can automate this for you. I also sent personal e-mails for good measure to smaller groups and specific investors with more details than my standard “status updates.” Build your collateral, and make it accessible online. Most crowdfunding platforms will offer a service to that end. **6. **Ask for feedback.** ** Investors see lots of deals. Many have launched successful businesses, some have even had successful exits, and they have seen lots of mistakes as well as lots of things that work. Sometimes it’s best to ask for advice before you ask for money; a good investor will let you know if they are interested. By soliciting valuable feedback, you’re sure to avoid wasting each other’s time. Even if you don’t get a check, at least you’ve improved your chances for the next investor by tweaking your pitch. **7. **Be bold and exude confidence.** ** Be ready to travel, because people don’t part with money easy. You must build rapport, so go meet an investor in person when you can. Fundraising is still a relationship-based business and there’s no substitute for a handshake. Use investors’ fear of missing out as an opportunity to create a sense of urgency, and de-risk the proposition by showing them clearly how they will make a return, and your ability to execute the plan. Making an investment is a very emotional decision. Investors have to believe in you, the founder, and that’s directly reflected in how much you believe in yourself and your company. Good investors can just smell uncertainty and hesitance, so don’t even try faking it. If you feel like you are, go back and work on your business, get more traction, convince yourself and try again next season.

In Britain, financial technology start-up is leading the challenge of traditional lending

“Sorry I’m late,” says Samir Desai, “but it’s been a crazy day.” Five years ago, Desai and two of his mates from the University of Oxford, James Meekings and Andrew Mullinger, started a crowd-funding site over pints at a London pub. Instead of catering to cash-strapped consumers like U.S. pioneers LendingClub and Prosper Marketplace did, the trio, all now 31, targeted enterprises with at least 50,000 pounds ($81,550) in annual sales that were having trouble getting credit from British banks. Today, Funding Circle is Britain’s No. 1 online matchmaker for small-business loans. From its inception through Sept. 25, it transacted 373 million pounds in lending between 32,000 investors and 5,000 firms, which pay interest rates ranging from 6 to 15 percent. “Some people may still want to sit with a branch manager, but this is a game-changing way for businesses to borrow money,” Desai said. That may sound cocky, especially considering his company’s modest volume. The small-business loan book at Santander UK, Britain’s No. 5 bank, stands at 30 billion pounds — about 80 times larger than that of Funding Circle. But Funding Circle is leading a generation of financial technology start-ups that have just begun to challenge traditional banking’s grip on the movement of money. Scores of fintech enterprises in London and Silicon Valley are devising new ways to lend cash, transfer money abroad, settle international commercial transactions and score credit risk — all of which have been the domain of banks for centuries. “Prior to 2008, it was accepted wisdom that if you didn’t have a banking license, a massive balance sheet and a 300-year-old name, you couldn’t possibly play in this space,” said Neil Rimer, co-founder of Index Ventures, which has invested in more than two dozen fintech firms in Europe and the United States, including Funding Circle. “But after trust in banks crumbled during the financial crisis, that emboldened entrepreneurs to start companies and go after them.” The fintech generation promises to harness the Web to create a faster, easier, more-efficient way for consumers to bank. One key tool: the online marketplace model pioneered by auction powerhouse eBay. By matching lenders and borrowers on a Web site, Funding Circle can originate a loan for a small business in three weeks or less instead of the months it can take at a conventional bank. While almost 40 percent of the small companies that sought loans from traditional British lenders were turned down in the second quarter of 2014, according to the Federation of Small Businesses, 100 percent of Funding Circle’s applicants obtained credit from investors. Betting that global banking — with $50 trillion in assets — is ready for a historic shift, investors are piling into fintech start-ups. French telecommunications billionaire Xavier Niel and PayPal co-founder Peter Thiel are backing TransferWise a London-based online marketplace that moves money internationally for 10 times less than conventional banks. Google’s venture arm has invested in Upstart Network, a peer-to-peer firm based in Palo Alto, Calif., that uses unorthodox measures such as college grade-point averages to assess the credit risk for recent graduates. Even old-school bankers are joining the revolution: John Mack, former chief executive of Morgan Stanley, sits on LendingClub’s board, and Richard Kovacevich, former chief executive of Wells Fargo, is an investor in Daric Corp., a crowdfunding venture based in Redwood City, Calif. With terms of less than five years and average net yields of 9 percent in a zero-interest-rate market, peer-to-peer loans have become desirable fixed-income bets, said Cormac Leech, an analyst at Liberum Capital, a London-based investment bank. In London, the world’s No. 1 international banking center, new ventures are materializing every month in the hipster haven of Shoreditch as angel investors and venture capitalists pour money into British fintech firms at twice the clip for those in Silicon Valley, Accenture said. “Banking is ready for massive disruption,” said Taavet Hinrikus, TransferWise’s co-founder, who was the top employee at Skype Technologies in a previous life. Fintech has a powerful ally in U.K. Chancellor of the Exchequer George Osborne. In speeches and policy statements, Osborne has expressed his frustration with Britain’s Big Four — HSBC Holdings, Barclays, Royal Bank of Scotland Group and Lloyds Banking Group — for squeezing credit to small and medium-sized companies. In the first half of this year, net lending to enterprises with less than 25 million pounds in annual sales shrank by 1.3 billion pounds even though the Bank of England has bestowed banks with cheap capital through its Funding for Lending Scheme. In August, Osborne introduced legislation that would require lenders to refer borrowers they reject to peer-to-peer firms and other alternative providers. “People are using technology in new ways to communicate, to form social groups, to shop — why not new ways to bank?” Osborne said in an August speech. “It means being able to bypass traditional banks altogether and lend money directly through peer-to-peer platforms like Funding Circle and Zopa,” a nine-year-old firm that pioneered the model. It’s going to be tough to disrupt an industry as entrenched as banking. In the United Kingdom, the Big Four control 80 percent of the lending market. “I’m positive about this financial innovation, but there is a little euphoria going around,” said Thorston Beck, a professor of banking and finance at City University London’s Cass Business School. “If this really expands at a rapid speed, then more-marginal companies will get loans, too. So we have to be realistic about questions of scale and risk.” Banks themselves are moving to co-opt the fintech surge. In December 2013, Barclays joined forces with Techstars, a U.S. and European accelerator, and started the first in a series of three-month boot camps that will help start-ups develop business plans. And in July, Santander UK, a subsidiary of Madrid-based Banco Santander SA, created a $100 million fund to invest in fintech ventures worldwide. “We’re good at assessing credit risk, but the whole idea of innovation isn’t a natural skill set for any large bank,” said Steve Pateman, Santander UK’s head of banking. “So we want access to different ideas, and we’ll seed those that give us more options to expand our business.” In 2009, Desai was watching the fallout from the global financial crash with a sense of opportunity. Desai, who studied economics and management at Oxford, specialized in the inner workings of banks at Boston Consulting Group and Olivant Advisers, a London-based private-equity firm. He saw how small businesses were paying a price for a crash not of their making as wounded lenders withdrew credit. That August, loan approvals to small and medium-size companies fell 13 percent. Desai said he wondered: What if someone used an online marketplace to provide these borrowers with an alternative? Brainstorming at a London pub, he, Meekings and Mullinger noted that large companies could tap the fixed-income market to raise capital. So they hit on the idea of using a peer-to-peer approach to form a virtual syndicate for more-diminutive enterprises. “We wanted to create a bond market for small businesses,” Desai said. To do so, they had to establish a secondary market where lenders could trade the loans the same way bondholders do, Mullinger said. Otherwise, investors would be loath to fund debt they couldn’t sell. “For this to work, we had to provide liquidity,” Mullinger said. “Without that, I wouldn’t put any money in it myself.” The three men formed Funding Circle in September 2009. Over the next year, they set up a risk-analysis system that grades borrowers using at least 400 bits of data, such as credit-card-payment history and legal judgments. They established a Web site where lenders scroll through a menu of potential borrowers. Funding Circle charges borrowers a 2 to 5 percent fee and lenders a 1 percent annual rate. Like bondholders, the investors receive a coupon-like payment; as of Sept. 8, their average net return was 6.4 percent. Those investors lend money to companies such as Kaizen Furniture Makers, a 35-employee firm. When company co-founder Antonius Wubben decided in 2013 that Kaizen needed a state-of-the-art Austrian hydraulic press to apply veneer to pieces of wood, he posted a loan request on Funding Circle’s Web site. Less than three weeks later, 612 investors had ponied up 100,000 pounds at a 9.1 percent interest rate. Now those investors are trading Kaizen’s debt on Funding Circle’s secondary market, which handles about a fifth of the site’s total loan volume. In less than five years, Desai and his partners have set up a lending alternative that’s growing so fast that they’re desperate to find more office space to accommodate all their new hires. Funding Circle has raised $123 million in venture backing from Index, Accel Partners, and Union Square Ventures, the same outfits that backed Skype and Facebook. Because of the Web, they’ve done so without the costly branch networks and capital requirements that burden commercial banks. Funding Circle and its online peers are originating loans for 40 percent less in costs than traditional lenders, said Leech of Liberum Capital. With a 1.4 percent default rate, Funding Circle has demonstrated that it can manage risk, he said Even so, Funding Circle has far to go. It isn’t expected to record a profit until 2016, according to a forecast by Leech. Desai has big plans. Funding Circle, which late last year began expanding into the United States, plans to push into asset-backed lending and property development debt. Asked if the inevitable next step might be an outright acquisition by a bank, Desai laughed. “If they can afford us,” he said. The full version of this Bloomberg Markets article appears in the magazine’s November issue.

How two start-ups marketed their business to consumers

Some start-ups find it easier to market to other businesses than to consumers. Here are the experiences of two women who have worked in the Washington region’s business-to-business sector: The idea for Shopsy came to founder Lisa Morales-Hellebo in a dream, and within a few months the former Wheaton resident had patented a “semantic commerce platform.” Using an algorithm, this site can create different groups of goods based on parameters – color, price, and style, for instance. For example, a user could create a $3,000 outfit from items found online, and then create a $300 version using Shopsy. Initially Shopsy targeted consumers, but failed to get sufficient traction. After her start-up was accepted into Techstars, a Boulder, Colo.-based start-up support group, she realized it could be more useful to businesses looking to present their merchandise online. Today, Morales-Hellebo is working to revamp Shopsy to highlight its business-to-business focus — and hopes to generate more revenue by targeting retailers. D.C. native Marlena Edwards is starting a business to help other tech entrepreneurs start their own. By putting their start-up ideas on her site, founders will be able to ask for small amounts of funding from many donors in a process called crowdfunding. IPitchTech is intended to help struggling start-ups raise capital, and Edwards’ decision to start during the economy’s slow recovery is intentional — she hopes to create jobs for entrepreneurs who haven’t found angel investors or other help. Edwards is familiar with the challenges of starting out – several years ago, she obtained a patent for a Global Positioning System tracking device for pets and animals, but found the patent process to be very expensive. Still, she succeeding in bringing it to market with moderate success — the item was featured on QVC.

Here’s what it’s like to launch a start-up in Iran

About 15 years ago, he was the first kid in his Tehran high school to get the Internet. “Don’t try to tell anybody else about it,” he recalls his principal warning. “It might affect their culture, their beliefs.” She was an early Internet user, too, and obsessed with Yahoo messenger. She’d message strangers in chat rooms while assuring her concerned parents that she wasn’t revealing too much. Fast forward to today and the duo is at the helm of some of Tehran’s thriving start-ups. Both left Europe for careers in Iran. Cafe Bazaar co-founder Hessam Armandehi, 28, and Takhfifan founder Nazanin Daneshvar, 30, have turned profits, had to move to larger offices and gained thousands of customers. His high school now has WiFi. And she’s too busy for chat rooms, but has come to idolize Yahoo chief executive Marissa Mayer. Shades of Silicon Valley are bubbling up in Tehran, which is home to a growing tech ecosystem with start-ups, accelerators and a venture capital firm, despite the significant challenges of launching a tech company in Iran. “It’s definitely more difficult than any other country,” said Eyad Alkassar, who manages the Middle East investments for Rocket Internet, a German company that replicates successful businesses in the developing world. Insiders say there has been a turning point in the past two years. “When I came to Iran, no one even knew the word start-up,” said Daneshvar, who returned to her native country three years ago after working in Germany. “If you look at the use of the words like entrepreneurship, start-ups and venture capital, I think you will see a trend that there was absolutely a minimum, nothing mentioned in Iran for two years,” said Said Rahmani, who founded Tehran’s first venture capital firm, Sarava. “Now you can talk about venture capital, VCs, its become a fashion.” Rahmani was born in Iran but left as a teenager for the United States. He worked for IBM and launched a start-up in Upstate New York. Later as an employee of Internet company Naspers, he was asked to evaluate the possibility of investing in Iran start-ups. Ultimately, Naspers decided not to invest, but Rahmani was convinced of the country’s potential and returned to where he was born. He and others point to the combination of a young, educated population, the proliferation of smartphones and increasing Internet speeds as fertile landscape for start-ups. The country’s leading start-up — Digikala — is similar to Amazon.com. The World Start-Up Fund says that it is worth $150 million.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico There are other signs, too. Iran Web Festival, launched in 2008 to recognize the country’s best Web sites, started with just 100 applicants. This year, 8,000 Web sites entered, and 450 people attended a related conference. Start-Up Grind has opened a chapter in Tehran to connect and mentor entrepreneurs. Iran now has three accelerators, including Avatech, which accepted its first class in October. They offer mentors such as Reza Hashemi, 38, who started the popular Persian Blog in 2001 as the Iranian equivalent of Blogger. At that time, Hashemi wasn’t able to raise money for his site as he encountered investors who were unfamiliar with the Internet.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico On the front lines of Iran’s growth are Armandehi and Daneshvar, who know well the challenges, advantages and frustrations of launching an Internet company in Iran, where sanctions are both a gift and a curse. Daneshvar’s profitable business — Takhfifan — is essentially a Groupon clone. Her site has more than 1 million e-mail subscribers and offers 25 deals per day. One especially successful deal sold 20,000 tickets to a movie. She also launched a Web site that resembles Yelp, and has 20,000 user-written reviews.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico Although international sanctions on Iran are imposed to hinder the economy, they’re somewhat of a benefit to entrepreneurs who don’t have to compete with international companies that are barred from operating in the country. But the road to a successful start-up is bumpy, and entrepreneurs can’t dream of scaling their business globally. Growing locally isn’t always easy either. “Where’s your manager?” Daneshvar remembers being asked in a meeting with a prospective client. “I am the manager,” she said. “Look, go back and come back with your manager. The idea is good but just come back with your manager.” Disappointed and saddened, she went home and told her father. “Welcome to Iran,” he said. She rescheduled the meeting and came back with her father. This time a deal was struck.  For a year, Daneshvar would bring her father to meetings. He’d first introduce himself as the manager, then sit back quietly as his daughter took over and explained the business. Armandehi has tangled with his own issues, and became frustrated with how Silicon Valley companies have handled Iranian sanctions. After college, Armandehi attended a graduate program in Sweden, but chose to return home. “If I came back to Iran, I would lose everything that I could do outside Iran — reservation via Airbnb, working on Android Market. I was losing everything and still I was not that unhappy with it. I felt that we can create everything inside Iran ourselves,” Armandehi said. Because Google’s app store for Android wasn’t initially available in Iran, it opened a door in 2010 for Armandehi to co-found Cafe Bazaar, which is essentially an Android app store for Iranians. It had 100,000 users within three months, and now has 10,000 local apps available from more than 2,000 developers. According to World Startup Report, it’s worth $20 million.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico To manage the growth, in March 2012 Armandehi became a customer of Zendesk, a Danish start-up, which could provide a helpdesk for Cafe Bazaar. He figured he’d be safe from sanctions, given Zendesk’s European roots. But suddenly in November of that year Zendesk cut him off. All the e-mail threads and support tickets for customers were lost. He asked Zendesk for a chance to back up the files. He never heard back. So Cafe Bazaar resorted to using gmail to respond to customers. He missed Zendesk’s ability to track the performance of his customer service team, and couldn’t find alternative software until this fall. “If you’re looking for a technology, if you’re looking for a device, if you want to buy a server, if you really need investment from other countries, yes in these parts sanctions are very bad,” said Shayan Shalileh, who started Iran Web Festival.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico Armandehi previously had an account on Google’s Android Market, where he launched a Persian calendar app. The account was later suspended by Google (but because of an apparent bug in the system he still receives monthly e-mails alerting him that “you’ll need to take action to receive your payment this month”).    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico At a 2012 conference in Barcelona, Armandehi asked then-Google chief executive Eric Schmidt if he would do anything to loosen the restrictions on Iranians.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico Schmidt offered condolences and cited the role of sanctions, but also drew laughter from the crowd when he said, “Prison is like, no bandwidth.” “He didn’t answer me with respect,” Armandehi told me. “It’s made me more determined to provide what Google does not provide for Iranians.” The desire to build inside its borders and deliver all the online services Iranians need was a common thread among Iranian entrepreneurs I spoke with. One of them was Sina Zand Karimi, who builds apps for Cafe Bazaar. The 20-year-old has made $20,000 since launching a popular car racing app two months ago. He’d like to launch a game studio in Iran, but his parents want him to complete his degree at Sharif University of Technology first. The school produces a lot of tech talent, including the founders of the dating service Zoosk.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico Although many top students — such as the Zoosk co-founders — leave Iran to pursue more degrees or launch careers, there are reasons to believe they can be successful at home. Twin brothers Hamid and Saeed Mohammadi, 35, founded the now-vaunted Digikala after a frustrating attempt to buy a digital SLR camera. They spent more than two months researching a camera as they struggled to find review Web sites in Farsi. When they finally settled on a Nikon D70, there were no e-commerce companies operating in Iran. So they bought a camera from a brick-and-mortar retailer in Tehran. But their photos turned out blurry. When they asked a friend in photography for advice, he pointed out that the camera’s lense had been swapped out for a worse model. “The seller cheated us,” Hamid Mohammadi recalled. So the brothers used $20,000 in savings to start their business. They borrowed office space from their brother, who didn’t charge them rent for their first year. Today Digikala receives 3,000 orders a day. Mohammadi thinks the $150 million valuation for his company should be even higher as he expects $100 million to $150 million in revenue this year. Digikala has 450 employees, and expects to have 700 in five months. It will have distribution centers in 16 cities in two months, and will offer next-day delivery in those cities. All deliveries are made by Digikala employees.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico The company was profitable from the start, by necessity, but this year Digikala is focused on growth. Profits can take a backseat this year as Digikala ramps up around Iran. That’s possible only because of venture capital, which until recently was unheard of in Iran. Although the brothers plan to focus on Iran for now, they are considering growing to Afghanistan, Turkmenistan and Iraq.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico “What is happening now which makes this as something very idealistic and dreamy, now that they have the local success stories they can refer to them,” said Mohsen Malayeri, who launched the accelerator AvaTech. “They will refer to the founder of Digikala and say, ‘He’s able to make it here. So why not me?’ ”

Too big to innovate: Get excited for the coming disruption of banks

Don’t worry, banks. Video stores, newspapers and film cameras can offer a shoulder to cry on. They know how you are about to feel. Welcome to the world of disruption, where businesses get upended. The race is now on to chip away at banks’ businesses with cheaper and superior services that customers love. As the full impact of software and the Internet washes over the global economy, more casualties will fall. A reminder of a teetering domino came Sunday night when London start-up TransferWise announced it raised $58 million from investors, including Andreessen Horowitz, a prominent venture capital firm.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico TransferWise lets users send money internationally without paying the hefty fees traditional banks have charged for such transfers. Its founders, two Estonian friends, got the idea after wanting to exchange Euros and British pounds. They soon realized the potential of a decentralized, peer-to-peer financial network. Why pay 7.99 percent — the global average for remittance — to some bank when TransferWise will charge only 1 percent for the first $5,000 and 0.7 percent for any additional money?    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico It’s a no-brainer for anyone sending money across borders. TransferWise says it has saved its customers over $200 million in fees since launching four years ago. It plans to use its new funding to continue to grow around the globe. TransferWise says it is growing 15 to 20 percent a month. The truth is, moving money shouldn’t be very expensive given today’s technology. “In the modern day, money is really just data,” Seth Priebatsch, chief executive of a similar type of financial service company, told me last year. “Anything that is data eventually moves to the medium that can move it with the least friction, the most quickly and at the least cost.” Priebatsch leads another company leveraging the latest technology to try to disrupt the traditional financial world. LevelUp processes restaurant payments for 1.95 percent, significantly less than what the Visas and Mastercards of the world offer. For businesses, small transactions such as a cup of coffee can be unprofitable because of fees to process the credit card transactions. (This is why many demand a minimum payment to use a credit card.) The problem for traditional financial players is that their business models rely on expensive fees. “They’re in a pretty difficult situation with their balances sheets and income. In that sense it’s very hard for them to say, ‘Hey we’ve been overcharging our customers. Why don’t we slash our hidden exchange rates by five times or 10 times to be competitive with TransferWise,'” said TransferWise co-founder Kristo Kaarmann. “Because they also have this legacy technology to keep up, the branch network, all the products that are costly to maintain.” For the incumbents, there’s little incentive to innovate. Why disrupt your profitable business and its rich profit margins? Max Levchin, the chief executive of Affirm and PayPal co-founder, gave a reminder of banks’ troubles at the Digital-Life-Design conference earlier this month. He noted that American Express is hiring software engineers to program with Cobol, a dated programming language. “Seventy percent of computer science departments worldwide do not even teach Cobol. The top 10 computer science departments do not offer Cobol pretty much in any form,” Levchin said. “I guarantee people going straight out of school to work for AmEx to write some awesome Cobol code are not from the top 10 computer science departments. Basically we’re going to hire dummies — well not really — but not the creme de la creme. The creme de la creme is going to go disrupt Cobol.”

JOBS Act aims to simplify start-up fundraising

Michael Mayernick, co-founder of the D.C. Web optimization company Spinnakr, has had several friends offer him small investments in exchange for a stake in his company. But because of regulations that make it unlawful to raise funds from unaccredited investors, so far, he’s turned them all down. With the passage of the JOBS Act, however, Mayernick would likely be able to take on such investors in the future. “It always helps to have the first money in when you’re raising money from professional investors,” he said. In fact, it may soon be much easier for start-ups to raise money and go public in a number of ways. The Senate version of the Jumpstart Our Business Startup Act cleared the House of Representatives last week in a 380-41 vote, and the bill now heads to the president, who has said he will sign it. For entrepreneurs, one of the bill’s most anticipated provisions is the establishment of a framework for crowdfunding — enabling small companies to solicit equity capital from myriad small-dollar investors over the Internet. AOL co-founder and Startup America chairman Steve Case, who was a vocal advocate for the bill, said the crowdfunding provision would help entrepreneurs who don’t live in venture hot spots like Silicon Valley or New York City, or whose business models don’t appeal to venture capitalists. “Capital is not adequately deployed across the nation, and this will be another tool that will help provide capital to underserved regions,” Case said. “Overall, that will be a good thing for innovation and for job creation.” To gin up support for the issue, more than 5,000 entrepreneurs and venture capitalists sent a letter to Senate leaders last week. One of the petition’s main organizers was Naval Ravikant, who runs AngelList, a type of social network for investors. Ravikant said he feels the bill rolls back outdated regulations such as the rule prohibiting businesses from advertising that they’re seeking investors. That made it technically illegal for entrepreneurs to announce that they’re fundraising at pitch competitions and other public forums, even though entrepreneurs routinely do so. The act’s backers also include more established companies, such as Jess3, an interactive agency in the District. The company added their voice to Ravikant’s petition as a way of expressing solidarity with the entrepreneur community. “While it may not be a direct impact on a company like ours, we want the ecosystem for start-ups to be as healthy as possible,” Jess3 President Leslie Bradshaw said. The act includes other measures that would loosen regulatory requirements for smaller companies seeking to go public by creating a new classification called “emerging growth companies.” It also provides for “mini” public offerings, under which companies raising $50 million or less would not be held to some of the financial disclosure requirements that most publicly held companies are subject to. Critics of the loosened regulations include some labor unions, regulatory groups and a handful of Senate Democrats, who warned that the bill may undo necessary financial protections under the guise of boosting jobs. Jeffrey Stibel, CEO of Malibu, Calif.-based Dun and Bradstreet Credibility Corp., said there are some potential pitfalls to having more investors participating in the financing of small companies. “Under this bill, you can now go to my grandmother and say, ‘I want you to invest in a company,’ but the whole thing can be effectively a scam,” he said. “Previously, you had to go to a qualified investor, who has enough sophistication to sniff out fraud.” As a measure of protection for investors, companies seeking crowdfunding investment would still file with the Securities and Exchange Commission under the act, and one amendment would limit individuals with an annual income or net worth of less than $100,000 to investing 5 percent of their income in crowdfunding.

Brendan Iribe, co-founder of Oculus VR, makes record $31 million donation to U-Md.

Brendan Iribe dropped out of college during his freshman year at the University of Maryland to join a throng of young entrepreneurs hoping to shake up the world with high-tech start-ups. Iribe’s brief tenure in College Park was followed by extraordinary successes in video-game technology, as he held key positions in companies that sold for millions or hundreds of millions of dollars. His latest venture, Oculus VR, which developed the Oculus Rift virtual-reality headset, sold to Facebook for $2 billion this year. On a recent visit to U-Md. — where Iribe first met his business partner, Michael Antonov, in a freshman dorm in 1998 — the 35-year-old Californian attended a school-sponsored “hackathon,” in which students use technology to solve a problem in a short amount of time. He met with professors and spoke to hundreds of students, impressed with their energy. But walking into the computer science center on campus, he said he found the facility “depressing” and “a lot worse than I remembered it.” So Iribe, originally from Montgomery County and a graduate of Atholton High School in Howard County, has pledged $31 million to the University of Maryland to fund scholarships and a new computer science building on the College Park campus, a record donation for the school. The gift is scheduled to be announced Friday. Most of the donation — $30 million — will support plans for a $140 million computer science center, to be named after Iribe, near the university entrance at Route 1 and Campus Drive. The school’s previous donation record — $30 million — was reached three times in separate gifts announced in 2005 for various projects in engineering, bioengineering, biomedical devices, business education and performing-arts programs. “The University of Maryland was an inspiration for me, and the relationships I made there have lasted a lifetime,” Iribe said. “I’ve always wanted to give back to the school and public education system, and I hope this building will shape the future of computer science students at the university. The space is designed for hackers, makers and engineers, which will help give rise to future breakthroughs, products and start-ups that will transform the way we live and interact with the world around us.” U-Md. also plans to announce that Oculus VR co-founder Antonov, a 2003 U-Md. graduate, is giving $4 million to the university for the building and scholarships. Iribe’s mother, Elizabeth Trexler, is giving $3 million to endow two professorships in computer science. The gifts, totaling $38 million, will boost a popular department at College Park that has outgrown its space. There were about 1,300 undergraduates majoring in computer science at U-Md. in fall 2013, up from about 760 in fall 2009. That makes computer science the second most-popular undergraduate field of study at the university, behind biological sciences, which has about 1,700 students who have declared it as their major. Samir Khuller, a computer science professor who chairs the department, said that since 1988, computer science has been based in what was meant to be temporary quarters in the A.V. Williams building. Khuller said the department shares the building with specialists in electrical and computer engineering and an institute for systems research. When the new center is built, he said, it will become a hub for innovators, with computer labs, an auditorium and meeting places. Maryland plans to open the facility in late 2017. University President Wallace D. Loh called it “a unique space where students from all disciplines can imagine, build, collaborate, and succeed together.” The idea for the gift began to develop after the death of Andrew Reisse in 2013. Reisse, a colleague at Oculus VR, had roomed with Antonov in College Park. To honor him, Iribe, Antonov and Reisse’s parents teamed up to create a scholarship in Reisse’s name. That got Iribe to thinking about his own legacy at Maryland. When he returned to College Park this year for the “Bitcamp” hackathon, he spoke about the importance of investing in students and wanted them to have something better than the facilities at A.V. Williams. “We walked in, and it felt kind of depressing,” Iribe said. He quickly embraced plans for a new center. “Just something that felt like the right thing to do: to give back to the University of Maryland, where Mike and I met.” After leaving Maryland, Iribe worked as a software programmer, developing the user interface for the Civilization IV video game. He and Antonov then co-founded Scaleform, a technology firm that let developers more easily convert video games to mobile platforms. That company sold for $36 million in 2011. Iribe then went to Gaikai — a company that let people stream video games — which was purchased by Sony for $380 million in 2012. Iribe and Antonov co-founded Oculus with Palmer Luckey in 2012, working to develop “immersive virtual reality” such as the Oculus Rift, technology that lets users interact with a virtual world through a wearable headset. Antonov is the company’s chief software architect, and Iribe is the company’s chief executive. Hoping to inspire Maryland’s current and future students, Iribe said he believes that computer science itself is on the cusp of big changes. “I like to think of it as this new field,” Iribe said. “Instead of computer science, it’s going to be virtual science.” Although it clearly worked out for him, Iribe counseled students not to follow his educational path. “They should definitely finish school,” he said. “They shouldn’t drop out. That’s an insane, crazy risk.” Hayley Tsukayama contributed to this report.

Twitter opens at $45.10 a share, valued at about $25B

Twitter took flight on the markets Thursday in one of the biggest initial public offerings of all time for a U.S. Internet company, and shares soared more than 70 percent after they debuted on the New York Stock Exchange. That meteoric rise was celebrated on Wall Street and hurtled Twitter into the ranks of the most valuable technology companies in the world. But the massive gain may also show that Twitter’s investment banks vastly underestimated how much the company could raise through the stock offering. Twitter gets only the $1.8 billion that comes from the initial sale of the stock — which its banks priced at $26 per share. That the shares nearly doubled in the first few minutes of trading and stayed there through the day may demonstrate that Twitter could have raised a lot more, analysts said. After jumping more than 90 percent from its IPO price, to $50 a share, Twitter’s stock closed at $44.90 a share. The primary parties that benefitted from the rising stock price were the banks — which in addition to commissions receive shares that they can bestow on favored investing clients at the initial offering price of $26. Unlike employees of Twitter, many of the investors could dump their shares immediately, pocketing a massive gain in one day. Twitter’s investment banks, which were led by Goldman Sachs, had spent weeks meeting with big funds and wealthy investors, assessing what they ultimately might pay for Twitter shares, as well as estimating the company’s growth potential. But coming up with the IPO price involves some guesswork — it’s a little like a real estate broker trying to price a newly built house that has no sales history. And some analysts said the banks may have gotten the price wrong. “Theoretically, it should be an embarrassment for both senior management and the [investment banks]. But that’s not the way it’s spun,” said Erik Gerding, an associate professor at the University of Colorado Law School. “It often looks like a great public relations coup to have your stock shoot up immediately. But what it really shows is that the market for social media stocks is really frothy.” The fact that the IPO most benefited Wall Street insiders was particularly jarring given Twitter’s populist roots and the company’s reputation as a service to the people. Twitter even went so far as to put prominent users, rather than executives, in charge of ringing the opening bell to mark its first day of trading. “Star Trek” actor Patrick Stewart, 9-year-old lemonade-stand owner Vivienne Harr and a representative from the Boston Police Department were on the podium. Some securities experts say Twitter and its banks may have settled on a conservative stock price to avoid the type of debacle that unfolded when Facebook went public and its share price dropped on opening day. There’s often a debate as to how to appropriately value a company as it prepares to go public. In a perfect world, the optimal pricing would lead to a modest pop on the first day of trading, roughly in the 15 percent ballpark, legal experts said. But getting the numbers right is more art than science. “Outside of optimal pricing, if your choice is having the price go to the moon or drop like a stone, obviously anyone involved in the IPO process would pick the former rather than the latter,” said Joel Trotter, a securities lawyer at Latham & Watkins. “A drop will often mean that you’ve got disappointed investors, or worse.” Twitter spokesman Jim Prosser declined to comment on the company’s stock performance. Goldman Sachs also declined to comment. The offering made newly minted billionaires of Twitter co-founders Jack Dorsey and Evan Williams. Williams’ 56 million shares of the company were worth $2.5 billion by the end of the day. Dorsey, now chairman and the author of its first-ever message, saw his stake in the firm rise to $1.05 billion. Ahead of the public offering, Twitter faced some skepticism over whether the company was ready to go public. It has never turned a profit, is attracting new users at a slower rate and has yet to prove that its advertising model is sustainable. By the end of the day, the company had a market value of nearly $24.5 billion — about $105 for each of its 232 million active users — a ringing endorsement of an unproven business plan. Analysts are already cautioning that, at about $45, Twitter shares are too high. Brian Wieser of Pivotal Research has already downgraded Twitter to “sell,” citing the price rise. RBC Capital Markets analyst Mark Mahaney, who has fixed a $33 price target for Twitter, said that is hard for him to define this valuation as “anything other than rich.” “I’d be awfully worried about buying a full position at $45,” he said. But Cornell University professor Robert Jarrow said that pundits should think twice before pulling out the tech industry’s most-dreaded word — bubble. Jarrow, a finance professor and expert in investment management, said that apart from an initial spike, Twitter’s first-day stock performance is more stable than a classic bubble. “Bubbles tend to be associated with high volatility,” he said. “Twitter doesn’t appear to have the same price fluctuations.” (Jeffrey P. Bezos, who owns The Washington Post, was an early investor in Twitter.) Related stories: Twitter IPO: Buzz builds over risks and (possible) rewards The Switch: Not that many Americans use Twitter, apparently Timeline of Twitter’s IPO: From humble beginnings to a company with a $18 billion valuation Photos: Who are Twitter’s major shareholders? _Follow The Post’s new tech blog,The Switch, where technology and policy connect._

The $104 billion question: What does Facebook’s value say about ours?

In the late 1990s, the craze for initial public offerings was hailed as the dawn of a new age. The Internet was replacing manufacturing. Who needed a factory floor when you could point and click? Facebook’s Friday IPO, which opened with a staggering $104 billion valuation for the company, hasn’t transported us back to the bubble years of the 1990s. But, like that time, today’s Facebook frenzy is about what our society values. When Mark Zuckerberg rang the opening bell on Friday, his company’s $38 share price wasn’t rooted solely in the economics of the social networking giant. What the financial analysts are selling isn’t just the initial public offering of a company that Zuckerberg started in his dorm room at Harvard eight years ago. They are selling an image of the United States. When public offerings break records, as Facebook did with most shares traded on the day of its IPO, they do so because the company mirrors how we see ourselves — and the image of the future we want to project. Before the tech bubble and the “new economy,” IPOs were about manufacturing strength and proven American power. That’s what the public offerings from General Electric at the turn of the 20th century and Chrysler and General Motors in the 1920s showed. When Ford finally went public in 1956, it broke records asthe largest IPO. By the time Americans could line up to buy a piece of the company, it had been around for 50 years. The stock market was driven by companies with established products seeking to expand, a growth idea that has been uniquely American. The notion that a product didn’t have to be well-established to attract starry-eyed investors began in the 1960s. A company called Syntex produced a birth control pill that was brought to market with much fanfare but a short track record. It went on to become the leader in its industry and helped change attitudes toward contraception. Despite its solid revenue and subscriber base, Facebook shows that it is possible to raise capital with little more than a marketing idea and great expectations. But the $104 billion question is simple: What does the excitement about the company reflect about the nation? In the 1990s, investors were persuaded to get on the Internet bandwagon. Analysts pushed it as a time of unprecedented opportunities: After all, how would you feel if you missed the railroad boom after the Civil War or the opportunity to invest in the country’s infrastructure at the end of the 19th century? Within five years, many of those new companies, online retailers or middlemen designed to reduce business-to-business costs, had disappeared. The ones that remained struggled with the expectations previously heaped on them. Their IPO prices reflected new concepts in finance. Not price-to-earnings multiples, but fuzzy math based on notions such as projected sales in five years to expected earnings. Basically, how much would the market pay for expectations? In some cases, quite a lot. The companies that survived have transformed the way we shop and search for information. This is a technology and industry mostly developed and nurtured in the United States; its continued success is the country’s success. Even the government recognizes this and aids indirectly in the process. Goods sold on Amazon.com, for example, are still free of state sales taxes in most places. Occasionally, the old economy enters the picture. The IPO for the new General Motors two years ago was not a hot issue in the novel, new economy sense. But its success did reflect a national desire to put the old GM bankruptcy behind us and concentrate on the future. That is what the IPO market has always been about. Despite politics, everyone was rooting for GM to reemerge, still standing. What do we expect from Facebook? Social networking is not in the same league as manufacturing, which, even in decline, employs many people and adds value to the supply chain and the nation’s general welfare. Yet its power is pervasive and persuasive. Almost 1 billion users can’t be disputed. More than any IPO in recent memory, Facebook represents the expectations of a new generation, the generation of its 28-year-old founder. Social networking is an American phenomenon, founded on the belief that our individual experiences are worth broadcasting. The connectedness that Facebook preaches also allows advertisers to connect with hundreds of millions of people in a more targeted way. So personal growth and business opportunity are combined in a uniquely American style. The company, too, reflects an American ideal: that a kid with an idea and the ability to pull it off can one day be worth billions. But not all quintessentially American IPO dreams come true. Securities analysts will continue to sell this and future ideas based on numbers, arguing that going forward into a Facebook world is the only direction in sight. Who ever made money by rejecting the railroads and opting for canal travel instead? The true test of social-networking companies may be proven in a future crisis. Will the federal government be likely to prop up Facebook as it did GM and Chrysler or even AIG and the big banks? That’s not a question about market hype or expectations. Only the hard facts about a company’s worth to the economy. Is the nation’s future linked to Facebook’s success? Probably not, but the analogy will be made for some time to come. For now, Facebook (whose board members include Washington Post Co. Chairman Donald E. Graham) is the deal of the moment. When the car companies Chrysler and GM went public in the 1920s, they symbolized the nation’s growing strength and freedom of movement. Syntex represented the early stages of the women’s movement and freedom of choice. Does social networking represent a new kind of freedom or is it a symptom of a fractured society that is desperately trying to remain in touch? To answer that, we’ll need to see what Facebook’s own timeline looks like in a few years. And although the company has amassed almost 1 billion users with breathtaking speed, it can’t predict the future. At least not yet. **Charles R. Geisst** is the author of “Wall Street: A History” and “Collateral Damaged: The Marketing of Consumer Debt to America.”

Business Rx: After chasing unicorns, it’s back to basics in 2016

Have you ever seen a unicorn? What about Big Foot or the Loch Ness Monster? Other than folklore and a few fabricated sightings, these mythical creatures are, well, mythical. Not real. Fodder for implausible stories, maddening searches and one of kind discoveries; not to mention celebrity and wealth to the victorious hunter. If you haven’t been following the tech sector, you might still believe that unicorns only visit the dreams of 8-year-old girls. However, over the past couple years, in the world of bits and bites, the mythical unicorn have morphed into the new standard bearer for start-up success, enchanting (or haunting) the dreams of venture capitalists and tech founders. To catch everyone up – the new “unicorn” is Silicon Valley’s not-so-mythical $1 billion-plus valued tech company. Think Uber, AirBnb, SnapChat, China’s Xiaomi, DropBox and Pinterest. No rare single horn, just a company worth a billion dollars that defies the traditional measures of a thriving company. This new metric that matters has set the bar high for the next generation of entrepreneurs, driving them to do more disrupting, innovating, risking, pivoting and iterating than ever before; all familiar buzzwords in start-up world. Yet, the vast majority of entrepreneurs aren’t chasing billion-dollar valuations and blockbuster IPOs — and that’s OK. For those start-ups, the buzzwords their backers will care about will be “revenue,” “customers,” “cash flow,” and “business model.” Nothing wrong with aiming big, right? Swinging for the fences? Putting all on red? Of course not. Our industry is built on the mythical – the dreams of “going viral,” the quest for a million users, the unlikely story of the venture capitalist who wires a $5 million check on the spot. Despite the potential for Tech Crunch glory and millionaire’s club stock options, chasing these unicorns can be treacherous for most entrepreneurs whose markets might not support these valuations. So, in 2016, let’s get back to basics and encourage entrepreneurs to think through business fundamentals. Even the innovative unicorns with the disruptive technologies need to be built on a solid business base to survive. In 2016 at the Dingman Center for Entrepreneurship at the University of Maryland’s Robert H. Smith School of Business, our programs are bringing back a better balance between exciting new ideas and business basics. We are encouraging all start-up founders to refocus on business fundamentals. Our weekly Business Rx column mirrors the advice we give our students – understand your customer, test your business model, build a strong team, identify competitors and beat them, control your costs, plan for growth and most importantly, according to entrepreneurship gurus like Steve Blank and Eric Ries, build a product people will pay for before you run out of money. Our real goal is to make sure entrepreneurs remember that they are creating a start-up business. We don’t want the business part to get lost. We have a lot of problems that we need to solve that need very innovative solutions. But you can’t solve any problems unless you also come up with sustainable business models. There may different metrics for success in Silicon Valley, but the reality in Washington is the companies that will win are the ones not just with the most creative ideas, but the ones with the most visionary ideas to create value for their customers and investors. Entrepreneurs – don’t forget you are building a business not just technology. You can only solve the big problems, like costly healthcare and education, clean energy and crumbling infrastructure, if you launch viable companies to solve them. That is how you slay the dragon. _Elana Fine is the managing director of the Dingman Center for Entrepreneurship at the University of Maryland’s Robert H. Smith School of Business._    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico

The Buzz: Surprise Ride looks for $2M from funding round

**Surprise Ride** , the District-based start-up that has been a favorite of TV coverage, is raising $2 million to take the company to the next level. The company, a subscription service that delivers a monthly “surprise ride” box packed with fun educational projects, is founded by sisters **Donna** and **Rosy Khalife**. The company, which moved into offices at Dupont Circle two months ago, has shipped more than 30,000 boxes to families across the United States since its May 2013 founding, and is nearing $1 million in sales, said Donna Khalife, 30. “The concept is simple,” said Khalife. “Some of the greatest innovators in history, from Albert Einstein to Steve Jobs, attributed their success to being curious. Surprise Ride ... fosters intellectual curiosity and creativity in kids.” The company got off the ground with help from a $600,000 investment from billionaire Irwin Jacobs, founder of tech-giant Qualcomm. “I pitched him at a scholarship event,” said Khalife, who graduated from Harvard Business School and worked on Wall Street before starting her own company. Khalife said the $2 million funding round, which just began, is intended to further expansion so the company can take advantage of the market for children’s gifts from parents, grandparents, aunts and uncles. We are going to continue to expand the team, invest in digital marketing and expand into new product lines,” Khalife said. Surprise Ride, which has about 10 full- and part-timers at its headquarters, has already received lots of press, including ABC’s “Shark Tank” and “The View,” “Fox Business,” the New York Times and InStyle magazine. Rosy Khalife, 23, handles the marketing end of the business. She graduated from Providence College and has experience in digital marketing. **Search Technologies** , the Herndon-based company in the hot big data sector, is expanding more deeply into the European market with the acquisition of a Prague-based technology company. The acquisition is slated to close any day. It will add $1 million to Search Technologies’s revenue of $25 million. It will also add about 20 staffers, bringing Search’s head count to 173. Search declined to name the target company until a formal announcement. “We are looking to significantly expand our technical presence in Europe via this Prague office in the same way that we have done in Costa Rica, which is a technical center of ours serving North America and Europe,” Search Technologies founder **Kamran Khan** said in an e-mail. Khan said the company plans to open an office in central London next month, the company’s second in the United Kingdom. Search Technologies currently employs 153, with 69 in the U.S., 62 at its technical training center in Costa Rica, and 22 between the U.K. and Germany. The company likes Costa Rica because it’s less expensive than the United States and has a highly-educated workforce. Costa Rica also is the location of several big U.S. technology companies, including Amazon.com, IBM, Hewlett-Packard, Intel and consumer giant Procter & Gamble. This isn’t its first acquisition for Search. In 2009, the company acquired a Midwest company called InfoSolutions. Khan, 51, who started Search Technologies in 2005, said the company has more than 500 clients, including the National Archives, the Library of Congress, EMC and information publishers such as Reed Elsevier. While in Davos, Switzerland for the World Economic Forum last week, **David Rubenstein** , the 65-year-old billionaire and **Carlyle Group** co-founder, likened the drop in oil price to a tax cut for Europeans during an interview with Bloomberg Television. “Europe has to take advantage of it,” Rubenstein told his interviewer. In other Carlyle news, real estate star **Andrew Chung** is leaving the firm to start his own real estate business. Chung’s resignation, reported earlier in Bisnow, took place just days after he was promoted to partner, which could have brought him millions from equity and bonuses. Chung worked for Carlyle real estate bigwig **Robert G. Stuckey** , longtime head of the firm’s U.S. real estate funds. Chung has worked on more than $8 billion in U.S. real estate deals, including a 60-story luxury real estate building in Manhattan called Riverside Center and the sale in 2013 of 650 Madison Ave. to Crown Acquisitions and Highgate for $1.3 billion.

Backers invest in people, not businesses through ‘Upstart’

Like many early-stage entrepreneurs, Shefali Friesen poured all her personal savings into her start-up, a mobile service for adding bits of music evoking emotions to text messages. As she worked toward her graduate degree in music at New York University, Friesen felt neither the start-up nor the musician crowds really understood her vision. “If I’m with music people or artists, I’m a musician who has a start-up, and if I’m in the start-up community, I’m a start-up who does music.” A couple of months ago, Friesen began seeking funding for her business, called Emotitones. She stumbled upon Upstart, a crowd-funding platform launched seven months ago by former Google Enterprise president Dave Girouard. Instead of investing in businesses, Upstart allows backers to invest in promising individuals — “upstarts” — entitling them to a percentage of an individual’s future income over the next 10 years. Backers can also opt to be mentors for people they fund. Each upstart — who must have graduated from undergraduate or graduate school between 2010 and 2013 — has an online profile, detailing their accomplishments and goals, which backers may browse. About 100 Upstart hopefuls from 30 eligible universities applied to be on the platform, which currently features 22. Friesen was primarily drawn to the platform because she needed funding and mentorship. But she also thought Upstart would be a better venue in which to gather support for her personal vision — the synthesis of music and entrepreneurship — than the traditional venture capital pitch, which would likely place disproportionate emphasis on the business plan. Upstart’s “pricing engine” attempts to predict each candidate’s future income based on factors like standardized test scores, work experience and job offers. Using the income estimate, Upstart determines a “funding rate” — or how much a backer must put forth to receive 1 percent of an individual’s income later. For example, the engine might suggest backers put in $12,000 for 1 percent of a person’s future income, and recipients can decide how much to request based on how much income they’d like to share with investors in the future. Upstart keeps three percent of the funding a graduate raises, and charges an annual account servicing fee of 0.5 percent to backers. Income is verified based on the recipient’s tax returns, and the payment is waived for years during which the recipient makes less than $30,000, extending the contract by a year. Girouard launched the platform to discourage young graduates from accepting high-paying jobs just for the financial security, and instead encourage them to pursue their passions. “We conceptualized that [a person] should be able to borrow from himself or herself,” he said. In the past couple of months, Friesen has attracted investments from four backers: Girouard himself, Andy Palmer, a serial entrepreneur and his wife, artist Amy Palmer, and Matthew Glotzbach, a managing director at YouTube. Upstart’s team vets backers to make sure they’re accredited investors, and subjects them to due diligence background checks. Though the Securities and Exchange Commission’s ban on general advertising for certain investments prevents Upstart from sharing details about how the recipients will use the funds they request and how much each backer puts forth, Friesen she said she plans to generally direct the funds to Emotitones. Amy Palmer said she invested in Friesen because her profile suggested she was“creative, confident, and believ[ed] in her mission.” Between the five upstarts Amy Palmer is backing, her investments range from $3,000 to $20,000, she said. The site places no restrictions on how recipients use the money they raise, Girouard said. The majority of recipients currently featured on the site plan to use the money to repay student debt, but others indicate they would use it to support their business or living expenses. The site’s most controversial aspect is that it’s for profit, Girouard said, indicating that some critics might feel that backers are only interested in making a return on their investment instead of supporting the upstart’s best interests. But “most of the backers like the concept, and want to make a good return on investment,” he explained. For Friesen, the debt she owes to her backers is a motivation for her business. “I like having more people to answer to. When you’re a start-up founder, you don’t have the traditional work community to keep you in line and make you want to live up to expectations,” she said. Though she feels added pressure to make enough money to repay her backers — who she feels obligated to impress because she doesn’t want to “let them down”, she said, “I’m up for it.” Girouard noted that the platform may not have attracted so many applicants in the past, but that social networks have opened young people up to very public fundraising. “If this wasn’t the Facebook era, this wouldn’t work,” he said. _Follow On Small Business onTwitter._

This start-up will 3D print your house…for $10K

A company says its 3D-printer will print a house. Fast and cheap.    “As you can see with the advent of new technology,” the company says in its blog post. “Construction 3D printing is changing the view and approach to the construction of low-rise buildings and provides new opportunities to implement custom architectural solutions.” The possibilities of this advancement in 3D printing are many. Houses could be quickly constructed for refugee camps, people displaced by natural disaster or for those who do not have available housing, such as the homeless. Governments could build entire communities of affordable housing at just a fraction of what’s paid today. Now if they could only help me to get my printer recognized on my home network?

Why baby boomers are an important part of technology’s future

Steve Jobs was 52 when he announced the iPhone. That was in 2007. Years later, the Apple co-founder introduced the MacBook Air, App Store and iPad. Tim Cook, who was 51 when he took over from Jobs, is building on his legacy. They both shattered a myth that the young rule the technology industry. Silicon Valley’s venture capitalists, however, speak openly of their bias toward the young. “People under 35 are the people who make change happen; people over 45 basically die in terms of new ideas,” Vinod Khosla, a prominent investor, said at a conference I attended. Referring to the age of entrepreneurs whom venture capitalists fund, investor Paul Graham told the New York Times, “The cutoff in investors’ heads is 32; after 32, they start to be a little skeptical.” He acknowledged that he could be “tricked by anyone who looks like Mark Zuckerberg.” Others go so far as to claim that Internet entrepreneurs peak at age 25. The cult of youth is so powerful that billionaire Peter Thiel announced in September 2010 that he would pay college students $100,000 to drop out. Instead of “wasting” precious years in school and then being burdened by “incredible amounts of debt,” he said, they could be “focused on breakthrough technologies that will take civilization to the next level.” The result of this bias is that older entrepreneurs often are shunned while younger entrepreneurs receive attention and funding. This is hurting the venture-capital system as well as Silicon Valley — because the stereotypes are flawed. Research on successful technology firms by a team I led at Duke and Harvard in 2008 looked only at companies that had made it out of the garage and were generating at least $1 million in revenue. The research revealed that the average and median age of their founders was 39. Twice as many were older than 50 as were younger than 25. And twice as many were older than 60 as were younger than 20. In a follow-up project, we studied the backgrounds of 549 successful entrepreneurs in 12 high-growth industries. The average and median age of male founders in this group was 40, and a significant proportion were older than 50. Dane Stangler, vice president of research and policy at the Kauffman Foundation, built on our findings by analyzing Kauffman Firm Survey data and the Kauffman Index of Entrepreneurial Activity, which uses data from the U.S. Census. He found that, in every year from 1996 to 2013, Americans in the 55-to-64 age group started new businesses at a higher rate than those in their twenties and thirties. And the trend is building. Those ages 55 to 64 started 14 percent of all new businesses in 1996 but nearly 24 percent of them in 2013. There are hordes of young founders in Silicon Valley, some of whom drop out of school to start their companies. Venture capitalists collectively invest billions in them. The vast majority of these start-ups fail, however, because there is no substitute for experience and knowledge. What makes entrepreneurs successful, as my team’s research revealed, is work and industry experience, and management ability. These come with age. The inexperience — and immaturity — of youth is one reason venture capitalists’ track record is so poor. In 2012, the Kauffman Foundation analyzed 20 years of investment data from nearly 100 venture funds. It found that the vast majority of them produced lower returns than did the public markets. The experiment by Thiel to pay college students to drop out did not result in any world-changing start-ups. Most Thiel fellows joined other companies or went back to school. The Thiel Foundation quietly redesigned its program, which now provides an alternative education to children. Perhaps the realization set in that the innovation advantage isn’t provided by youth, but by knowledge, maturity, experience and connections. The claim that only the young can effect change has been disproved not only by Apple, but also by founders, inventors and innovators, and executives at almost every major technology company, including Google, LinkedIn, Salesforce.com, Qualcomm and Intel. Qualcomm, for example, was founded by Irwin Jacobs when he was 52 and Andrew Viterbi, who was 50. It also is untrue that people “die in terms of new ideas” as they approach 45 or that “young people are just smarter,” as Facebook chief executive Mark Zuckerberg told an audience at Stanford in 2007. Benjamin F. Jones, an economist at the Kellogg School of Management at Northwestern University, analyzed the backgrounds of Nobel Prize winners and other great achievers of the 20th century. He found that the average age at which Nobel laureates performed their prizewinning work and the average age at which inventors had their great achievement was 39. He also found that twice as many — 14 percent — were older than 50 as were younger than 26. Jones found that the average age of innovators is steadily rising, with the average age of greatest achievement for Nobel Prize winners and great tech inventors having increased six years, to 45, in the 20th century. Young entrepreneurs surely have an advantage in social media and app building. They understand these new technologies better than their parents do because they have grown up using them. It also is easier to write code for a cellphone than to learn how to motivate and inspire employees, manage finances and market products. But building a business requires all of those skills. That is why older entrepreneurs have more success. As baby boomers become as familiar with Internet and mobile technologies as their children are, they surely will give the youngsters a run for their money. They also have greater buying power and a better understanding of the markets for the next generation of technologies. A technology shift is happening that will dramatically alter the entrepreneurial landscape in the next few years. Several technologies — involving medicine, robotics, artificial intelligence, synthetic biology, 3D printing and nanomaterials — are advancing at exponential rates and are converging. This is the same type of advance that is occurring with computers — with processing power doubling every 18 months, prices falling and devices becoming smaller. A $500 laptop today has more computing power than did a Cray 2 supercomputer that cost $17.5 million in 1985 and had to be housed in a large building. These advances are making it possible to solve the global problems of health, energy, education and hunger. Inexpensive sensor-based devices, for example, allow the continual measurement of heart rate, temperature, movement, pressure and light. They can be used to build devices that keep track of blood pressure, glucose and blood oxygen levels, respiration and even sleeping habits. They also can be used to improve agriculture, monitor the environment and reduce food spoilage. Systems based on artificial intelligence can be used to make medical diagnoses, to drive autonomous cars, and to predict traffic patterns, crime and trends. Robotic devices will allow us to care for the elderly and automate routine processes. Digital tutors will be able to transform education. These technologies will make it possible to create the next trillion-dollar industries and to better our lives. But they require knowledge of fields such as medicine, biotechnology, engineering and nanotechnology. They require experience, an understanding of the problems people face and cross-disciplinary skills. All of these come with age and experience, which the baby boomers have in abundance. That is why we need to get beyond the stereotypes and realize that baby boomers are going to better the world.

Cvent files to sell shares to public

Cvent, the high-flying Tysons Corner-based event management software company that nearly imploded during the dot.com bust, filed papers with the U.S. Securities and Exchange Commission on Monday to raise up to $100 million in an initial public offering. The filings show that the company earned a net profit of $4.3 million in 2012 on revenue of $83.5 million. It plans to list on the NYSE under the symbol CVT, according to the SEC documents. Cvent creates software that allows companies and associations like Visa, Wal-Mart and Merck to send out the invitations, record the responses, collect the fees and book hotel for their events. For example, if the meeting is in downtown Chicago for 1,000 participants, Cvent has software that helps companies find the right venue. Cvent, which was launched in September 1999 with $250,000, once had an investor list that read like a who’s who of Washington. But it was hit hard after the bubble burst, and went from 125 employees to 26 in less than six months. Founder and chief executive Reggie Aggarwal was able to avoid bankruptcy and began building the company on the $400,000 in cash it still had on its books. The company has expanded and now has offices in Tysons Corner and in India.

The powerful role of incentive competitions to spur innovation

In the 1920s, New York hotel owner Raymond Orteig offered a $25,000 prize to the first person to fly non-stop between New York and Paris. Several unsuccessful attempts were made before an American airmail pilot named Charles Lindbergh won the competition in 1927 with his plane, the Spirit of St. Louis. Lindbergh’s achievement made him a national hero and a global celebrity, but it also sparked the interest and investment that led to the modern aviation industry. In 1996, inspired by Lindbergh’s achievement, Peter H. Diamandis wanted to reach for the stars. He formed a new organization called the New Spirit of St. Louis and created a $10 million competition to reward the first privately financed team whose spacecraft would carry three people to 100 kilometers above the Earth’s surface twice within two weeks. Renamed the Ansari XPRIZE, in recognition of the family who donated the purse, pursuit of the prize motivated 26 teams to spend more than $100 million on research and development. On Oct. 4, 2004, the Mojave Aerospace Ventures team won the competition, launching a new era in competition and yielding the $2 billion commercial space industry that exists today. Unlike traditional venture-capital firms, which back one idea, specific competitions inspire multiple solutions — often leading to new industries. Such competitions do this by setting a specific target that several teams strive toward. Unlike traditional philanthropic organizations, which focus on specific projects and determined outcomes, competitions’ large purses attract large amounts of operating capital, and teams wind up investing significantly more money than the prize offers, and consequently create responses with broader applicability. Diamandis explains that such competitions, in setting an audacious but achievable target that experts vet, “offer credibility and ‘air cover’ for entrepreneurs, innovators, and inventors who want to pursue a path that would otherwise be considered too risky.” (Disclosure: Diamandis is also founder of Singularity University, where I am a distinguished fellow). Competitions inspire entrepreneurs and philanthropists to attempt the impossible. I recently joined about 100 engineers, scientists, thought leaders, and celebrities in Los Angeles to design such a competition. This “Visioneering” conference, hosted by the XPRIZE Foundation, brought together people such as innovation guru Bill Gross, Qualcomm executive chairman Paul Jacobs, businesswoman and investor Lynn Tilton, Indian industrialist Ratan Tata, and entertainment industry leaders, Will.i.am and Patricia Arquette.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday The purpose of the gathering was to brainstorm what new and radical innovations can be created in the next few years that will positively affect humanity. These ideas — which could spawn new industries and challenge the conventional wisdom of what is “impossible” —- will form the basis of the next XPRIZE competitions. My brainstorming team, which included Tilton and Tata, proposed a prize to create affordable housing for the billions of people who lack decent shelter. The challenge: develop the tools and technology to build, in less than 24 hours, a home for a family using locally sourced materials for $1,000, providing them with the dignity and shelter that all human beings deserve. It sounds like an impossible challenge, but so were transatlantic flight and building your own spacecraft. In the end, our prize concept took second place. The wining idea was to develop radical, even controversial, alternative sources of energy. But some ideas that emerged from this event were so great that a few contestants said they would fund them personally. There are other notable public competitions too. Richard Merkin, president and chief executive of Heritage Provider Network, for example, announced in 2011 the $3 million dollar Heritage Health Prize data-mining competition to decrease the $40 billion dollars spent in the U.S. on avoidable hospitalization costs. The challenge is to create an algorithm that predicts how many days a patient will spend in the hospital so that doctors can work with the patient to prevent that hospitalization in the first place. This prize in predictive modelling is larger than the Nobel Prize for Medicine and the Gates Health Prize, and offers six “milestone prizes” along the way. Merkin says that his goal is to “create an online global community of problem solvers dedicated to creating more cost effective, healthier outcomes.” Useful competitions needn’t be grand, though. Corporations can use more-achievable challenges and smaller prizes internally to spur out-of-the-box thinking. The power of the crowd can also be harnessed for social causes. A startup named HeroX, which the XPRIZE Foundation spun off, created a platform upon which to design and launch such competitions on the Internet. It’s modeled on popular crowdsourcing sites Kickstarter and Indiegogo. One of the first HeroX competitions is the ImagineX Challenge, a $10,000 prize for the best ideas to challenge their community. The real genius in offering such prizes is that the possibilities truly are endless. We could have thousands of innovation prizes, addressing every challenge humanity faces — competitions that unleash the intellectual power and drive of entrepreneurs to create a better solution and a better world.

PayPal, as a spinoff, is worth way more than eBay, its former parent company

PayPal is its own company again. The payment firm, which officially spun off from eBay last week, started trading under the "PYPL" ticker Monday on the Nasdaq exchange, and closed the day slightly up at a price of $40.47 per share. That put its market capitalization -- the price per share multiplied by the number of outstanding shares -- at $47.13 billion at market close, though its value Monday was as high as $49.5 billion. As Business Insider noted, that's far more than it's former parent company -- which now has a value of $34.7 billion \-- and also makes it larger than Twitter, which has a value of roughly $23.4 billion. It's roughly the same size as Netflix, which closed Monday with a market cap of $48.7 billion.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico It was a solid debut for the firm, which decided to return to the same ticker symbol it used on the Nasdaq exchange before its 2002 eBay acquisition. After more than 12 years as a part of eBay, PayPal is in a strong position when it comes to several online payment trends. That's due not only to the success of the traditional PayPal service, but also to its business-focused branch Braintree and the peer-to-peer payments app Venmo. The company also recently announced that it has acquired Xoom, an online money transfer company. But the space is a crowded one, with startups such as Square and traditional companies such as Visa, Apple and Google eyeing a way to become the method of choice for online payments. To get ahead, PayPal chief executive Dan Schulman said the company will continue to build its products but also work to break into underserved markets, where there isn't basic financial infrastructure. "[We’ll] work with people around the world to make financial services accessible and affordable to everyone, anywhere in the world, so that it is simpler, safer and cheaper to spend, save, manage and move money than it has ever been before," Schulman said in a company blog post.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico

Sheldon Adelson, corporate interests boost Trump inaugural fundraising to record levels

Casino magnate and Republican mega-donor Sheldon Adelson donated $5 million to President Trump's inaugural festivities, as corporate interests and lobbyists lifted the inaugural committee's fundraising to record levels. In all, more than 45 individuals and companies donated at least $1 million each to the effort as Trump broke with the practice of most recent inaugural committees and placed no limits on corporate or individual donors. Major donors included Robert Mercer, the hedge fund manager who has been one of Trump's biggest donors, Dow Chemical, and Phillip Ruffin, a longtime Trump friend and business partner. Several owners of National Football League teams gave $1 million, including Washington Redskins owner Daniel Snyder, Los Angeles Rams owner Stanley Kroenke, Houston Texans owner Robert McNair and a Trump friend who owns the New England Patriots, Robert K. Kraft, whose team is visiting the White House on Wednesday. Trump's inaugural committee, which raised money to fund a concert and other celebrations surrounding his inauguration in January, announced Tuesday that it has raised $107 million, doubling a previous record set by President Barack Obama in 2009. A 510-page filing with the Federal Election Commission made public Wednesday provided details of donations, though it provided no information about how the committee spent its money, including how much money remained after the festivities. The committee has said it would donate leftover funds to charities but has not identified which charities will receive money or how much. But the new filing provides a window into the flood of support from wealthy individuals and major corporations that helped support the event, despite Trump's campaign promises to “drain the swamp” and limit the role of money in Washington. Presidential inaugural committees have traditionally been a way for major donors to express their support for a new administration — and for donors who backed a president's rivals during the campaign to make amends. The filing showed that more than 1,500 people and companies gave money to the effort. But more than two-thirds of the money raised came from big-dollar donors who contributed at least $500,000. Other corporate donors that gave $1 million included AT&T, Bank of America, Pfizer and Boeing. Boeing's donations came after Trump took a shot at the company on Twitter in early December, threatening to cancel a contract to build new presidential jets. Since then, the company has built strong ties to the Trump White House, and Trump has visited a Boeing facility. In a statement, a company spokesman noted that the $1 million contribution matched one given to support Obama's inaugural committee in 2013, and that the company had given to many inaugural committees before then. Another $1 million came from Marlene Ricketts, a member of the family that owns the Chicago Cubs. Trump had nominated her son Todd Ricketts to be deputy commerce secretary, but the Chicago Sun-Times reported Wednesday that he was withdrawing from consideration from the post after being unable to disentangle himself from his financial holdings. During his daily briefing Wednesday, White House press secretary Sean Spicer was asked whether he was concerned about any real or perceived conflicts, given that many inaugural donors will be affected by actions taken by the Trump administration. “No,” Spicer responded, saying the situation is similar to that posed by campaign donations. “There's disclosure on this for a reason, so you know what's happening,” Spicer said.   But Luckey was heavily criticized last year after he donated $10,000 to a pro-Trump Internet group called Nimble America, which was infamous for its off-color memes about Hillary Clinton, including a Pennsylvania highway billboard that called her "too big to jail.” Trailed by the scandal and a series of separate lawsuits, Luckey left Facebook last month. Luckey declined to comment. The committee had been chaired by longtime Trump friend Tom Barrack, with fundraising efforts led by vice chairmen Woody Johnson and Elliott Broidy.  Adelson is a major supporter of Israeli causes and has pushed for the United States to move its embassy from Tel Aviv to Jerusalem, a Trump campaign promise that remains unfulfilled. When Sean Spicer incorrectly recounted the history of the Holocaust at a White House briefing last week, he called Adelson personally to apologize.

Obama’s greatest legacy may be the global entrepreneurship he sparked

This was the seventh annual GES. The first, which was held at the White House in 2010, was announced by Obama in Cairo in 2009 to “deepen ties between business leaders, foundations and social entrepreneurs in the United States and Muslim communities around the world.” Its scope has since been expanded to include entrepreneurs from all communities.   In the United States, we have the American Dream; we often put entrepreneurs on a pedestal. To the rest of the world, this is unimaginable, a culture shock.  The 2013 summit in Kuala Lumpur led to the creation of the Malaysian Global Innovation & Creativity Center. Asran Dato Gazi, who heads this program, said GES had prompted their prime minister to work toward changing the country’s culture and removing regulatory obstacles to start-ups. The government also created educational and support programs, which have so far taught 15,000 entrepreneurs and incubated 150 companies.  U.S. Chief Technology Officer Megan Smith, whom I have known since the days she was working on moonshots at the secretive Google X labs, said that after spending time in Kenya, Uganda, Senegal and Nigeria, she learned the potential of uplifting entrepreneurs. She believes that this is the best way to boost these nations’ economies. Smith said that after she joined government, she also realized the opportunity to lift up American entrepreneurs, particularly those in the country’s rural parts. This is why she has been working on globalizing Silicon Valley’s best practices “to provide them with the resources and networks for funding, talent, partnerships, peers and more so they can grow their ideas, iterate and scale.”

Updated: Trump campaign says it raised an astounding $3 million since Tuesday

Presumptive GOP nominee Donald Trump's call this week for his backers to contribute to his presidential bid generated more than $3 million since Tuesday, according to campaign officials.  In an interview with Fox Business Network, national finance chairman Steve Mnuchin said that the campaign brought in more than $3 million online and that Trump would personally match the first $2 million. "So we made over $5 million online yesterday and we’re just starting that effort," he said. Raising such a huge sum in a short amount of time — through an email list that had never before been tapped for contributions — would make Trump's pitch for donations one of the most successful in American politics, according to veteran fundraisers. Because not every email recipient responds to a solicitation, experts estimate that it would require a list of as many as 6 million supporters to raise a sum as large as 3 million dollars in such a short period. Digital fundraising experts were skeptical that Trump has been able to curate and maintain such a big list. But if he did pull off $3 million in a day, Democrats should be worried, they added. At such a rate, Trump could pull in more than $20 million online by the end of the month. By comparison, likely Democratic nominee Hillary Clinton raised $28.3 million in May from 430,000 contributors, including $9 million in donations of $200 or less.  Trump pushed back and accused GOP officials of not rallying around his bid, threatening to self-fund his campaign and leave the party to fend for itself. He also sent out what he declared was his first fundraising email, although an earlier solicitation had gone out under his name from a joint fundraising committee set up in collaboration with the Republican National Committee.  "Let's make history again, and keep winning, by making this the most successful first fundraising email ever," he added.

Start-up that automates charitable donation raises $1.65 million from investors

The ALS ice bucket challenge is thought of as one of the first charity campaigns to figure out how to use social media. But imagine that, every time someone posted #IceBucketChallenge on Twitter, money was automatically pulled from their checking account? District start-up GoodWorld is aiming to put the Twitter-sphere’s money where its hashtag is – and now investors are taking notice to the tune of $1.65 million. Here’s how it works: Once a donor signs up with GoodWorld, giving a donation to a charity becomes a one-step process that takes no longer than it takes to compose a tweet or a Facebook post. When a charity registers with GoodWorld, anyone can donate to the cause simply by adding #donate, followed by @[name of charity] on Twitter. On Facebook the donor has to use #donate in a post with the amount they’d like to give, posted on the nonprofit’s Facebook page. GoodWorld takes a 4.8 percent cut of each donation and another 2.2 percent goes to the credit card company, but the rest of each donation goes directly to the nonprofit groups. [Meet GoodWorld, the start-up that wants to make giving to charity as easy as using a hashtag]    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico The start-up launched last October with just seven charities, and now there are almost 200 nonprofit groups in GoodWorld’s system, and almost 4,000 donors have signed up. What started as a team of four has grown to 12 people based out of District start-up incubator 1776, and the company announced Tuesday that it has secured $1.65 million in seed funding. Seeking to “democratize the landscape for donors,” as chief executive Dale Pfeifer puts it, the company says it is attempting to make it easier for donors to contribute to their favorite causes, beating popular crowd-funding sites like Indiegogo by just a few critical clicks. “People hate to click links. They’ll sit there on Facebook and ask questions all day long but they won’t click and follow a link,” said Ryan Moore, vice president of social media fundraising and promotions at the Beagle Freedom Project, an animal protection organization that has piloted GoodWorld’s software. Moore says his organization has raised almost $40,000 through GoodWorld’s technology after just a few months. And the instantaneous nature of donations makes it easier for nonprofits to conduct rapid-fire fundraising efforts in the event of a crisis. “Since we’re a rescue organization, being able to remind people about a rescue that we’re on, and having people be able to donate simply by posting [on social media] has been revolutionary for us,” said Tim Woodward, chief operations officer at Animal Rescue Corps, a nonprofit organization that advocates against animal cruelty and responds to specific cases of animal cruelty. “It works particularly well for us when we’re on scene in the moment and people feel the urgency.” Woodward’s team tested the fundraising software by asking the Internet for help with patching up some of their response vehicles that needed work. They agreed to be one of GoodWorld’s initial product testers in February, and in March they held a “fix up the fleet” campaign that raised $5,000 in less than a week. Woodward estimates they have raised more than $10,000 with the software. The latest round of fundraising was co-led by New York-based Nyca Partners,  a venture capital firm. Chris Liddell, an investor who served as the chief financial officer for both Microsoft and General Motors, also contributed to this round of funding. The raise includes an initial $500,000 round of investment that included Katharine Weymouth, the former publisher of The Washington Post. “The ability to transfer money on social media with just a hashtag is revolutionary for the financial technology sector – a space ripe for disruption,” Hans Morris, managing director of Nyca Partners, which led the latest round of funding, said in a statement. GoodWorld executives say their next challenge is figuring out how to turn online donation into a game, coaxing users to donate by finding ways to pit them against one another, such as offering prizes for the top donor on an individual post. “Social media is a very new channel for donations that’s very different from what anyone else has done, this is more of a call-and-response activity,” GoodWorld’s chief executive Pfeifer said. “People like to feel like they’re not just giving, they’re also receiving. They want to feel like they’re a part of something.”

Snapchat lawsuit tells a common tale: A start-up can have its Winklevosses

In the spring of 2011, Reggie Brown was a junior at Stanford when he approached a friend with an idea: an ephemeral text-messaging service that would delete photos automatically, seconds after they were received. The friend, Evan Spiegel, allegedly replied, “That’s a million-dollar idea,” and the two decided to recruit a third partner and build it. Spiegel was wrong. It wasn’t a million-dollar idea but a $3 billion idea — the amount Facebook reportedly offered recently to buy Snapchat, which is what Brown’s idea had morphed into. On Snapchat, users set limits for how long their photographs will be visible to others, helping them protect their privacy and preventing intimate or embarrassing photos from being forwarded. Spiegel turned down the offer. Brown was unable to turn down the offer because he was no longer part of the company. He’d been, he says, ousted by Spiegel and their third collaborator, Robert Murphy — sentenced to the footnotes of creation and the foothills of fortune. He’s suing, of course. A legal complaint, demanding a portion of Snapchat’s worth, was filed this year, detailing the company’s origins, as related above. Last week, video clips of the trio’s depositions appeared on Business Insider: three handsome young men in collared shirts, awkwardly dancing around issues of creativity and compensation. The written complaint from Brown’s lawyers begins with an epic, potboiler opening line: “This is a case of partners betraying a fellow partner.” Brown is a plaintiff gunning for millions, but he’s also an increasingly visible character type: the left-behind partner, the almost-success, the cautionary tale of the start-up world. Take Noah Glass. A central conflict in the new book “Hatching Twitter” is the way that co-founder Jack Dorsey orchestrates the dismissal of Glass, the man who was responsible for much of the site’s conceptualization and who came up with the name Twitter in 2006. (In an act of 140-character justice, Dorsey was eased into Twitter’s background and pulled as chief executive, although not before branding himself, fairly successfully, as the sole visionary behind the operation.) The most famous examples of left-behind idea men are Cameron and Tyler Winklevoss, the Harvard rowing twins who, along with classmate Divya Narendra, enlisted Mark Zuckerberg to help build them a social-networking site. And who then were as shocked as anyone when Zuckerberg publicly introduced a little project he’d been brainstorming on the side, called The Facebook. Their story became the backbone of the Oscar winner “The Social Network” (2010), and their name became synonymous with inventors who were elbowed out of their inventions. Glass was Winklevossed. Brown appears to have been Winklevossed. The Winklevosses were Winklevossed but compensated handsomely for it: They accepted a settlement from Zuckerberg for a reported $65 million and now run their own venture capital firm. Weaseling a colleague out of fame, or accepting sole credit for a shared idea, goes back centuries, but in the app-happy 2010s, the money gets so big, so fast, for people so young. Jolly dorm-room experiments become 40-page legal complaints in a matter of months. Are Winklevosses (Winklevii, colloquially) the tragic heroes of our time? The Oedipus or Thyestes, the King Lear? Their fatal flaw is trusting that old-fashioned oral agreements would keep pace with complex and quickly changing technology. In court documents and other media, they come across as morally correct, perhaps, but also as slightly grubbing and somewhat embarrassing. They undermine the creation myths we like to hear, in which one genius’s idea transforms society. Or, perhaps, the fatal flaw of a Winklevoss-type is being an English major, as Brown was — a discipline known for producing imaginative thinkers but not for producing people capable of coding Web sites. The real issue that these court cases get at is the question of what it means to invent something. In Spiegel’s deposition, he is asked who came up with the idea behind Snapchat. “Reggie did,” he replies. But is coming up with an idea worth a billion dollars? Is writing the code worth it? Is landing the first financial backer? Is designing an icon, as Brown dictated the design of Snapchat’s ghost mascot? In an industry in which some products succeed wildly while nearly identical ones flop, how does one calculate the alchemy that results in a $3 billion offer? For evidence in the Snapchat case, Brown’s attorneys have produced old e-mails, Facebook pages and text messages from Spiegel’s father to Brown’s mother, in which the parents crow about their sons’ industriousness. The most problematic evidence for the defendants seems to come from chief executive Spiegel’s testimony, although only a fragment was available for viewing. “Do you think Reggie deserves anything for the contributions he made on the project?” Spiegel was asked by Brown’s attorney in his deposition. Spiegel waits several seconds before replying. “Reggie may deserve something for some of his contributions.”

As regulators circle Bitcoin, virtual money men ante up for the digital currency

It was a chance encounter on a beach in Ibiza, Spain, in summer 2012 that would lead to Cameron and Tyler Winklevoss becoming two of the biggest investors in Bitcoin. While looking for lounge chairs on the celebrity-studded island, the twins ran into David Azar, a private investor from New York who recognized them and offered them his seat. Azar started talking about Bitcoin, the digital currency that has gained prominence this year for its wild price swings and for piquing the interest of regulators from New York to Germany. “He asked us if we’d given much thought to virtual currency, and, at the time, we really hadn’t,” says Cameron Winklevoss, who along with his brother in 2004 sued Facebook founder Mark Zuckerberg, saying he stole their idea for the social-networking site. “I got really fascinated by the implications for the financial world,” he says. Within weeks, the brothers — flush with cash from the $65 million they received after settling the Facebook case in 2008 — started buying Bitcoins. They weren’t the only ones. In the past six months, at least half a dozen venture capital firms that made fortunes from early contrarian bets on tech companies such as Twitter, Tumblr, Skype and Spotify have put their money on Bitcoin. After dismissing Bitcoin as a joke for years, many Silicon Valley investors now see digital currencies as the next revolution to hit the Web after social media. In May, Founders Fund, set up by PayPal founders including Peter Thiel, led a $2 million investment in Atlanta-based BitPay, which allows merchants to accept Bitcoin payments and is processing transactions totaling about $7 million a month. Also in May, after two years of wait-and-see, New York-based Union Square Ventures, an early investor in Twitter, put $2.5 million in Coinbase. Coinbase was processing $20 million worth of Bitcoins a month as of September, up from $1 million in February. Then Google Ventures jumped into digital currency with an investments in OpenCoin, which started Ripple, a payment system using Bitcoin and other currencies. Like the Bitcoin investors who came after them, the Winklevii, as they are known, started small. They invested $1 million in BitInstant, a New York-based Bitcoin payment processor in which Azar was investing. Rowers who competed in the 2008 Olympic Games in Beijing, the brothers say they began snapping up Bitcoins when the price was in the low single digits. It was a wise investment; one Bitcoin was worth $140.45 as of Oct. 1. The Winklevosses, 32, say they own about 1 percent of the $1.6 billion worth of Bitcoins in circulation, making their holdings worth about $16 million. They say they see Bitcoin as a way around a sclerotic global payment system that is balkanized into rival currencies and competing financial institutions. “We feel that digital currency, and Bitcoin for now, is a huge place for innovation,” Cameron says. Bitcoin originated at the height of the financial crisis in November 2008, when a programmer or group of programmers known only as “Satoshi Nakamoto” released an academic paper outlining the design for a new peer-to-peer electronic cash system that removes the need to deal with third parties such as banks. A few months later, in a blog post, Nakamoto described the idea for issuing encrypted digital coins that were not tied to any central bank. Users store Bitcoins in digital wallets, with transactions recorded on the Blockchain, a public ledger that can be accessed via the Internet. The system Nakamoto designed caps the number of Bitcoins at 21 million. The open-source Bitcoin protocol has been tested by some of the world’s top computer security experts, who have tried to hack it and failed. While anyone can see transactions made from a Bitcoin address — a string of about 34 numbers and letters — the owner remains hidden. The same goes for Nakamoto, whose identity remains a mystery. No central authority issues Bitcoins, which is part of their appeal to libertarians, who form a significant cohort of the virtual currency’s supporters. Nakamoto argued that attempts to create digital money beginning in the 1990s failed because, even though these currencies were not issued by a government authority, they were centrally controlled by a company. One such attempt was E-Gold, a digital currency based on the precious metal. In 2007, the Justice Department indicted E-Gold. The following year, the company’s founder, Douglas Jackson, pleaded guilty to a conspiracy to engage in money laundering and operating an unlicensed money-transmitting business. Skeptics say Bitcoin could fail, too. Some compare its appeal to the mania for Dutch tulip bulbs in the 1600s, when speculators drove up prices only to see the market collapse as investors rushed to sell. Others have branded Bitcoin fool’s gold, saying a digital code can’t be valued as a traditional commodity can. “Bitcoin will be the Esperanto of the monetary world,” says James Angel, a finance professor at Georgetown University. “Most people will see it as a fad like hula hoops, and they’ll look back on it a decade from now and say: ‘That was a clever idea. I even bought a cup of coffee with it once.’ ” Fad or not, Bitcoins are being adopted by a few merchants striving for cyber-cred. You can use your Bitcoins to buy beer at Pembury Tavern in East London or cocktails at EVR in New York. Bitcoin exchanges and payment processors akin to PayPal have mushroomed, luring users to trust often-unregulated third parties to hold and handle their digital currency. Regulators are cracking down on this Bitcoin free-for-all. Last week, the FBI arrested Ross Ulbricht, a.k.a. “Dread Pirate Roberts,” the alleged founder of Silk Road, a Web site that authorities say was a platform for illegal drug sales. Silk Road generated about $1.2 billion of sales using Bitcoins and $80 million in commissions, according to a criminal complaint. Ulbricht was charged with narcotics trafficking conspiracy, computer hacking conspiracy and money laundering. The FBI seized 26,000 Bitcoins worth about $3.6 million. In March, the Treasury Department’s Financial Crimes Enforcement Network issued guidelines requiring Bitcoin exchanges and processors operating in the United States to register with FinCEN as money services businesses. The regulations — a costly headache for Bitcoin start-ups — require companies to follow the same “know your customer” rules that banks do and report suspicious transactions. In May and June, the Department of Homeland Security seized $5 million from two U.S. accounts connected to one of the largest Bitcoin exchanges, Tokyo-based Mt. Gox, because it failed to register as a money-transmitting business. In June, Mt. Gox registered with FinCEN. In keeping with anti-money-laundering rules, it is requiring users to verify their identities when they deposit or withdraw cash. In August, the regulatory onslaught intensified. Benjamin Lawsky, the superintendent of New York’s Department of Financial Services, jumped in with subpoenas to 22 digital-currency companies and investors, requesting information on their Bitcoin operations as part of a fact-finding mission. “If virtual currencies remain a virtual Wild West for narco-traffickers and other criminals, that would not only threaten our country’s national security but also the very existence of the virtual-currency industry as a legitimate business enterprise,” Lawsky said in August. In Germany, Bitcoin has won a victory of sorts. Germany’s Finance Ministry said Bitcoin would be recognized as “private money” and would be subject to sales and capital gains taxes. Frank Schäffler, a member of the German parliament’s finance committee, lauded Bitcoins as a first step toward the Austrian economist Friedrich Hayek’s vision of a world with denationalized, competing private currencies. In the United States, the regulatory chill has caused Bitcoin businesses to go into hibernation. In July, BitInstant said it was suspending operations to sort out “growing pains” before relaunching — casting a doubt on the Winklevosses’ investment. “The BitInstant team is working hard to get its site up and running, and we hope that happens soon,” the brothers said in an e-mail Sept. 19. Tradehill, a Bitcoin exchange, announced in August that it was suspending trading because of regulatory issues. “For Bitcoin to succeed, the banks need to be on board,” says Shakil Khan, head of projects at music streaming service Spotify, an early investor in BitPay and backer of CoinDesk, a Bitcoin news site. “Living in hope that the regulatory challenges will disappear is not a strategy.” The libertarian wing of the Bitcoin movement — many of them geeks in T-shirts who wouldn’t look out of place at an Occupy protest — says the U.S. government is bent on destroying Bitcoin. “I recommend setting up in the least tyrannical jurisdiction, so stay the hell away from the U.S.,” Erik Voorhees, founder of Coinapult, which helps customers transmit Bitcoins via e-mail and mobile phones, said in July at a digital-currency conference in London’s Canary Wharf. The currency has fluctuated this year, turning some young entrepreneurs into Bitcoin millionaires, such as 25-year-old Coinbase co-founder Fred Ehrsam, a former Goldman Sachs trader. After trading as low as $17 in January, the price of a Bitcoin surged to a high of $240 in April, spurred by the banking crisis in Cyprus. Bitcoin was behaving like gold, a store of value that tends to rise at times of economic or political uncertainty. Bitcoin believers say the currency is more than just an antidote to financial turmoil. In his office in Manhattan’s Flatiron District, Union Square Ventures co-founder Fred Wilson compares Bitcoin to the creation of the protocols behind e-mail and the World Wide Web. “It’s a scheme for computers to talk to each other that people can build on top of,” says Wilson, 52, whose firm was one of the first to invest in the social-media site Tumblr and social-gaming company Zynga. Investors say Bitcoin could challenge dominant players such as Visa and Western Union as a means of international money transfer. With no need for a third-party intermediary, users can send Bitcoins to one another for free. PayPal, by contrast, charges sellers 2.9 percent per transaction and more for international sales. Working from Flatiron offices featuring sleek gray sofas and exposed industrial pipes, the Winklevoss twins say they want to offer pension funds and retail investors a way to gain exposure to the digital currency without buying Bitcoins. “The driving force is bringing Bitcoin to the mainstream investor,” Cameron Winklevoss says. In July, the brothers filed a 95-page application with the Securities and Exchange Commission for an entity called the Winklevoss Bitcoin Trust, an exchange-traded fund that would track the performance of the digital currency. Cameron says he and Tyler spent months on the filing with lawyers at Katten Muchin Rosenman, which helped draft the paperwork for the first ETF 20 years ago. The Bitcoin ETF idea is so far-fetched that SEC approval, if it comes, could take years, says Reggie Browne, head of ETF trading at Cantor Fitzgerald. “I think it’s a riot,” he says, laughing. The Winklevosses have competition in the race to snag Bitcoin investors. Barry Silbert, founder of SecondMarket, which became the biggest private market for trading shares in Facebook before it went public, is raising capital for a private Bitcoin Investment Trust aimed at institutional and accredited investors, not retail clients. SecondMarket invested $2 million in the fund, which launched in September. Silbert says the only way for Bitcoin to become a global currency is for trading volumes and overall market value to increase beyond $1.6 billion. Silbert began buying the virtual currency as a personal investment in early 2012, when the price was $5 to $10. Then in spring 2012, he started the Bitcoin Opportunity Fund and began investing in start-ups, including Tradehill. He says he’s invested more than $1 million in 10 companies — and used Bitcoins to finance many of the companies he’s backed. Bitcoin could go viral, Silbert says. “I’m not going to suggest it will replace the U.S. dollar,” he says. “But can it have as transformative an effect on the world as Facebook? Yes.” Bitcoin’s future is largely in the hands of regulators. By forcing companies that handle digital currencies to act by the same rules that banks do, regulatory authorities could draw Bitcoin into the mainstream like any number of innovations that are now embraced by the marketplace. Or they could break it, marginalizing it as a threat to financial integrity and spelling the end of what many hoped would be a digital-currency revolution. The full version of this Bloomberg Markets article appears in the magazine’s November issue.

Why collect cash for super pacs when you can bankroll puppy cow dolls?

The region’s creative types have collected millions of dollars using the crowdfunding site Kickstarter to bring us a portable breathalyzer test, D.C. punk documentaries and food trucks. **The District** Since Kickstarter launched in 2009 Launched projects: 1,791 Successfully funded projects: 750 Dollars pledged to projects: $11,451,053 2014 Launched projects: 481 Successfully funded projects: 170 Dollars pledged to projects: $3,494,060 2013 Launched projects: 415 Successfully funded projects: 197 Dollars pledged to projects: $3,579,030 2012 Launched projects: 416 Successfully funded projects: 195 Dollars pledged to projects: $2,634,089 Examples: a 20-foot tall “cargo cult pyramid” to take to Burning Man 2013, a theme song for the District, and a guerrilla food zine. **Virginia** Since Kickstarter launched in 2009 Launched projects: 3,013 Successfully funded projects: 1,074 Dollars pledged to projects: $16,708,757 2014 Launched projects: 1,070 Successfully funded projects: 328 Dollars pledged to projects: $5,648,858 2013 Launched projects: 683 Successfully funded projects: 286 Dollars pledged to projects: $6,063,764 2012 Launched projects: 608 Successfully funded projects: 259 Dollars pledged to projects: $3,304,120 Examples: portable solar panel laptop charger, plasma jet electric thrusters for spacecraft and “combat kitchenware.” **Maryland** Since Kickstarter launched in 2009 Launched projects: 2,323 Successfully funded project: 822 Dollars pledged to projects: $11,993,621 2014 Launched projects: 723 Successfully funded projects: 427 Dollars pledged to projects: $5,211,859 2013 Launched projects: 501 Successfully funded projects: 208 Dollars pledged to projects: $3,409,067 2012 Launched projects: 544 Successfully funded projects: 228 Dollars pledged to projects: $2,176,218 Examples: “adorable yet udderly terrifying” puppy cow dolls, a robot sailboat and a movie about people who county penguins. Source: Kickstarter For stories, features such as Date Lab, Gene Weingarten and more, visit WP Magazine. Follow the Magazine on Twitter. Like us on Facebook. E-mail us at wpmagazine@washpost.com. ** **

Twitter will need to be insanely profitable just to hit its valuation

If you're considering whether Twitter is a good investment now that it's officially on the stock exchange, it might help to look not only at what future opportunities might hold, but also what it will take to get there. Trading on Twitter has just begun, with an initial share price of $45.10 and a valuation of over $25 billion.      *[WSU]: Wayne State University So far, the morning has been a huge success on the one hand for Twitter, which set its IPO price at $26 a share on Wednesday night. On the other hand, it's indicative of how much farther the company will need to climb in order to justify its IPO. Dartmouth economist Anant Sundaram puts it this way to the Wall Street Journal:    *[WSU]: Wayne State University That's pretty ambitious. But given that Twitter's current valuation is now so much higher, Twitter would need to perform ridiculously well over the same time frame to fulfill what investors see as its potential. Along the way, it will still have to deter potential rivals, develop a more innovative business model, grow its user base (which, in the United States, is still remarkably small) and fend off the worst threat to its long-term prospects: age. Will Twitter still even be cool in 10 years?    *[WSU]: Wayne State University

Meet Orange Chef, the other IoT start-up Google backed

Google surprised analysts last week when it announced plans to buy Nest, a Palo Alto-based company producing smartphone-controlled thermostats and smoke detectors that adjust to user preferences, for $3.2 billion. But Nest isn’t the only Internet-of-Things start-up Google has invested in. In December, the company’s venture capital arm led a $1.2 million investment round in The Orange Chef Company, a San Francisco-based start-up creating connected kitchen devices. The 10-person company developed the Prep Pad, a Bluetooth enabled kitchen scale that can weigh food and transmit data to a smartphone app. Scheduled to hit the market in March, the scale pre-orders for $149.95; the app includes a database of nutritional information for hundreds of thousands of foods, and can scan product codes. The Orange Chef also sells iPad stands and covers designed to protect the tablet from food in the kitchen. These products will soon be distributed in Williams-Sonoma cookware stores. The Nest acquisition suggests there’s a market for connected home start-ups, said The Orange Chef’s marketing head Michael Tankenoff . “We’re very happy [Google] had the faith and the shared level of excitement [about connected homes],” he said. “It would be amazing to be able to continue on the path of Nest — it’s a very lofty goal, but first things first, we want to make sure we tackle the connected kitchen the right way.” In the future, the company would be open to collaboration with Nest or another connected-home company, Tankenoff said.

Facebook IPO hits Nasdaq hiccup

Facebook shares were making a comeback in early afternoon trading Friday after falling to their original IPO price of $38. According to a report from CNBC, Nasdaq’s technical difficulties worried investors trying to get their trades in as the market opened, possibly driving Facebook’s stock back down to its opening price. Traders were said to be angry with the Nasdaq for the technical delays. CNBC also reported that the retail component of the offering could be the largest in IPO history. Shares were at around $40 at 12:45 p.m. after a dip in the late morning trading. The stock spiked to $42.05 as soon as it began trading, soaring as high as $45. Overall, the Nasdaq was down about 2 percent at 12:30 p.m. The Facebook IPO was the largest initial public offering ever handled on the Nasdaq, trading an astonishing 82 million shares in the first 30 seconds, NBC News reported. It is the largest technology IPO in U.S. history and one of the top IPOs overall, trailing only those of General Motors and Visa. (Washington Post Co. Chairman Donald E. Graham is a member of Facebook’s board.) Related stories: Facebook stock falls back to $38 after jump at open Facebook’s Mark Zuckerberg rings the Nasdaq bell Facebook IPO: Five things to know Facebook’s market debut draws criticism from lawmakers

Ted Cruz raises $4 million in just over a week

CONCORD, New Hampshire -- Sen. Ted Cruz has raised $4 million in the eight days since officially launching his White House bid, his campaign confirmed Wednesday night. And in a sign of his appeal to grassroots conservatives, his campaign said that 95 percent of the contributions came in amounts of $100 or less. Cruz, who formally announced his presidential campaign on March 23, remains the only major candidate in either party to officially launch a White House bid. He raised $1 million within a day of his formal announcement, and $2 million within the first three days, according to his campaign. Cruz's campaign said bundlers accounted for one-third of the money raised and that 300 donors maxed out on their contributions to Cruz. Word of his latest fundraising figures was first reported by the Wall Street Journal. “Often you have an establishment candidate, usually the moderate, who will be well funded,” Cruz spokesman Rick Tyler said in a statement. “Here we have a candidate who is conservative and can raise money.” [ _The politics of Ted Cruz bashing -- in one quote_]    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico Cruz will most likely rely heavily on small-dollar donations rather than big checks from the wealthy donors who tend to back establishment candidates. The Cruz campaign said Wednesday that the average donation during the eight days from the campaign launch through March 31, the deadline for candidates to file their fundraising totals from the first quarter of 2015, was around $83. The goal of the Cruz campaign is to bring in some $40 million over the next year. That haul will most likely be dwarfed by the big bucks expected to be raised by former Florida Gov. Jeb Bush, Wisconsin Gov. Scott Walker, and possibly Sen. Rand Paul of Kentucky. Cruz told the Washington Post and NH1 News two weeks ago that he can "absolutely" compete with the big bucks that Bush, the former Florida governor and son and brother to former presidents, is expected to raise. "Jeb Bush will shatter every fundraising record ever set. They've set a goal this first quarter of raising $100 million. It wouldn't surprise me if Jeb does much more than that, if he blows past $100 million," he said. "Among donors, Jeb Bush represents Mick Jagger and the Beatles rolled all in one. But at the end of the day races are not decided by donors in fancy fundraisers. Races are decided by actual primary voters, by people on the ground. And I'll tell you the support we're seeing at the grassroots is breathtaking and in my experience, grassroots plus money beats a whole lot more money every time," Cruz added, saying he was "more and more confident that we will have the financial resources to compete, and compete vigorously."

Trump campaign says it raised $3.5 million in one day

This week's dramatic Republican National Convention has helped unleash a gusher of cash for Donald Trump's presidential campaign, which said it raised $3.5 million in a 24-hour period. In a statement, the campaign noted that the total was reached as Indiana Gov. Mike Pence, the vice-presidential nominee, addressed the crowd Wednesday, crediting him with igniting "the passion of grassroots conservatives." More than 750,000 new donors have contributed to the campaign in the past 30 days, the campaign said.

A villain, a prophet and two wildly successful start-ups

_Antonio Garcia-Martinez is a former Facebook product manager, Twitter advisor, and is author of “Chaos Monkeys: Obscene Fortune and Random Failure in Silicon Valley.”_ Silicon Valley encourages an odd form of meritocracy that inpires the ambitious to succeed and disregards whatever happens to the rest — it’s a winner-take-all and loser-get-nothing world. In his new book, “The Upstarts: How Uber, Airbnb, and the Killer Companies of the New Silicon Valley Are Changing the World,” Brad Stone reveals the workings of this brutal tech-world battlefield. He amply illustrates that for every tech champion, there is a forgotten crowd of decapitated competitors, pissed-off investors, defenestrated founders and unrewarded early employees. The Silicon Valley meritocracy rewards some for good luck and destroys others for a bad twist of fate. Consider the different outcomes for two early Uber employeees. Matthew Kochman was a charismatic and ambitious Cornell grad hired to lead Uber’s assault on the New York market. Relying on his considerable charm, he cut deals with the city’s recalcitrant limo drivers to use the newfangled mobile app. But after his relationship with Uber’s chief executive and founder, Travis Kalanick, soured, Kochman bailed on the company only nine months into his tenure, walking away from his unvested equity stake. In a vindictive pique, he consulted for competitors, bad-mouthed Uber to potential investors and founded another transport start-up that went nowhere. Right now, the Uber shares he abandoned are worth more than $100 million. By contrast, Oscar Salazar happened to know an Uber founder and ended up heading the Mexican development team that coded the original Uber app. Since he was officially in the United States as a student, he couldn’t accept payment in cash. Instead, he took equity in the fledgling start-up. His stake is now worth hundreds of millions of dollars. “It’s way more than I deserved,” Salazar admits. “It’s more than any human deserves.” While ill fate and chance play their role, true merit also drives some competitors to the top. Uber founder Kalanick demonstrated his swift reaction time in dealing with an incursion by a London company in the U.S. market. When Hailo, a mobile app matching passengers and taxis in London, announced that it planned to set up operations in Chicago, Kalanick raced into the city with Uber. By the time Hailo finally arrived on the scene five months later, it was too late — the company would never carve out an American beachhead. Similarly, Kalanick impetuously launched Uber operations in Paris during a personal visit, and in a piddly market called China. Soon after flying into Beijing, Kalanick had the Uber engineering team whip up a very basic Chinese version of Uber that he personally convinced a handful of drivers to use. Then he took the first Uber ride in China himself. Within months, Uber would accomplish what no other U.S. tech company had ever managed, not even Google: It captured a substantial portion of the Chinese market and even fought the Chinese taxi incumbent to a stalemate. Airbnb founder Brian Chesky also has a claim on entrepreneurial genius, anchored by a much-retold story about his company’s origins. Airbnb got its start when penniless industrial-design students began offering lodgers air mattresses in their apartment to pay for their rent (hence the “air” in Airbnb). Early on, the company struggled. Short on cash, the students used their design skills to produce cereal boxes featuring caricatured faces of the 2008 presidential candidates, Barack Obama and John McCain. They then sold the $4 boxes for $40 at the Democratic National Convention and saved their foundering start-up with the cash earned. As I observed when I pitched my own start-up, a cereal box featuring Obama’s face still adorns the offices of Y Combinator, the prestigious Silicon Valley venture capitalist firm that first funded Airbnb (and my own unremarkable company). While Uber and Airbnb are the twin showpieces of new entrepreneurship, the leaders of these two companies could not be more different. Each embodies one of the two chief-executive archetypes currently in vogue. Uber’s Kalanick is start-up CEO as textbook sociopath: glib, charming, manipulative, calculating, sometimes reckless and content to treat people as mere means to personal ends. In one telling scene, Kochman had just received veiled physical threats from a sketchy Ukrainian who ran one of New York’s vast limo fleets. In response, Kalanick whimsically observed, “If you get whacked, do you have any idea how much press that will get us?” The combative Kalanick tenaciously fought any attempts to regulate Uber in the United States, alienating one regulatory agency after another in rowdy public hearings, to the point where Uber staffers eventually kept him from attending. Meanwhile, a direct competitor named Lyft attempted to woo and cajole the California Public Utilities Commission into allowing what we now call ride hailing (that is, permitting anyone to become a taxi driver in their personal vehicle). Suddenly Kalanick became a rule-following reactionary, badgering the commission to go after Lyft as intensely as he’d hectored it to ignore Uber. When Lyft got approval for ride hailing in San Francisco, Kalanick instantly pivoted and announced that Uber was launching a similar product (now known as UberX). What followed was a start-up death match that lives in Silicon Valley lore: Uber employees routinely requested Lyft rides and then offered Lyft drivers huge bonuses to defect to Uber. On the other side of the start-up playbook, Airbnb’s Chesky is CEO as prophet of a new start-up religion, motivated as much by a mission as by money. Its mission: to bring the world together via shared experiences and cheap lodgings. Airbnb headquarters (like that of my former employer Facebook) is papered with exhortatory distillations of company culture, such as “Belong everywhere” and “Airbnb love” (Facebook’s were rather less cuddly). The company held yearly pow-wows — elaborately staged in grand venues with A-list entertainment — for all of its hosts, while Chesky evangelized to the converted in revival-tent style. Even Stone, the cynical journalist, found some meaning in Airbnb hosts’ gratitude to the company and their passion for its culture. The Silicon Valley carnival of characters and oddities doesn’t attract nearly enough serious, long-form reporting. Leigh Gallagher, an assistant managing editor at Fortune, offers another much-needed perspective in her new book, “The Airbnb Story: How Three Ordinary Guys Disrupted an Industry, Made Billions . . . and Created Plenty of Controversy.” Gallagher describes how the can-do passion and prophetic vision of Airbnb’s founders overcame all obstacles on the way to redemptive success. The take is more corporate and dry than Stone’s account, and the tale is told in more linear fashion (and somewhat conventionally) from creation, to growth, to surmounting challenges, to eventual success. It’s Airbnb rendered as a Horatio Alger fable, but with smartphones. What Gallagher lacks in snark she makes up for in business perspective, including a long competitive analysis with thoughts from industry leaders that assesses how Airbnb fits into the conventional hostelry business. By contrast, where Stone really succeeds is in providing the reader with the visceral experience of the start-up enterprise, something lost in typical rah-rah tech journalism. Reading “The Upstarts,” you can almost smell the tightly wound aggression of a pacing Kalanick inside an Uber conference room, phone pressed to his ear, alternately hectoring an employee to meet tighter deadlines or cajoling a wary partner into a deal. You can feel the sphincter-clenching fear and confusion of neophyte Chesky as Airbnb is hit with the first of several scandals involving hosts burned badly by destructive guests, or guests harmed, or even killed, by negligent hosts. We are spectators of capitalism as theater staged inside progressively more sumptuous offices, all paid for by escalating rounds of venture capital financing that is dizzying even by Silicon Valley standards: Uber and Airbnb have collectively raised around $12 billion. If everything in our lives eventually becomes shared, booked and optimized via software, then Uber and Airbnb will have been the beginning of that epochal transformation. By Brad Stone Little, Brown. 372 pp. $30 By Leigh Gallagher Houghton, Mifflin Harcourt. 236 pp. $28

As drones evolve from military to civilian uses, venture capitalists move in

Commercial drones will soon populate U.S. airspace, and venture capitalists like Tim Draper are placing their bets. Draper, an early investor in Hotmail, Skype and Baidu, is now backing DroneDeploy, a start-up that is building software to direct unmanned aircraft on land mapping and the surveillance of agricultural fields. Draper says he even expects drones to one day bring him dinner. “Drones hold the promise of companies anticipating our every need and delivering without human involvement,” Draper, 55, wrote in an e-mail. “Everything from pizza delivery to personal shopping can be handled by drones.” Venture investors in the United States poured $40.9 million into drone-related start-ups in the first nine months of this year, more than double the amount for all of 2012, according to data provided to Bloomberg News by PricewaterhouseCoopers and the National Venture Capital Association. Drones are moving from the military, where they’ve been used to spy on and kill suspected terrorists, to a range of civilian activities. Congress has directed the Federal Aviation Administration to develop a plan to integrate drones into U.S. airspace by 2015 and to move faster on standards for drones weighing less than 55 pounds. It’s not just start-ups that are anticipating the changes. ConocoPhillips says that drones could be used to monitor ice floes and marine mammals in the Arctic. Entrants could also include established drone makers AeroVironment, Boeing’s Insitu unit and Israel Aerospace Industries in Tel Aviv, according to Bloomberg Government. Sales of civilian unmanned aerial vehicles, or UAVs, will reach $8.2 billion within the decade, up from nothing today, according to Phil Finnegan, director of corporate analysis at researcher Teal Group, which tracks aerospace and defense. “There’s going to be a lot of growth in this market,” Finnegan said. While the capital invested in drone-related start-ups has surged, it’s still concentrated in just a few companies. Three start-ups account for all of the money raised in the first nine months of this year, compared with five in all of 2012. Draper backed DroneDeploy through his Menlo Park, Calif.-based firm, Draper Fisher Jurvetson. Airware, a start-up in Newport Beach, Calif., raised $13.3 million earlier this year from investors including Andreessen Horowitz, Google Ventures and First Round Capital to develop customizable autopilots for UAVs that cost about $4,500 to $7,500, according to the company’s Web site. Airware found it much easier to attract the attention of venture capitalists this year after testing the product with customers, chief executive Jonathan Downey said. “We’d looked at raising money last year, and it was very different,” said Downey, who plans to move the company to San Francisco in January. The business of drones still carries plenty of risks. UAVs will have to occupy parts of the airspace not used by airplanes, and investors don’t yet know what the rules will be. Concerns over privacy are most notable given the history of drones as tools used by the government and military. The American Civil Liberties Union has warned of the possibility of a “surveillance society” monitored by drones. “The only way to avoid this dystopian future and prevent mass, suspicionless searches of the general population is to ensure that information collected by drones for one purpose cannot be used for another purpose,” Allie Bohm, a strategist for the ACLU, wrote in an August blog post. Andy Wheeler, a partner at Google Ventures, said drones are moving into the mainstream because of the steep drop in the cost of sensors, which have been mass-produced for smartphones. The plunge in costs helped persuade Google Ventures to invest in Airware as well as another drone-related start-up, Wheeler said, declining to say which one. “We are talking orders of magnitude lower than military technology,” Wheeler said, referring to the prices for commercial equipment. While DroneDeploy is building software and Airware is developing systems, some start-ups are focusing on services. Matternet, funded by Andreessen Horowitz, aims to use drones to deliver items such as mail and medical supplies. (Bloomberg LP, the parent of Bloomberg News, is an investor in Andreessen Horowitz.) Firefighters and law enforcement officials are likely to be some of the early beneficiaries of the drop in costs, said Kent Goldman, a partner at First Round Capital in San Francisco. “I see a bright future for non-military applications,” he said.

A start-up to feed other start-ups

Welcome to CapBiz A.M., your morning primer on business news with a focus on Washington.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico **The hand that feeds:** For culinary entrepreneurs, moving from the kitchen to a real business can be financially challenging. Now EquityEats, a new crowdfunding platform, is giving would-be restaurateurs the opportunity to raise as much as $1 million from accredited investors before even signing a lease or buying kitchen appliances. (CAPBIZ)    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico **Meeting goals:** The Defense Department recently met its small-business contracting goals. That wasn’t by accident, according to Andre Gudger, the Pentagon’s small-business director. (OSB)    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico **Disaster loan disaster:** In the aftermath of Superstorm Sandy, the Small Business Administration took roughly twice as long as intended to approve disaster loan applications from home and business owners, according to a federal probe. (OSB)    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico **Ready or not:** Apple rolled out its mobile payment system, Apple Pay, last week. Some Washington-area retailers were not exactly ready for the introduction. (CAPBIZ)    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico **Rocky road ahead?:** Speaking of Apple Pay, less than a week after the system’s launch, Rite Aid and CVS have disabled their Apple Pay technology, a sign that the tech titan’s quest to make its digital wallet ubiquitous may be more difficult than many thought. (WP)    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico **Anatomy of a tweet:** Twitter has for years offered access to its real-time stream of public tweets to tech companies and researchers that are willing to pay. But now, the company announced a so-called data grant program that will offer a handful of research teams access to its database for free. Here’s how some researchers are using that valuable data. (On I.T.)    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico **Anatomy of Twitter:** Twitter’s third-quarter growth fell short of Wall Street’s expectations as the company struggled to add more followers and sell more advertising. (Bloomberg)    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico **Live long and prosper?:** The good news is, Americans are living longer than previously thought. The bad news: the longer lifespan doesn’t bode well for the corporate pension plans that are supposed to support workers into old age. (WSJ)    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico **On Wall Street**    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico Stocks ended mixed as the price of oil slipped and more disappointing news on the global economy emerged. (Get the latest updates here)    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico **What’s on tap today**    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico TechAmerica’s 50th annual Vision conference kicks off (7 a.m.)    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico Federal Reserve Board’s two-day meeting begins Case-Shiller home price index (9 a.m.) Durable goods orders (8:30 a.m.) **Help:** You have a job offer. Now here’s how to talk about pay. (CAPBIZ)    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico **Follow:**EquityEats **   **    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico **Extra:**America’s war on candy (WP)    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico **Thoughts?** Have feedback, tips or events we should know about? E-mail us here.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico

Steve Case makes a spur-of-the-moment million-dollar investment in 10 start-ups

Venture capitalists are increasingly looking for young, innovative companies in areas outside of traditional technology hubs such as Boston, New York and California’s Silicon Valley. And few are scouring the country quite like Steve Case. Case, the former chairman of America Online, announced plans Thursday to invest $100,000 in each of 10 tech start-ups in cities such as Durham, N.C.; Nashville; and Minneapolis. He made the decision after hearing the companies describe their businesses at an event Wednesday sponsored by Google at the search giant’s headquarters in Mountain View, Calif. “I was so inspired by the consistent quality of each of the pitches that I made an on-the-spot decision to support each company,” Case, one of the investors behind Revolution Ventures in Washington, said in a statement. Case has spearheaded a campaign in the past few years to unearth promising new technology ventures in every corner of the country, particularly areas that have been historically underserved by angel investors and venture capital groups. Calling the movement “the rise of the rest,” Case has urged investors and policymakers to look beyond Google’s and Facebook’s back yard when trying to cultivate innovation and entrepreneurship. Google invited the companies to its campus to pitch to investors after the start-ups won local competitions. None were guaranteed to walk away with any capital. A start-up called Windsor Circle claimed one of Case’s $100,000 infusions. Judges at the event crowned Windsor Circle the top company. The start-up, which hails from the American Underground business incubator in Durham, offers software that helps online retailers retain customers through targeted, data- driven marketing. “For us, winning on a national stage like that reads as ‘Boom, we just punched a ticket and proved that one of the hottest marketing start-ups in the country is located in Durham, North Carolina,’ ” Matt Williamson, Windsor Circle’s chief executive, said in an interview. Others pitching at the event included Automated Insights, also from Durham, whose technology converts big data patterns into easy-to-read narratives, and Detroit’s iRule, which lets users control their televisions and lighting from their smartphones. The lone representative from the health-care sector, Nashville’s InvisionHeart, provides software that transmits cardiac patients’ data between health-care providers and cardiologists in real time. Meanwhile, Chicago was represented by WeDeliver, a service that allows anyone to work as a delivery person for local businesses such as florists and restaurants, and MarkITx, a marketplace where companies can buy and sell used IT hardware. Capital Business is The Post’s weekly publication focusing on the region’s business community. For more Washington business news, go to capbiz.biz.

Facebook’s market debut draws criticism from lawmakers

Facebook, the social network that began eight years ago in a Harvard dorm room, will debut Friday on the stock markets having raised $16 billion, making it the third largest initial public offering in U.S. history. With massive press coverage and financial pundits sharply divided over whether the stock is a good buy, Facebook will initially trade at $38 per share under the symbol “FB.” At that price, the company’s value is $104 billion, larger than corporate stalwarts such as Walt Disney or McDonald’s. With that much money at stake, Facebook’s market debut has been the buzz not only of Wall Street bankers and Silicon Valley investors, but also Washington policymakers concerned about what the firm is paying in taxes. On Thursday, Sen. Carl Levin (D-Mich.) used the anticipation surrounding Facebook’s big day to talk again about why Congress needs to close loopholes in corporate tax law. Levin objected to Facebook’s decision to issue its employees options to buy company stock in the future at its original issuing price. If the stock goes up in value by the time employees use the option, the company can deduct the difference. In Facebook’s case, that deduction is estimated to be around $16 billion. The company’s filings also say that the deduction could entitle Facebook to a refund of up to $500 million in corporate taxes during the first six months of 2013. The senator said the fact that this is legal “shocks the conscience.” Facebook’s “ability to use a stock option loophole to zero out its U.S. tax bill, despite ample profits, makes no sense,” Levin said. Even those no longer with the company are being used to illustrate what lawmakers say are additional problems with the country’s tax code. Facebook co-founder Eduardo Saverin has come under fire from Sens. Charles E. Schumer (D-N.Y.) and Robert P. Casey Jr. (D-Pa.) for giving up his U.S. citizenship ahead of the company’s initial public offering. The co-founder, a Brazilian native who left the company in 2005, said through a spokesperson that the move was for business purposes. But Saverin, who owns about 4 percent of Facebook shares worth at least $3 billion, could save millions in taxes. Singapore has no capital gains tax, meaning he would only pay taxes on the value of what he owned while the company was still private. On Thursday, the lawmakers proposed a bill that targets individuals who renounce their U.S. citizenship for tax purposes. Under the proposal, anyone who gives up their U.S. passport and has “either a net worth of $2 million or an average income tax liability of at least $148,000 over the last five years” will be assumed to have moved for tax purposes. They will be taxed 30 percent on future gains and, if they avoid paying the taxes, will be denied entry into the United States. “We simply cannot allow the ultra-wealthy to write their own rules,” said Casey in a statement. “Renouncing citizenship to simply avoid paying your fair share is an insult to middle class Americans.” Meanwhile, the state of California is eyeing Facebook’s stock sale as a tax jackpot. The offering is worth so much money that it’s officially tallied in the state of California’s revised budget as a potential $2.1 billion windfall off of an expected $12 billion increase in personal income growth. The amount Facebook raises Friday could climb to $18.4 billion with the inclusion of shares set aside to meet additional demand. The largest initial public offering in U.S. corporate history was General Motors at $20.1 billion in 2010, followed by Visa’s $19.7 billion debut in 2004. The stock is also likely to see a first-day pop, said Motley Fool analyst Andrew Tonner. But he cautioned that Facebook hasn’t proven it can maintain and grow its revenue at a pace that justifies its initial public offering price. “There are so many uncertainties with Facebook,” he said. “It could become a great business, but why risk your nest egg on something so untested?” (Washington Post Co. Chairman Donald E. Graham is a member of Facebook's board.) Related coverage: Co-founder under fire for renouncing citizenship The biggest challenge for Facebook after IPO Barry Ritholz- Facebook’s IPO: What does it mean for you? Why Facebook ads are different Facebook to offer as many as 421 million shares in IPO

Dreading a move? These companies want to make it easier for you.

Dreading a move this summer? Here’s help: A new wave of start-ups is trying to bring the convenient user experience popularized by companies such as Uber and Airbnb to the unglamorous world of moving and storage. A handful of companies such as Boxbee, Clutter, MakeSpace and Roost have popped up in recent years, targeted at the apartment-dwelling, smartphone-wielding millennial generation. And venture capitalists are betting millions that these new entrants can revolutionize an old-school industry. Take New York start-ups MakeSpace and Boxbee. Both are pick-up and delivery storage services. Customers can order boxes using an app, pack their stuff and send it to a storage facility through the company. In select cities, the companies will deliver your stuff back to you for a flat fee. MakeSpace, which calls itself “the Dropbox of physical storage,” builds a catalog of a person’s belongings, so that users can remember what they put in storage and order individual boxes back when they need it. Boxbee offers a similar service.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico The idea for MakeSpace was born in 2012 when co-founder Sam Rosen was helping his then-girlfriend move her belongings into storage. Hurricane Sandy had destroyed most of her apartment and the two had a hard time keeping track of her belongings. “I asked her where her snow boots were and she didn’t know,” Rosen said. “That’s when I said to myself — imagine if a storage unit could be browsable and searchable.” MakeSpace has raised $10.1 million from investors including Upfront Ventures, Lowercase Capital and Hollywood actor Ashton Kutcher’s venture capital firm A-Grade Investments. The company recently expanded its delivery service to Washington and Chicago. MakeSpace also has a paid delivery partnership with UPS across the country, but the company hopes to scale up its fixed-price service to 30 cities in the next few years, Rosen said. He declined to provide details about sales or profits. Boxbee has raised more than $7 million since its launch in 2013. While Los Angeles-based Clutter, a storage start-up that also offers packing services, has picked up $2 million.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico Other start-ups are trying to re-think how people find storage. San Francisco-based Roost follows the Airbnb model, connecting people who want to rent out space in their homes to those looking for cheap storage options. Austin-based SpareFoot is a Web site that lets people compare prices and book storage facilities in their neighborhood. The start-up is backed by D.C.-based venture capital firm Revolution Growth, among others.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico “People need storage in good times and bad,” said Chuck Gordon, co-founder of SpareFoot and a Washington native. “It’s a very large industry with a lot of room to grow.” The U.S. mobile storage industry — as this sector is officially known — is worth $7.4 billion, according to a 2015 report by research firm IBIS World. Storage is dependent on the real estate market and oil prices. The industry took a hit during the housing bust but has bounced back, according to the report. A recovering housing market and low oil prices are expected to drive sales up by more than 6 percent in 2015, the report said. That’s why the storage industry is bustling. International players such as British-based SpaceWays and Australian company Zippy Shell have entered the U.S. market in recent years, banking on the fact that Americans have a lot of stuff and will always need somewhere to put it.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico For Zippy Shell, which delivers shell-like trailers to customers’ doorsteps, the move to America was a simple business opportunity. “When we came here in 2009, there were more storage facilities in Tampa, Fla., than all of Australia,” said Rick Del Sontro, chief executive of the company’s U.S. operations. Zippy Shell is headquartered in Georgetown and has more than 100 franchise locations across the country. The company chose D.C. to serve as a hub for the company’s East Coast operations, Del Sontro said. “We love the city’s energy and how it’s growing,” he said. Zippy Shell has raised $25 million in a recent round of funding, which it will use to buy back some of its franchise locations and build a national brand, Del Sontro said. “Moving and storing are not fun,” he said, “we want to be seen as a company that clearly understands that and can help.”

Ice cream start-up licks its capital needs through crowdfunding campaign

**The big idea:** With flavors like Amaretto Biscotti, Earl Grey Pine and Mint Chocolate Brownie, MilkMade couldn’t keep up with demand. The New York craft ice cream start-up had grown organically for four years. In 2013, its founder, Diana Hardeman, needed an injection of cash to ramp up production. She decided that a successful crowdfunding campaign was the best strategy to make MilkMade attractive to angel investors. **The scenario:** Hardeman launched MilkMade in 2009. Her business model was simple: Ice cream enthusiasts went online to join her ice cream-of-the-month club. For a $30 monthly fee, members received two pints of ice cream, delivered to their doorsteps across Manhattan and Brooklyn, that Hardeman churned in small batches from locally sourced, organic ingredients. Hardeman’s unique, sophisticated flavor combinations (she created two flavors each month) and savvy use of social media helped her build an in-demand brand, turning MilkMade into a one-woman powerhouse with thousands of people on its waiting list, fans as far as New Zealand, and 1.5 million followers on Tumblr. In 2013, MilkMade’s small-scale operation was run out of a shared commercial kitchen in Brooklyn. Hardeman had to cap membership at 300 because of limited production capacity. She wanted to buy new equipment and expand operations; she also wanted to hire staff, including a pastry chef who had run the kitchen. All that required capital. Hardeman turned to crowdfunding. Crowdfunding involves raising small amounts of money from large numbers of people to fund projects or businesses through an online platform such as Kickstarter, Indiegogo or RocketHub. People who donate money on reward-based platforms do not get an equity stake; they get personal e-mails from founders, behind-the-scenes tours and other creative perks. Last December, Hardeman launched a Kickstarter campaign called “Lickstarter.” Her objective was to raise $45,000 to buy a new ice cream machine to increase capacity and expand to markets beyond New York City. MilkMade’s advantage on Kickstarter was a built-in audience — an established customer base, a long wait-list of potential customers, and followers on various social media platforms. Hardeman worked hard to engage that audience and grow it by using Facebook, Instagram, Tumblr and Twitter while driving traffic to her Kickstarter page. **The resolution:** The month-long campaign attracted 532 backers, who helped MilkMade exceed its fundraising goal. In addition to getting the immediate capital without having to give up equity, crowdfunding had many ancillary benefits. “Our campaign helped us to spark engagement and raise awareness,” Hardeman said. “Exposure was great. You can easily spend $47,000 on marketing. We raised that amount in a month and got free marketing.” Most important, Hardeman leveraged her crowdfunding campaign to raise outside funds; she recently closed a seed round with angel investors. **The lesson:** Crowdfunding can be a powerful tool for entrepreneurs. Often, its real value isn’t the cheap money. A successful crowdfunding campaign can provide market validation, raise brand awareness and create a large, loyal customer base. Not to mention that it looks great to potential investors. ** — Gosia Glinska  ** Glinska is a senior researcher at the Batten Institute for Entrepreneurship and Innovation at the University of Virginia’s Darden School of Business. Glinska is co-author of the original case with Darden Adjunct Lecturer Meghan Murray. **** Related: Looking for a previous Case in Point? Visit our archives.

Inside Silicon Valley’s most grueling ritual: Raising cash

MOUNTAIN VIEW, Calif. -- The second floor of the Computer History Museum here was a sea of young entrepreneurs and top Silicon Valley investors going on speed-dates, and Qasar Younis was the matchmaker. He surveyed the scene: hundreds of entrepreneurs, each with their own table, spread out across two giant rooms last week. Investors swarming around and plunking down for rapid-fire meetings that had been scheduled by algorithm the night before. The low-key Younis is the chief operating officer of the start-up incubator Y Combinator, and he was presiding over that most vaunted of Silicon Valley rituals: the Y Combinator Demo Day. Over the past 11 years, the incubator, which takes a 7 percent stake in the companies it invests in, has become one of the most important institutions in the region — hatching start-ups such as Dropbox, Reddit, Stripe and Airbnb with $120,000 in seed funding and matching them to investors. The three-month boot camp is also seen as bellwether for the valley's evolution — on diversity, on start-up trends, and lately, for how the tech industry views itself in relationship to the wider world. This year's batch included the usual disparate gaggle of companies: Multiply Labs, a company 3-D printing dietary supplements, and Burrow, a start-up specializing in mail-order sofas for young professional millennials who move a lot and are sick of buying Ikea. There were a slew of drone start-ups — specializing in delivery, security, and surveying crops. A start-up trying to create credit scores for immigrants. Perhaps the most buzzy was Flex, a tampon alternative women can wear during sex.  Like many things at Y Combinator, the third day is an experiment. Younis dubbed it Investor Day, which he described as “a more elegant and transparent” alternative to “the happenstance and informality” of typical fundraising. The traditional courtship process usually begins right after Demo Day, when start-ups begin canvassing venture capitalists' offices across the region in a frenzied hunt for cash. Y Combinator engineers had created special software that uses mathematical models to match investors with companies they might want to meet. So here was Mamoon Hamid, a general partner at the venture firm Social Capital, fresh off a meeting with Validere, a start-up that was building a pocket-size sensor to test the quality of oil and gas. “The sales are amazing, the managers are amazing — that’s just a cash-producing business!” he gushed to Younis. But, no, he wasn't opening his wallet. His fund focuses on bigger companies, he explained. Still, Investor Day was a great place to find inspiration, and he had other leads the event's software had chosen for him. At the table for Flex, chief executive Lauren Schulte looked pleased. “We’re not taking in any new money,” she said, as she stuffed her device, which looks like a large female condom, into a plastic model of a woman’s genitalia. Flex was in an enviable position: It was only Demo Day, and they were already oversubscribed. The company would begin taking its first online orders that day. Younis, wearing a gray hoodie and a T-shirt printed with the Y Combinator motto, "Make Something People Want," milled about one day last week, introducing his favorite companies. He was as enthusiastic about a building sensor that can identify burglaries as he was about a wristband that detects calories consumed by tracking blood flow. The 34-year-old, who grew up in rural Pakistan and sold his Y Combinator-backed messaging start-up to Google in 2011, spent hours talking with entrepreneurs, comparing strategies for taking a product to market, the merits of going public and ways to handle investors. His iPhone was pinging every five seconds, with founders asking for gut checks and advice on how much to value their companies and how to read signals of interests from investors. “Game-time decision-making,” Younis explained. "For most founders, this is the first time they're raising money — a lot of the process is a mystery." The room was full of notable venture capitalists backed by hundreds of millions of dollars, each hoping to find the next Airbnb. Underneath the event's friendly vibe was the status-consciousness that has led some to criticize the organization as elitist. Everyone watched which start-ups got the most meetings and money. Demo Days are invite-only; investors who are too aggressive with start-ups don’t get asked back. “You’ve got all these investors here — it’s like, you're looking around, who is everyone talking to?” said Niko Bonatsos, managing director of the venture firm General Catalyst and a large investor in Snapchat. “That’s good for the founders,” Younis shot back, grinning. The pressure he said, would stop investors from dillydallying, helping to create a "true marketplace." "Everyone is looking for something above the hype," said Alex Gurevich of Javelin Venture Partners. “In truth, it’s impossible to tell. It's hard to get real-world intelligence from two minutes of pitching.” In Silicon Valley, Y Combinator is often seen as bellwether. By its metrics, America's innovation hub is getting somewhat more diverse. Twenty-six percent of the companies in this season’s class, called a batch, had a female founder, compared with roughly 5 percent in 2008. Black and Latino founders were roughly 7 percent of the current class, but the group only began tracking underrepresented minorities last year. There were also other shifts. Roughly a third of the companies were international — more than ever. The list included OMG Digital, a media company from Ghana that aims to be the “Condé Nast of Africa,” and Innov8, a company building co-working spaces in India. Roughly 5 percent of companies were focused on biotechnology and hard sciences, bucking the trend of copycat social networking and on-demand delivery apps that have flooded Silicon Valley in recent years. Y Combinator was co-founded 11 years ago by entrepreneur Paul Graham, who held the first Demo Day in a rented house in Cambridge, Mass. The handful of investors who attended were mostly his friends. Y Combinator’s current president, Sam Altman, has extended the organization’s footprint far beyond technology. He’s launched a nonprofit arm, called YC Research, which is funding an organization dedicated to promoting artificial intelligence for the good of humanity, a project to study and perhaps build a future city and a vast experiment in social welfare that involves giving monthly payments to poor people in Oakland, Calif. He's also planning to foray into online education, according to people familiar with the matter. Younis has focused more on the organization itself. He has spent the past several years helping the incubator raise a $700 million “Continuity Fund,” which provides funding to later-stage companies. He has rebuilt and streamlined Y Combinator’s suite of software tools, which are built in-house and used for marketing, reviews and communication between entrepreneurs. Younis's biggest concern is that the organization will become spread too thin. “Like all start-ups, we risk losing focus on core goals: servicing our founders and picking great companies,” he said. “It’s really about giving good advice — that’s the hardest thing to define, but it may be the most important thing. It’s easy to get distracted.”

MOUNTAIN VIEW, Calif. -- The second floor of the Computer History Museum here was a sea of young entrepreneurs and top Silicon Valley investors going on speed-dates, and Qasar Younis was the matchmaker. He surveyed the scene: hundreds of entrepreneurs, each with their own table, spread out across two giant rooms last week. Investors swarming around and plunking down for rapid-fire meetings that had been scheduled by algorithm the night before. The low-key Younis is the chief operating officer of the start-up incubator Y Combinator, and he was presiding over that most vaunted of Silicon Valley rituals: the Y Combinator Demo Day. Over the past 11 years, the incubator, which takes a 7 percent stake in the companies it invests in, has become one of the most important institutions in the region — hatching start-ups such as Dropbox, Reddit, Stripe and Airbnb with $120,000 in seed funding and matching them to investors. The three-month boot camp is also seen as bellwether for the valley's evolution — on diversity, on start-up trends, and lately, for how the tech industry views itself in relationship to the wider world. This year's batch included the usual disparate gaggle of companies: Multiply Labs, a company 3-D printing dietary supplements, and Burrow, a start-up specializing in mail-order sofas for young professional millennials who move a lot and are sick of buying Ikea. There were a slew of drone start-ups — specializing in delivery, security, and surveying crops. A start-up trying to create credit scores for immigrants. Perhaps the most buzzy was Flex, a tampon alternative women can wear during sex.  Like many things at Y Combinator, the third day is an experiment. Younis dubbed it Investor Day, which he described as “a more elegant and transparent” alternative to “the happenstance and informality” of typical fundraising. The traditional courtship process usually begins right after Demo Day, when start-ups begin canvassing venture capitalists' offices across the region in a frenzied hunt for cash. Y Combinator engineers had created special software that uses mathematical models to match investors with companies they might want to meet. So here was Mamoon Hamid, a general partner at the venture firm Social Capital, fresh off a meeting with Validere, a start-up that was building a pocket-size sensor to test the quality of oil and gas. “The sales are amazing, the managers are amazing — that’s just a cash-producing business!” he gushed to Younis. But, no, he wasn't opening his wallet. His fund focuses on bigger companies, he explained. Still, Investor Day was a great place to find inspiration, and he had other leads the event's software had chosen for him. At the table for Flex, chief executive Lauren Schulte looked pleased. “We’re not taking in any new money,” she said, as she stuffed her device, which looks like a large female condom, into a plastic model of a woman’s genitalia. Flex was in an enviable position: It was only Demo Day, and they were already oversubscribed. The company would begin taking its first online orders that day. Younis, wearing a gray hoodie and a T-shirt printed with the Y Combinator motto, "Make Something People Want," milled about one day last week, introducing his favorite companies. He was as enthusiastic about a building sensor that can identify burglaries as he was about a wristband that detects calories consumed by tracking blood flow. The 34-year-old, who grew up in rural Pakistan and sold his Y Combinator-backed messaging start-up to Google in 2011, spent hours talking with entrepreneurs, comparing strategies for taking a product to market, the merits of going public and ways to handle investors. His iPhone was pinging every five seconds, with founders asking for gut checks and advice on how much to value their companies and how to read signals of interests from investors. “Game-time decision-making,” Younis explained. "For most founders, this is the first time they're raising money — a lot of the process is a mystery." The room was full of notable venture capitalists backed by hundreds of millions of dollars, each hoping to find the next Airbnb. Underneath the event's friendly vibe was the status-consciousness that has led some to criticize the organization as elitist. Everyone watched which start-ups got the most meetings and money. Demo Days are invite-only; investors who are too aggressive with start-ups don’t get asked back. “You’ve got all these investors here — it’s like, you're looking around, who is everyone talking to?” said Niko Bonatsos, managing director of the venture firm General Catalyst and a large investor in Snapchat. “That’s good for the founders,” Younis shot back, grinning. The pressure he said, would stop investors from dillydallying, helping to create a "true marketplace." "Everyone is looking for something above the hype," said Alex Gurevich of Javelin Venture Partners. “In truth, it’s impossible to tell. It's hard to get real-world intelligence from two minutes of pitching.” In Silicon Valley, Y Combinator is often seen as bellwether. By its metrics, America's innovation hub is getting somewhat more diverse. Twenty-six percent of the companies in this season’s class, called a batch, had a female founder, compared with roughly 5 percent in 2008. Black and Latino founders were roughly 7 percent of the current class, but the group only began tracking underrepresented minorities last year. There were also other shifts. Roughly a third of the companies were international — more than ever. The list included OMG Media, a media company from Ghana that aims to be the “Condé Nast of Africa,” and Innov8, a company building co-working spaces in India. Roughly 5 percent of companies were focused on biotechnology and hard sciences, bucking the trend of copycat social networking and on-demand delivery apps that have flooded Silicon Valley in recent years. Y Combinator was co-founded 11 years ago by entrepreneur Paul Graham, who held the first Demo Day in a rented house in Cambridge, Mass. The handful of investors who attended were mostly his friends. Y Combinator’s current president, Sam Altman, has extended the organization’s footprint far beyond technology. He’s launched a nonprofit arm, called YC Research, which is funding an organization dedicated to promoting artificial intelligence for the good of humanity, a project to study and perhaps build a future city and a vast experiment in social welfare that involves giving monthly payments to poor people in Oakland, Calif. He's also planning to foray into online education, according to people familiar with the matter. Younis has focused more on the organization itself. He has spent the past several years helping the incubator raise a $700 million “Continuity Fund,” which provides funding to later-stage companies. He has rebuilt and streamlined Y Combinator’s suite of software tools, which are built in-house and used for marketing, reviews and communication between entrepreneurs. Younis's biggest concern is that the organization will become spread too thin. “Like all start-ups, we risk losing focus on core goals: servicing our founders and picking great companies,” he said. “It’s really about giving good advice — that’s the hardest thing to define, but it may be the most important thing. It’s easy to get distracted.”

Just in in time for 4-20: A ‘Shopify’ for cannabis

It’s that time of year. Thursday is April 20. 4-20, 4/20, 4:20 or just 420. It’s the day of the year many call the “stoner Christmas.” No one really knows where this day and time to celebrate pot came from (Herb.com traces it back to a bunch of high school stoners in the ’70’s who called themselves “Waldo’s). But that’s not important. What’s important is that millions of pot-smokers will be celebrating this Thursday, and the multi-billion-dollar cannabis industry stands to profit. So naturally, it’s a great time to introduce an online shopping application for cannabis businesses. That’s what the entrepreneurs at Baker Technologies, a three-year old marketing start-up are doing. It’s called Shop and it’s pretty much like the uber-popular e-commerce application Shopify. Except that this application is geared for the growing number of pot shops and dispensaries in the 34 states that now allow either recreational or medicinal use of marijuana.  David Champion, Baker’s co-founder and chief product officer told Fast Company that “a lot of tailoring and customization” of their platform was needed “so that the dispensary can go in and set their preferences—the language, the imagery, the branding—in accordance with their state rules,” It’s a still a risky investment for Shop’s backers, who have plowed more than $3.5 million into the company to date. The Trump administration has been making noises that it intends to enforce national laws on the sale and possession of marijuana, which is still classified as a Schedule 1 drug under the federal Controlled Substances Act. Regardless, many analysts believe that pot could be legalized in all 50 states within the next five to seven years and that this momentum would force a change in federal regulations. Which is why other start-ups, like Meadow and Eaze, are also introducing their own competitive ecommerce apps to go head-to-head against Shop.

Less than one in five start-ups are founded by women

It’s still a man’s world, particularly for those starting up a small business.  For example, since the study began in 2015, Crunchbase found that of the 43,008 start-ups around the world that received funding from 2009 to 2017, only 6,791 (15.8 percent) had at least one female founder. The number reached about 17 percent in 2012 but has since stayed the same, which means that five years have passed with no percentage growth in the number of women-founded venture-backed start-ups. Where can you find the greatest number of female entrepreneurs who received funding? Education is the most popular industry, with about 32 percent of all female start-ups. Close behind are companies in the e-commerce space followed by healthcare and media and entertainment firms. “The biggest issue is not the number of women starting companies, but the access to capital as you move up the food chain,” said venture capitalist Susan Lyne in the TechCrunch report and the numbers don’t lie. According to the Crunchbase analysis, $10 billion of funding went to companies with female founders in 2016 as compared to $94 billion invested in companies with male-only founder teams. The good news is it that more and more organizations, made up of angel investors and other venture capitalists, are appearing to address this need. These organizations are helping female founders not only get financing, but get better educated about their financing options. But judging by the data so far, there’s still a long way to go for today’s female entrepreneurs to gain equal footing with their male counterparts.

My Crowdfunding Campaign: A shipping container for your pens

Phil Foss is what you might call a connoisseur of corrugated plastic. Ever since he stumbled upon the ribbed material two years ago, he’s been looking for way to incorporate it into new products. His latest creation: A pen-holder that looks like a shipping container. “I was looking for something that was very simple to produce, and this is what I came up with,” Foss said. “The shape itself is simple — it’s just an open-top rectangle — and the ridges are good for hanging pens.” He fashioned a quick prototype using a sheet of plastic and four bolts, and posted it on Instagram to show his 4,700 followers. Immediately, someone from California placed an order. He bought 250 of the containers, emblazoned with a company logo for Built Rite Industries. “I wasn’t expecting that,” he said. “It looked cool so I thought people would want it, but it happened very fast.”  “That turned out really well,” he said, adding that he has sold more than 300 driftpads to date. “So I thought, maybe I’d do it again.”  “I set a low bar,” Foss said. “I think people enjoy over-funding something simple.” Foss said he knew he didn’t need too much money to get started. He already had a U.S. manufacturer lined up, and the actual containers don’t cost much either: A single prototype is about $60, but if he orders 50, he gets them for $5 a piece. He decided to set a goal of $300 to cover his first 50 products, as well as shipping costs. A $14 pledge on Kickstarter will get donors one blue shipping container; for $24 they get two, one blue and one orange. “There are decent margins as long as I have the quantity,” Foss said. But, he added, “selling plastic doesn’t pay the bills.” For that, he has his day job as a web designer. Foss has a degree in graphic design from James Madison University and in his spare time runs Tyo Toys, a line of products inspired by street art and graffiti.  Wednesday morning, before he’d even gotten his coffee, Foss sat down at his work computer and set up his Kickstarter campaign. It went live at 10:51. Then he waited. “It was a couple of hours of nothing,” he said. “I was getting worried. I thought, ‘What if people don’t think this is that cool?,’ ” he said. But he needn’t have worried, Within a few hours, the donations began pouring in. He met his goal in six hours. Within 24 hours, he’d raised $1,340 — more than four times what he was seeking. “I knew it looked cool, so I can’t say I’m totally surprised,” Foss said. “I knew people would buy it.”

No, entrepreneurs, most of you don’t need angel investors or venture capitalists

AUSTIN, Texas–It’s understandable, perhaps even inevitable, to walk away from events like South by Southwest with the impression that entrepreneurs must persuade investors to write them a big fat check in order to succeed in today’s start-up world. In many cases, it’s as much about validation as it is the money and with some of the most renowned investors strolling the streets of Austin in search of hot new companies, you could be forgiven for assuming something must be wrong when a new company mentions it’s – gasp – self-funded. Only, that simply isn’t true. Not by a long shot. During an event in Austin on Monday, the Kauffman Foundation outlined research dispelling some of the most common myths that distort America’s idea of the business-building process, tops among them the notion that most successful start-ups raise money from outside investors. Check out the chart below, from a decade-long study the Kansas City-based research and advocacy organization conducted on more than 5,000 new firms. Kauffman’s researchers discovered that roughly two-thirds of the companies were financed by either personal savings, investments by friends and family or traditional loans. Only one in 10 obtained funding from venture firms or angel investors (individual start-up backers). In fact, credit cards – among the most expensive mechanisms of financing – was used more commonly by start-ups than either angel or venture funding. “It’s very different than the stereotypical start-up story we hear about,” Arnobio Morelix, one of the group’s economic researchers, said during a presentation. Now, wait. While that may be true for new companies across the entire economy – including everything from dry cleaners to law firms – it doesn’t capture the importance of outside investors to those fast-growing start-ups we think of in places like Silicon Valley, right? Surely, the businesses that actually take off and grow and create jobs rely much more heavily on well-heeled investors. Not true either. While Kauffman’s study above included a representative sampling of new companies by industry, the group followed up with a similar survey more recently of the country’s 500 fastest-growing companies, as compiled annually by Inc. Magazine. Take a look. Not much difference here, as only 7.7 percent of the fastest-growing companies took money from angel investors, while even fewer are backed by venture capitalists. Once again, personal savings and bank loans are far away the most commonly used source of funding. Of course, that isn’t to say angel investors and venture capitalists aren’t enormously important for a certain subset of entrepreneurs, particularly those building companies whose survival depends on their ability to scale quickly. However, those companies that do not immediately attract attention from outside investors shouldn’t automatically throw in the towel. “It’s a sexy story when a 20-year-old raises $2 million for a new company, and that’s what we hear about,” Morelix said. “Those stories are important, but they aren’t really representative of the process most start-ups go through.” _Follow_ _J.D. Harrison_ _and_ _On Small Business_ _on Twitter._    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico

PayPal makes strong debut on Nasdaq

PayPal, which officially spun off from eBay last week, started trading under the PYPL ticker Monday on the Nasdaq Stock Market and closed the day up 5.4 percent at $40.47. That put its market capitalization — the price per share multiplied by the number of outstanding shares — at $47.13 billion at market close, although its value Monday was as high as $49.5 billion. As Business Insider noted, that is far more than its former parent company, which now has a value of $34.7 billion, and larger than Twitter, at about $23.4 billion. It is about the same size as Netflix, which closed Monday with a market cap of $48.7 billion. It was a solid debut for the firm, which decided to return to the ticker symbol it used on the Nasdaq before its 2002 eBay acquisition. After more than 12 years as a part of eBay, PayPal is in a strong position when it comes to several online payment trends. That is because of not only the success of the traditional PayPal service but also its business-focused Braintree branch and the peer-to-peer payments app Venmo. The company also recently announced that it has acquired Xoom, an online money-transfer company. But the space is a crowded one, with start-ups such as Square and traditional companies such as Visa, Apple and Google eyeing a way to become the method of choice for online payments. To get ahead, PayPal chief executive Dan Schulman said the company will continue to build its products but also work to break into underserved markets, where there isn’t basic financial infrastructure. “[We’ll] work with people around the world to make financial services accessible and affordable to everyone, anywhere in the world, so that it is simpler, safer and cheaper to spend, save, manage and move money than it has ever been before,” Schulman said in a company blog post. **— Hayley Tsukayama** President Obama has chosen Kathryn Dominguez, an economist at the University of Michigan, to join the Federal Reserve Board of Governors, the White House said Monday. Dominguez, who is also a research associate at the National Bureau of Economic Research, has a background in foreign exchange rates, emerging markets and international borrowing, the White House said. “Dr. Dominguez has the proven experience, judgment, and deep knowledge of the financial system, monetary policy, and international capital markets to serve at the Federal Reserve during this important time for our economy,” Obama said in a statement. “She brings decades of leadership and expertise from various roles, particularly from her years as a leading economist and academic. I am grateful she has chosen to take on this important role, and I look forward to working with her,” he added. Dominguez has served as a research consultant at the World Bank, the International Monetary Fund and the Bank for International Settlements. Her expertise would be “a vital asset to the Federal Reserve as it considers how international financial conditions interact with U.S. monetary policy and U.S. banking regulations,” a White House official said. “This expertise will bolster the Fed’s ability to appropriately respond to complex international systems and provide unique expertise in analyzing economic metrics and devising mechanisms to stabilize global markets,” the official said. **— Reuters** **— From news services**

A comeback story: Cvent, once on the brink of bankruptcy, sells for $1.65 B

It’s hard to believe now, he says, but 15 years ago, Reggie K. Aggarwal was on the brink of bankruptcy. He was living with his parents and had little more to his name than a few hundred dollars and an old Jeep Cherokee. He also had a dying company to shore up. Cvent, the events-management software company he founded in 1999 during an era of high valuations and dot-com excess, had fallen from glory just as quickly as it had risen. And here was Aggarwal, a 31-year-old former lawyer, trying to pick up the pieces. The company had burned through $16.6 million of the $17 million it had raised from big-name investors — the likes of former AOL chairman Steve Case and MicroStrategy co-founder Sanju K. Bansal — just a couple of years earlier. Then terrorists struck on Sept. 11, 2001, and the dot-com bubble burst, sending Internet start-ups reeling. By late 2001, the country was in recession, and Aggarwal was almost out of money. He and co-founder Charles V. Ghoorah spent their days laying off employees — their workforce of 125 dropped to 25 in less than six months — and nights fretting about what they had done. “Those were very humbling days,” said Ghoorah, executive vice president of sales and marketing. “When you downsize three different times, as we did, you look at yourself in the mirror and say, ‘What have I done to people?’ ” Slowly, Aggarwal, Ghoorah and two other co-founders turned around the company — and, in mid-April, sold it for $1.65 billion to private-   equity firm Vista Equity Partners. “It’s taken us 15, 20 years to build a good company,” Aggarwal said. “When you start the way we did, with a punch to the gut, it crushes you. Most companies don’t recover from something like that.” But somehow, he says, Cvent did. In 2002, Aggarwal signed a personal guarantee for the company’s lease in a Fairfax County office building and stopped talking to the press. He forgot about chasing investments and instead focused on adding customers and building revenue. “I didn’t want to talk to anybody,” Aggarwal, 46, said. “I didn’t even want to put our name on the building. It was very much like, ‘Put your head down. Don’t talk about it. Just freakin’ do it.’ ” When the Tysons Corner-based company reemerged in 2011, it was to announce that it had received $137 million in venture-capital financing from New Enterprise Associates and Insight Venture Partners. Aggarwal planned to use the money to pay back his investors, many of whom had waited 12 years to cash out. The news took the media by surprise. The website Tech Crunch was the first with the announcement: “It’s pretty amazing that we have seemingly never written about Cvent before,” its story said. The company was touted as one of the decade’s biggest comeback stories and heralded as an example of what a Northern Virginia tech firm could do. But for Aggarwal, who had experienced good times before, there was an underlying sense of caution. “We were, frankly, a beaten dog,” Aggarwal said. “We felt like we’d always been fighting the world.” In the five years since, he has steadily built on that momentum, creating a 2,000-person company with nine offices around the world. The company went public in 2013, raising $117.6 million in the process. Last year, Cvent’s annual revenue climbed 32 percent, to $187.7 million. That growth is what attracted Vista, which is based in Austin, to Cvent. The firm is paying $36 per share for the company, a 69 percent premium over Cvent’s stock price on the trading day before the deal was announced. “Reggie and the Cvent team have built a leading portfolio of products and are positioned for expansion in a large and underpenetrated market,” Brian Sheth, co-founder and president of Vista, said at the time. Cvent executives stand to make tens of millions of dollars as a result of the deal. Just 12 days before the purchase was announced, the company handed out thousands of shares of stock and stock options to top executives, leading to even larger cash-outs. Aggarwal, who owns about 2 million shares of the company, is poised to receive more than $75 million when Vista’s acquisition is finalized later this year. “This is a really seasoned management team,” Ghoorah said. “We’ve been through two deep recessions. We’ve been the hero, we’ve been the goat. And now we’ve become the hero again.” Before Aggarwal founded Cvent, he created something called the Indian CEO Council. He was a young lawyer at Shaw Pittman (now part of the District law firm Pillsbury) who wanted to build a network of local executives. The criteria were specific: Members had to be chief executives of Indian descent who either ran companies with more than 75 employees and $10 million in revenue or had raised at least $10 million in venture capital. Back then, even Aggarwal didn’t qualify to be a member of his club. “It was a very exclusive group,” Aggarwal said. “But slowly we went from 20 members to 50 to 100.” Eventually, it grew to include thousands. Aggarwal began inviting chief financial officers and chief investment officers, and later, non-Indians, too. The group hosted several events a month — often dinner and drinks at the Ritz-Carlton Tysons Corner — and Aggarwal was the one planning them. He spent his evenings and weekends emailing executives, one by one. “It was so painful. My tools were Outlook, yellow sticky notes and Excel,” he said. “Imagine if I was sending a thousand invitations by email. I would cut and paste, one at a time, each one. If you’re going to invite the CEO of the World Bank or the president of Nasdaq, you’re not going to send mass emails. I knew there had to be a better way.” He came up with an idea for a software system that could automate emails and track responses. Soon after, Aggarwal quit his job and used all of his savings, about $100,000, to start Cvent. His parents, both engineers for the federal government, loaned him an additional $75,000. It was a bare-bones operation. Aggarwal, with David Quattrone and Ghoorah, worked out of his parents’ basement. “Reggie realized that, with technology, we could build something from the ground up to fix this,” Quattrone said. Cvent has evolved through the years, from a sort of Evite for corporations to a full-service operation that helps meeting planners find the right venues and manage everything from booking rooms to printing badges. Aggarwal’s role as chief executive has changed, too. Instead of calling customers and investors as he did in the early days, Aggarwal now spends most of his time vetting new hires. “You can’t scale your business talking to customers,” Aggarwal said. “The reality is, you get me a good employee who sticks with me for a decade, and they’ll get us hundreds of customers over a five-, 10-year period. That’s the right way to do this.” Aggarwal likes to recruit what he calls “unpolished diamonds” — employees straight out of college, who he hires by the dozen and puts through an eight-week training called Cvent University. “Take the typical person,” he said. “They went to Virginia Tech. They have a 3.3 GPA, maybe a 3.1 — if they’re a 3.8 they’re probably getting a job at a top consulting firm or a bank — so let’s take a 3.3. They’re a political science major. Who’s hiring that person? There are literally hundreds of thousands of people like that.” Aggrawal travels to schools, including the University of Virginia and Penn State, several times a year to meet students. He says he likes to look beyond their college track records to find out what they were like in high school. “When you go down there, you start finding out things like, ‘You know what, Mary was captain of the lacrosse team in high school, she was class vice president for two years. Mary was editor in chief of the yearbook,’” he said. “That’s a big deal. That means you’re a hardworker, you work late at night. That means you’ve had great DNA since you were young.” He is partial, he said, to people like him, who were active in student government. He was class president of his high school, which he mentions no less than four times in a two-hour conversation. Co-founder Ghoorah was student-body president at Duke University, which the two bonded over when they first met. Aggarwal also relies heavily on an 800-person office in India, where employees handle client services, marketing and human resources. Until recently, he used to spend two months a year in Gurgaon, a city near New Delhi, meeting with job applicants for the company’s call center. “The India office is my secret weapon,” said Aggarwal, born to Indian immigrants who settled in Kansas. “You can’t get an American to work past 8 p.m.” The buyout offers came quickly and unexpectedly. Earlier this year, an unnamed software company came to Cvent with an unsolicited offer. A number of other firms followed suit, but Vista — which last month bought software firm Solera Holdings for $6.5 billion — had the highest bid. “Were we looking to sell the company? Absolutely not,” Aggarwal said. “But when something like this comes along, you do what’s best for shareholders.” The private-equity purchase is good, he said, because Cvent will remain in Tysons Corner and keep doing what it does: selling software to big-name companies such as Walmart, Marriott International and Hilton Worldwide. Sometimes, Aggarwal said, he thinks back and wonders how things might have been if he had started Cvent in a different era or had gone about things in a different way. But he’s adamant about one thing: Being in Northern Virginia — an accident, really, because that’s where he grew up and where his parents lived — has helped the company become what it is, he said. “Do you think Cvent would’ve survived in Silicon Valley? The answer is no,” Aggarwal said. “It is so Darwinistic there. Do you think my team would’ve stuck around? No, they would’ve gotten other offers. They would’ve left. The company would’ve been bankrupt.” But being in Washington, he said, has allowed him unique access to customers — namely the hundreds of associations and government agencies headquartered here — and a growing group of engineers and tech-savvy workers in the area. “You can find bright, hardworking people here,” he said. “And,” he added, “it’s great to be the big fish in a small pond.”

Investors think Uber is worth $17 billion. Why that’s not entirely crazy.

Since it first launched in 2010, facilitating black town car rides through a mobile app, Silicon Valley start-up Uber has been surrounded by debate over what exactly the company _is_. Cities want to treat it -- and regulate it -- like a modern alternative to taxicab service. Uber itself dodges the comparison on a fine distinction: It's a "platform," chief executive Travis Kalanick says, not a "transportation provider."    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday Lacking language to identify this new thing -- whatever you do, don't call it "ridesharing" \-- regulators have meanwhile invented new euphemisms: Uber is a "transportation network company" in California. It's a "transportation network provider" in Chicago. In other circles, it often gets lumped in with the "sharing economy," but sharing is not quite what's going on here, either.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday [Read: Uber mobilizes its users to fight ban in Virginia]    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday Today, though, it's clear that all of this wordsmithing misses the point: Uber is going to be a very big company. It will facilitate a lot more than rides to the airport. And we may not even think of it in the future as primarily a transportation company at all. Uber announced Friday that had just raised $1.2 billion in new funding from investors who valued the four-year-old company at $17 billion. When the current fund-raising round is done, Uber says it expects to total $1.4 billion in new funds, effectively quadrupling its valuation from what it was just last summer. Among tech start-ups, only Facebook has raised capital at a more impressive clip. Before it went public, Facebook was valued at $50 billion by Goldman Sachs. At $17 billion, Uber is now valued at more than traditional car-service competitors Avis and Hertz.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday All of this money is an indication that investors believe Uber is poised to become something much larger than a service provider or platform for people taking rides in each other's cars (although that activity alone has appeared to be pretty lucrative). Already, there are signs that Uber is evolving into a much more ambitious logistics company. Soon, it will be moving stuff, not just people. And all of the data it collects in the process will be used to design systems, not simply apps.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday Uber could, in other words, become as central to mobility for many people as Facebook has become to communication. At least, that's the promise that's pushing the company's perceived value to such heights. Today, anyone who talks about Uber as a niche service for rich urbanites is missing the fact that the company has its sights on so much more. "We wouldn’t have a viable business if cellphone penetration wasn’t approaching 100 percent in the United States," Corey Owens, Uber's head of global public policy, recently told me in response to criticism that the company can only serve those with a credit card and a smartphone. "And credit cards – that’s an arc-of-history problem, where eventually we will get to a place where, regardless of payment method, anyone can use the service. You’ll have more and more people who are banked, and Uber will figure out other payment options." Now why would Uber bother to do that if it merely aspired to ferry investment bankers around Manhattan? ( _Disclosure: Washington Post owner Jeffrey P. Bezos is an Uber investor.)_    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday

Petition engine Change.org raises $25 million from tech luminaries

In the world of so-called civic tech -- the field based on the idea that networked technologies, especially the Internet, can help engage people in positive social change -- there has long been a debate over exactly what business model is the most sustainable. Nonprofit? For-profit? Something else? Or more simply put: If the Internet is going to save the world, who's going to pay for it? The idea that the for-profit company is the way to go has just gotten the backing of an eye-catching group of investors, many from the tech world. Change.org, a petition site that has acted as an online rallying point around the public's ideas for how the world could work a lot better, has just raised $25 million in its latest, Series C, round of fundraising. And that cash is coming out of the pockets of everyone from Virgin's Richard Branson to actor- investor Ashton Kutcher and Guy Oseary's A-Grade Investments, from Arianna Huffington to tech incubator Y Combinator president Sam Altman, from Twitter co-founder Ev Williams to LinkedIn co-founder Reid Hoffman.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico Not to mention LinkedIn chief executive Jeff Weiner, Twitter executive and former State Department official Katie Stanton, Yahoo co-founder Jerry Yang, the Omidyar Network led by the founder of eBay and his wife, and Code.org co-founders Ali and Hadi Partovi. Oh yeah, and Bill Gates. "This investment is a recognition that there's an opportunity to democratize democracy," says Change.org founder and chief executive Ben Rattray, "in the same way that we've democratized everything from media and communications to commerce to, increasingly, transportation," with everything from blogging to Uber. "It's about lowering the barriers to entry in industries that traditionally are difficult to participate in, and the opportunity" in the civic space, that is, "is larger than any of us thought." Indeed, that investor list is a collection unique in shape and scale in the civic tech realm. Brigade, the still-in-the-works civic-centered social network launched by former Facebook president Sean Parker in August, opened with a funding round of $9 million, with contributions from Parker, noted venture capitalist Ron Conway, Salesforce chief executive Marc Benioff and others.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico Launching in 2007, Change.org has run through several business models on its way to stability. For a time, it tried out life as a issues-driven blogging platform where readers were encouraged to make online donations to aligned advocacy groups. It swapped that plan in 2010 for something close to its current model. The site today has more than 83 million users in just about every country, the company says. Many of the petitions started on the site are small-bore -- a bid to create a local park or tweak a package's branding. But others have gotten enough attention to shift a major news story: a petition by the family of Michael Brown, the 18-year-old shot to death by a police officer in Missouri, calls for Congress to approve funding for equipping cops with body cameras. In about a week, that petition has racked up more than  63,000 signatures.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico Change.org counts among its successes petitions for getting humanitarian relief for the family of a U.S. military interpreter in Afghanistan, convincing Old Navy to fairly price its plus-sized pants, and triggering  an investigation into the death of a boy with special needs in Oklahoma.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico This latest round of funding, says Jake Brewer, Change.org's managing director of external affairs, is part of a bid to make the company truly global. To that end, the company was eager to tap the expertise of funders who have grown companies with massive reach, rather than oft-plodding donors from the philanthropic world. "We want to empower billions of people," says Brewer, "and the nonprofit model isn't the way to have global impact on the scale and speed of Twitter and Facebook." Change.org says that it hand-picked would-be funders who would support the company's unique way of doing business. Change.org is a certified B Corporation, which carries with it self-imposed requirements for social accountability and transparency. (The craft marketplace Etsy and the crowd- funding platform Kickstarter are also B Corps.) More than that, while fundraising for a seven-year-old successful tech company would often focus on exploding its growth in the hopes of turning it public, Rattray has sworn off the idea of an IPO.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico Says Brewer: "Our mission isn't to create more revenue. That's not why we're in business. We're a business so that we can create impact." Headquartered in San Francisco, Change.org has about 22o employees distributed across offices in Washington, New York, London, Madrid, Berlin, Rome, Paris, New Delhi, Tokyo and elsewhere. "But in order to hire engineers to create a platform in 12 languages that can support 83 million people," says Brewer, "we have to have a sustainable income for that." Change.org -- despite, or perhaps because of, its success -- has come in for criticism, especially by those who work in the field of politically progressive online technology, where the company has found many of its employees over the years. Some object to what appears on the site -- lately, for example, the company was slammed for hosting a petition called "Keep the Redskins' Name." More than that, however, Change.org has drawn ire for the way it profits from the collection of e-mail addresses, helping to land it the epithet of "Change.biz" among some.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico Brewer rejects both arguments. "If you want to be a platform that empowers people to create change, you have to give them power. And that includes power to create change to do things you might not always want," he says. And, "we never give your e-mail to anybody unless you tell us to." According to the company, the vast majority of its revenue comes from what Brewer calls "an action-based advertising model based on click-per-action." Or, in plainer speak: Sign an animal rights petition on Change.org, and the site suggests you might like to sign a sponsored petition put out by the World Wildlife Federation. Change.org gets paid if you click a box saying that you'd also like to join WWF. Change.org's funding round isn't particularly striking in the broader tech world. Consider that what the company just raised is about one-50th what the ride-on-demand company Uber expects to raise in its latest funding round. But it does signal new heights in the civic tech space. The Govtech Fund, for example, made news earlier this fall when it launched with the focus of backing companies aimed at improving government IT. The full scope of that fund was $21 million, or about $4 million less than what Change.org alone has just put in its own coffers.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico And much of that value comes, no doubt, from the fact that Change.org sees itself as a different kind of civic tech outfit and that some high-profile investors have signed off on the concept. Says Brewer, "The self-righteousness of saying that there's no choice but for civic tech to be either nonprofit or just for-profit" -- that is, one centered on generating profits, not social change -- "is, to me, disrespectful to democracy."

For broker/dealers, crowdfunding presents new opportunity

While start-up owners eagerly await the Securities and Exchange Commission’s regulations for crowdfunding, a handful of broker/dealers are racing to be the first to capitalize on the phenomenon. An exemption in the Securities Act allows start-ups to conduct a version of crowdfunding today, as long it’s through broker/dealers — companies who buy or sell securities for themselves or customers and who are registered with the SEC. These intermediaries can issue securities to an unlimited number of accredited investors (typically, individuals with a net worth of more than$1 million, or whose income exceeded $200,000 in the past two years). A recent crop of broker/dealers are looking to pair with platforms that draw entrepreneurs and potential investors. For instance, New York-based broker/dealer Bendigo, which specializes in global technology, began developing its crowdfunding division, called CrowdClear, a few months ago. The firm announced a partnership with crowdfunding platform Rock the Post earlier this month — together, they’ll allow start-ups to raise funds from accredited investors, while they wait for SEC regulations on public crowdfunding. The move might be a risk for Rock the Post, which, under the Securities Act, can’t profit from securities sales (only registered broker/dealers can). The platform used to function on a donation-only basis, taking a cut from each transaction, in exchange for non-financial rewards. After the partnership, Rock the Post has discontinued the donations, funding its operations with seed money it raised previously. Rock the Post founder and chief executive Alejandro Cremades said once crowdfunding regulations are passed, he predicts platforms like his will be able to directly generate revenue. But for broker/dealers like Bendigo’s CrowdClear, which plan to take a cut of each sale, the partnership represents less of a financial risk, and more a move into a new digital space. “We want to do what we do best—our background is in high-volume transaction processing, building scalable platforms. Our expertise is not in social media or aggregating the crowd. We think these guys [crowdfunding platforms] are going to do a better job of aggregating,” said Rob Simmons, founder and chief executive of Crowdclear. In its first week of operation, more than 550 start-ups and 330 accredited investors signed up for Rock the Post’s new platform. Simmons noted that CrowdClear is “funding-portal agnostic,”, meaning the broker/dealer may partner with other platforms in the future. “We’re not in the position of picking winners. We don’t know who ultimately is going to win the crowdfunding game ... We think there are hundreds of portals we’ll try.” Miami-based platform EarlyShares also announced this month it would be moving forward with equity deals, and has partnered with Chatham, N.J.-based broker- dealer Point Capital Markets. Crowdfunding “is a natural extension to our current business line,” said John Holman, chief executive of Point Capital Markets, which specializes in early stage investing. “Using a portal [like Earlyshares] expands the people we touch.” PointCapital is entering the crowdfunding space, because “the first one to the race is usually the winner,” Holman said. He noted that EarlyShares’ site already draws the kinds of investors who will likely participate in public crowdfunding. Rory Eakin, founder and chief operating officer of San Francisco-based consumer products crowdfunding platform CircleUp, has been operating exclusively for accredited investors for almost two years. Several start-ups have successfully raised capital on the platform. CircleUp is partnered with registered broker/dealer WR Hambrecht, but Eakin said the platform is currently applying for its own broker dealer license, which would allow it to generate revenue from sales on its platform. Limiting a platform to accredited investors could encourage entrepreneurs to use it to raise capital, Eakin explained. “Fundamentally, they’re looking for investors who bring more than just capital. People ask about the nature of the investors on the site, and what kind of partnerships they’re able to form.”

How the crowdfunding dream machine has changed everything for artists

Karin Ringheim had been waiting nearly 30 years for an e-mail like the one she got last spring: “Congratulations!” A well-regarded theater festival in New York had selected the musical she has been writing, polishing and — futilely — marketing since 1988. She only had to wait a few days for the next big e-mail: How are you going to pay for it? Festival organizers wanted to know her plans for covering the estimated $20,000 cost of the 10-actor, three-musician show. “I’m looking around, thinking, ‘What can I sell on Ebay?’ ” said Ringheim, a 69-year-old public health consultant in Arlington. But a lot has changed since she launched her project in the era when producers called potential backers on a rotary-dial phone. Instead, she went to an organization that raises more money for artists than the National Endowment for the Arts. Kickstarter, a crowdfunding Web site that pumped $251 million into arts-   related projects last year, has allowed dozens of Ringheim’s friends and family to chip in as small-scale theater angels. With three days to go, 133 donors had pledged $20,142, and it looks like Ringheim will actually see her life project, “Welcome to the Hard Luck Cafe,” come to life on a Manhattan stage next month. “I had pretty much given up on it,” she said. “Crowfunding has been a game-changer.” She’s just one of thousands of playwrights, musicians, filmmakers, choreographers and others finding a new lease on artistic life through sites that match fundraisers with donors. Amid the pitches to invest in hot new products and the heart-tugging appeals on behalf of cancer patients and displaced families, singers are funding their first CDs, playwrights their first stage shows and bands their first tours. “Oh my God, this has changed everything for us,” said Sean Chyun, 30, frontman of Bethesda-based band the DCeivers. After years on the bar circuit, his group had enjoyed little financial backing beyond what it made at gigs and the occasional gift of a used amp. “Our parents aren’t millionaires,” he said. But two years ago, the band raised more than $10,000 on Kickstarter for its first studio sessions with a professional producer. The resulting nine-song CD pushed them to the next level, giving them something to sell at shows, boosting their rep with booking agents and forcing Cyun to hone his songwriting chops. “It was a lot of pressure,” he said. “We got all these people to give us money, we better get this right.” Across the performing arts, “Let’s put on a show!” has become “Let’s get everybody we know to give $5 or $10,” said Star Johnson, 32, a fledging playwright from Prince Georges County, Md. Johnson was able to batch together $2,510 in small pledges to mount a production of her own first play at this year’s Capital Fringe Festival in Washington. The novice playwright was recently sleeping on friends’ couches in New York in a more conventional — and disastrous — attempt to break into theater. She came back to D.C. and began writing a musical about four young people trying to break into showbiz. Not only did she see her play, “How to Quit Your Day Job,” on stage last month, the show won an audience award and was selected for an extended run. Since seeing the first performances financed through the sites about five years ago, Fringe Festival organizers now incorporate crowdfunding strategies in the orientation they give to all the artists accepted to perform. This year, about 10 of the festival’s 125 shows relied on some kind of crowdfunding. The most talented artists aren’t always the most capable online fundraisers, so Fringe staffers advise them start their campaigns early, push hard on the gifts — including show tickets and backstage access — to donors and to think well beyond just friends and family. “It’s not about, ‘Oh my god, I got 20 likes,’ ” said Julianne Brienza, the head of Capital Fringe. “It’s, ‘Okay, who are these people, and how can I get connected to the people they know?’ Not everyone is a natural networker.” Regardless, artists have been flocking to the crowdfunding sites. Indiegogo, the site Brienza recommends to her participants, hosted more than 9,000 theater and music campaigns last year. That number has ballooned more than 110 percent each year since 2011, according to the company. Music projects are the single biggest category on Kickstarter, where more than $1.5 billion has been raised for all kinds of endeavors since 2009. The site has hosted more than 30,000 successful campaigns in music and theater. “It’s meant everything to me,” said Torrey Berry of the GoFundMe campaign that is letting him record his first album. Berry had already traveled an impressive distance as a performer — and a person — in recent years, clawing his way from sleeping at Metro stations as a homeless person to singing at them as a popular street busker. The 27-year-old has been playing guitar and singing since second grade, and writing his own music for about the last decade. But a string of setbacks and a messy breakup left him homeless for a few months two years ago. He spent a few nights outside the Rosslyn Metro station. Getting back on his feet has included at steady job at Jammin Java, a live music club in Vienna, and hours serenading the commuters at the Crystal City Metro station two or three mornings a week. A good day brings in more than $200. “I enjoy it,” Berry said. “It’s good practice to be out front of people.” With his own apartment and a job, Berry has raised more than $900 through crowdfunding to start recording some of his own tunes at a studio in Woodbridge. “Drinking Cold Coffee” is in the can, and he started laying down tracks for “Raindance.” It costs more than $300 for each song. “I couldn’t afford it without the [GoFundMe] campaign,” he said. “I work to pay the bills, and I busk to buy equipment. There’s not really money left to record.” But few artists have had a longer path to fulfillment than Ringheim, who nursed her play through child-rearing, a long global health career and hundreds of rejections. Most of the time, she heard nothing at all from the theaters, producers and festivals she tried to interest in her script. Ringheim was a graduate student in 1988, with no musical training beyond a few years of piano, when inspiration struck her on a Minnesota interstate highway. Her mind was suddenly flooded with the plot, characters and even some of the music for a story of recovering addicts running a diner. Addiction problems have plagued more than one of her relatives. “It’s a subject that’s meaningful in my family,” she said. She scribbled down as much as she could when she got home, and then spent the next several years fleshing out the script and score, buying a used pink piano and, eventually, a software program for composing music. By the mid-1990s, she had a copyrighted text and some rough cassette recordings of the songs. Then came two decades of hoping to actually see the thing staged. “I was really losing hope,” she said. But at a recent Dramatists Guild meeting, she heard members of a panel hailing Internet crowdfunding as a breakthrough for frustrated producers. She decided to submit her play to the Thespis Theater Festival in New York. In September, she’ll sublet an apartment for two weeks of rehearsals and then three performances at the Hudson Theatre on West 44th St. “It’s off, off, off Broadway; I don’t know how many offs,” Ringheim said. “And that’s fine.” **Read more:** Lawyers offered to pay this street band to stop playing. It said ‘no.’ House of Cards: Seven guys in a poker crash pad play Texas hold’em for a living ‘Touch my plate and feel my fork.’ In an age of food sharing, diners who don’t Swelter for hours in line to eat the acclaimed Rose’s Luxury? People do it every day.

These tech celebrities saw their investment in Square grow by 60 times in a day.

Back in 2009 a group of Silicon Valley investors cut Square a $10 million check. It was venture capital in its purest form: A risky bet on an unproven technology. The odds of Square being successful were long. The entire nation was in the depths of a severe recession. And Square’s technology was centered on a small, white, square-shaped card reader that no one knew much about. So Square’s co-founders Jack Dorsey (of Twitter fame) and Jim McKelvey looked to private investors in Silicon Valley willing to buy a stake in the new company. There were 19 investors in that first Series A financing round, according to Crunchbase. The $10 million investment was led by Khosla Ventures, which focuses on early-stage companies. Other investors included Biz Stone, co- founder of Twitter; Dennis Crowley, co-founder of Four Square; Silicon Valley veteran Esther Dyson; Marissa Myer, who worked at Google and would go on to lead Yahoo; and Kevin Rose, founder of Digg who would go to join Google Ventures.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico That gave the investors shares priced at just under 22 cents each. According to documents filed ahead of Square’s initial public offering, the Series A investors had about 46.7 million shares. On Thursday, Square’s stock debuted on the public markets. The price started at $9 a share, which was below the value given to investors in the last financing rounds. But by day’s end, Square stock ended at $13.07 – a 45% increase. For those earliest investors, stock they had purchased for .21627 cents (to be exact) back in 2009 was now worth 60 times as much. There is some slight variability in that number, depending on how some of the financing was structured. Overall, that $10 million investment today is worth $604 million.

Two years in, Halcyon Incubator’s charitable start-ups are finding private investors

Japanese pharmaceutical tycoons Sachiko Kuno and Ryuji Ueno created Halcyon Incubator two years ago in a mansion they had purchased in the District’s toney Georgetown neighborhood. Through their S&R; Foundation, they recruited start-ups with ideas that they thought showed the right mix of social mission and market potential and began offering five-month, live-in entrepreneurial immersion courses for those they invited. The jury is still out on whether Halcyon’s projects will survive commercially. But two years in, the incubator’s start-ups have a surprisingly strong record in raising private capital, seen as a first step toward viability for many new companies. Halcyon program director Ryan Ross says that 45 percent of Halcyon’s 32 alumni companies have raised an initial round of seed funding from investors or donors, totaling $10 million among them. About half report that they are generating revenue. “We want to create this environment of an army of incredible social entrepreneurs that’s showing you can both drive return and [social] impact. They’re not at odds,” Ross said. Halcyon’s unique setup, in which there are no membership fees and the incubator doesn’t take an equity stake, has attracted an eclectic mix of pie-in-the-sky businesses that strike a stark contrast with the District’s government-minded business ecosystem. There’s Coral Vita, a for-profit venture that wants to grow coral reefs in contained “farms” on beaches and sell them to developers and governments at tropical tourist hubs. Founders Sam Teicher and Gator Halpern are longtime divers who wanted to help revitalize reefs but felt that a for-profit venture could be more powerful than a preservation nonprofit group. “We consciously chose to go for-profit because it’s the best way to tackle this problem,” Teicher said. “From a financial sustainability standpoint, it’s tough to go grant-to-grant, donation-to-donation.” They have raised about $320,000 from “social-impact investors,” people and organizations offering private capital for charitable causes. Another Halcyon start-up is Up Top Acres, which has five rooftop farms set up around the District. A partnership with José Andrés’s ThinkFoodGroup placed an organic farm on the top of the building that houses its Oyamel, an upscale Mexican restaurant in the District’s Penn Quarter neighborhood. A D.C. regulation designed to encourage “green roofs,” essentially rooftop gardens that help control rainwater runoff, means the company doesn’t have to pay rent on any of its farms. Another food-related start-up called Local Roots sets up mobile organic farms inside tractor-trailers, which the company hopes to sell to grocery stores and wholesalers. Founder Dan Kuenzi’s team has three working farms set up and has been pulling in revenue for two years. He wants his mobile farms to eventually be cost-competitive with large-scale agriculture and to be maintained by one person with minimal training. Ross says these businesses can contribute something unique to the District’s start-up scene: “Do we want to be the hub for the next best dating app? Or the hub for the next social enterprise that’s going to change the world?”

Google Fiber provides faster Internet and, cities hope, business growth

KANSAS CITY, Kan. — Smack in the middle of the nation, this city is about as far as possible from the hubs of high-tech innovation on both coasts. An effort last spring to excite new Web entrepreneurs in a place better known for cattle drives and barbecue sauce turned up just a dozen people. Then Google blew into town. The company, dominant in the virtual world, began digging actual holes in the ground and connected homes and businesses to Internet speeds 100 times faster than most Americans have ever seen. Three months into Google’s much-publicized experiment, signs of new business life have emerged. Nick Budidharma, an 18-year-old game developer, drove with his parents from Hilton Head, S.C., to live in a “hacker home” that’s connected to Google’s Fiber broadband network. Synthia Payne uprooted from Denver and landed here to launch a start-up that aims to let musicians jam real-time online. That sleepy weekly gathering for Web entrepreneurs recently attracted a standing-room-only crowd of 260 businesspeople, investors and city officials. Just as the move from dial-up modems to higher-speed Internet connections helped launch Netflix, Facebook and YouTube, policymakers and Google hope this next leap forward will breed a whole new slate of innovations. The effort also is turning up the heat on cable companies, which now have to compete for consumers who can get faster speeds at lower monthly costs. Those telecom companies have begun bidding against Google to wire firms and city buildings with equally high-octane Internet. “What Google is providing is a catalyst. This infrastructure is enormously important to create a ripple effect of entrepreneurial activity,” said Lesa Mitchell, a vice president at the Kauffman Foundation, a multibillion-dollar nonprofit that is trying to help local start-ups and officials turn around this city. It’s an audacious and unproven experiment, the equivalent of replacing country roads with the Autobahn speedway and then assuming Formula One race cars will materialize. The question is whether it is a curiosity — a publicity stunt — or an example of what could happen around the country if more cities had access to such fast connections. Some privacy advocates also worry that the project raises questions about how deeply Google will become entwined in its customers’ lives. “It gives them yet another way to gather and amass information about people, to build their digital dossiers,” said John Simpson, director at the public interest group Consumer Watchdog. “They have so much data about users at their fingertips and become a magnet for government request for that information.” But local officials think those lightning-fast Internet speeds, which allow movies to download in seconds and create picture- and sound-perfect video conference calls, will enable companies to operate more efficiently and use increased computing power to create cutting-edge technologies. The ripples so far are small. About a dozen start-ups have launched in the first neighborhood to get Google’s 1-gigabit-per-second service. Leading economic indicators such as employment growth haven’t budged. There is a frothy excitement, but even city officials who dub the region Silicon Prairie admit it will be hard to measure how the new network will lead to economic progress other than a general sense of activity. “This is exactly what we hoped would happen. More home-sprung businesses. More competition. In that way, Google’s project is a success already,” said Richard Usher, the assistant city manager for Kansas City, Mo. The network was initially brought to neighborhoods on the Kansas side of the city and will be in its first community on the other side of the state line this spring. Of course, Google has much to gain if the test in Kansas City works. It won’t say how much it spent to build the network, but it wants faster speeds so consumers will search more, put more videos on YouTube and shift all e-mails and documents to its cloud system of servers. By doing so, the company gathers more data to build more complete portraits of users and boost its $37 billion business of selling customized ads. The company is taking small steps in other regions, and this month began to offer free WiFi to the Chelsea neighborhood of Manhattan. Its chief financial officer said in an earnings conference call this week that the firm thinks its foray into telecommunications is “not a hobby” and will be a real business. For new entrepreneurs here, Google’s motives don’t matter. The faster and cheaper service opens up opportunities. EyeVerify, a security software firm, was in a part of the city where AT&T was the only Internet service provider, offering maximum speeds of 5 megabits per second for $80 a month. That turned the company’s daily tests of its software into a hair-pulling exercise in patience. The firm uses an individual’s unique eyeball vein patterns to secure smartphones and other devices. But sending files with thousands of high-definition photos of eyeballs took hours to deliver and required constant babysitting of outboxes to make sure files went through. On a recent afternoon, founder Toby Rush sat in the firm’s new office space in Google’s Hanover Heights “fiberhood” and sent several of those files within minutes. He quickly uploaded large documents and videos on the cloud for his staff of 11 to access. “This allows us to spend time on things that are much more useful and essential for the business to grow,” said Rush, one of hundreds of residents and entrepreneurs who have signed up for Google’s service so far. Nearby on this former industrial strip in Hanover Heights, a dozen other start-ups have taken refuge in Craftsman-style homes. All connected to Google’s network, they call themselves Kansas City Startup Village. There is a “Home for Hackers,” donated by a local resident who lets entrepreneurs live and work there for free. Investors are showing greater interest, too. A microfinance investment firm called Justine Petersen opened an office in the city last year with hopes of investing more in the burgeoning tech community. The St. Louis-based company is looking at creating another Home for Hackers. “We see much untapped potential here. Google is the spark,” said Galen Gondolfi, a spokesman for Justine Petersen. Such opportunities have attracted start-up hopefuls such as Payne, who moved from her home in Denver last month to live in the first hacker home. Building her CyberJammer software requires massive amounts of bandwidth, she said. In order for a drummer in Germany to play with a guitarist in Brazil, there can be no delay from slow Internet speeds. Here, Payne is betting the software she develops with her 1 gigabit connections will become the go-to place for musicians, though all will need similar Internet speeds for it to work. She shares the bare-bones three-bedroom home with Budidharma, a recent high school graduate who is trying to create software for servers running multiplayer video games. In his small bedroom with bunk beds covered in race car bedsheets and a desk with two monitors and a server, Nick pulls all-nighters coding and working with massive video files. Anywhere else, he said, getting the bandwidth needed for his firm LeetNode would be too expensive. “It’s hard to develop a business when you have to think about the cost of Internet and speeds,” Budidharma said. “You don’t even have to consider it here.” The hope is that these newcomers will drive the kind of economic growth the city seeks. There is debate over whether access to the Internet betters an economy. Telecom operator Ericsson said in 2011 that doubling broadband speeds increases gross domestic product by 0.3 percent. The Federal Communications Commission has said areas that got broadband for the first time experienced a creation of 2.6 jobs for every one job lost. On the Missouri side of the state line, businesses are eagerly awaiting the new service. When T2 Studios sends its ultra high-definition videos, known as 4K video, to television stations in Chicago and Los Angeles, it has to degrade the quality for the files to transfer. When Google’s network arrives in this part of the city this spring, T2 could send its pixel-packed videos in original form to clients. The start-up buzz was on display recently at the Kauffman Foundation’s weekly meeting of start-ups, called “1 Million Cups.” Investors, city officials and budding entrepreneurs lined up against the walls to hear pitches by two start-ups. City officials speculated that the Google project motivated Time Warner Cable to bid for a contract to wire a new city-sponsored start-up incubator in the old Union Station of Kansas City, Mo., with 1 gigabit speeds. “It was the first time I had heard from Time Warner in six years,” Usher said. For residents here, Time Warner Cable provides speeds one-tenth of Google’s for about $5 more than Google’s $70 a month. In an e-mailed statement, Time Warner Cable said, “Kansas City has always been a very competitive market. We are confident in our ability to compete.” That may be Google’s greatest early achievement. Its project — even if it never broadens beyond Kansas City — has drawn fresh attention to the problem of higher cable bills, poor customer service and low speeds in many parts of the nation, local officials say. “This should make other mayors of cities very jealous and really make people unhappy about the status quo of wired Internet access in their cities,” said Susan Crawford, a former technology advisor to President Obama and author of “Captive Audience,” a new book on cable and phone monopolies. “What this does is, for the first time, it allows people to question the status quo,” she said. _Sign up today to receive#thecircuit, a daily roundup of the latest tech policy news from Washington and how it is shaping business, entertainment and science._

Dogecoin helps Jamaican bobsled team in its quest for Sochi

In a story packed with more Internet buzzwords than a Buzzfeed listicle, the much-beloved Jamaican bobsled team has qualified for the Sochi Olympics — and Dogecoin and crowdfunders will help send them there. It was announced over the weekend that the team had qualified for the games for the first time in 12 years, but couldn’t afford the $80,000 price tag of outfitting a sled and traveling to Sochi. The Internet quickly rose to the occasion, donating more than $40,000 to an official Indiegogo account and launching parallel campaigns on Crowdtilt and Reddit, where Dogecoin enthusiasts publicized their own cryptocurrency fund. (Dogecoin, you’ll recall, is basically a meme-ier version of Bitcoin.)    *[WSU]: Wayne State University As of 11:30 a.m. Tuesday, the team had raised nearly $200,000 combined on the three platforms — and, perhaps more importantly, secured a promise from the International Olympic Committee that it would cover their travel costs, letting the Jamaican team turn their donations to things like equipment and training. This is obviously great news for the Jamaican team (and for the cryptocurrency community, which celebrated the fundraiser as “a great opportunity to promote dogecoin on the world stage.”) But it also holds a great deal of promise, at least theoretically, for other athletes who struggle with the monumental cost of becoming an Olympic athlete. After all, there’s a reason — besides pure talent and population size — that the U.S. tends to medal more than, say, India: It costs upwards of $100,000 to train an Olympic athlete over the course of her career, and that’s before the cost of going to the games themselves. Poorer countries are at a distinct disadvantage.    *[WSU]: Wayne State University If crowdfunding can level that playing field, it would mark an incredible feat for both the crowdsourcing movement and international sport. Unfortunately, very few teams have a cult Disney movie and built-in theme song to their name. And just like conventional crowdfunding sites, which have been criticized for their failure to “democratize innovation,” athletic crowdfunding seems to favor those who already have funds and followings — the U.S. ski and snowboarding teams both use RallyMe.    *[WSU]: Wayne State University So maybe this isn’t exactly a profound win for crowdfunding. But it is a good excuse to revisit “Cool Runnings.”

With passage of JOBS Act, Steve Case, AngelList founder and others look forward to a less-regulated start-up world

For decades, it has been against the law for an entrepreneur to announce he or she is fundraising while presenting at a demo day, pitching at a contest or otherwise speaking in a public forum. But with Tuesday’s passage of the JOBS Act, that may soon no longer be the case. In fact, it may soon be much easier for start-ups to raise money and go public in a number of different ways. The Senate version of the Jumpstart Our Business Startup, or JOBS, Act cleared the House of Representatives Tuesday by a 380-41 vote, and the bill now heads to the president’s desk. Among other provisions, the bill does away with the ban on so-called “general solicitation” — the idea that a company can’t advertise itself to investors. If it is signed into law, start-ups would be able to announce their fundraising intentions to venture capitalists. The bill’s proponents include Naval Ravikant, who runs AngelList, a type of social network for venture capitalists. He said he feels the bill rolls back outdated regulations that don’t apply to today’s start-up ecosystem. “General solicitation is an old rule on the books that should be eased,” he said. “Previously, some overzealous processor could have gone after an investor for violating it, and that could destroy a start-up’s entire financing.” The bill also establishes a framework for crowdfunding — which enables small companies to solicit equity capital from myriad small-dollar investors. As we reported last week, companies seeking crowdfunding investment would still file with the Securities and Exchange Commission, and one amendment would limit individuals with an annual income or net worth of less than $100,000 to investing 5 percent of their income in crowdfunding. AOL co-founder and Startup America chair Steve Case, who was a vocal advocate for the bill, said the crowdfunding provision would help entrepreneurs who don’t live in venture hot spots like Silicon Valley or New York City, or whose business models don’t appeal to venture capitalists. “Capital is not adequately deployed across the nation, and this will be another tool that will help provide capital to underserved regions,” Case said. “Overall, that will be a good thing for innovation and for job creation.” Michael Mayernick, co-founder of the Web optimization company Spinnakr in Washington, said he’s frequently had to turn down family and friends who have wanted a stake in his company in exchange for a small investment. If crowdfunding were legalized, he would be able to say yes. “It always helps to have the first money in when you’re raising money from professional investors,” he said. The JOBS Act includes other measures that would loosen regulatory requirements for smaller companies seeking to go public, creating a new classification called “emerging growth companies.” For companies with less than $1 billion in revenue, the number of audited financial statements required for an IPO would be reduced, and those companies would be exempted from having to hire an external auditor prior to the offering. Furthermore, it provides for “mini” public offerings, under which companies raising $50 million or less would not be held to some of the financial disclosure requirements that most publicly held companies are subject to. “This will try to reduce some of the costs of being a new public company,” said Rick Kline, partner at Goodwin Procter, a technology lawyer in Silicon Valley. “It will trickle down and encourage investment by VCs and earlier-stage investors who will view exit timing and strategy as not being so far off.” Some experts, as well as the editorial boards of Bloomberg and the New York Times, expressed concern that the law would pave the way for investor fraud by allowing collaboration between brokers and analysts who cover the new, emerging-growth category of companies. “An industrywide resolution in 2003 forced structural changes designed to end some of the conflicts of interest,” wrote former New York governor Eliot Spitzer in Slate last week. “The bill ... will remove the critical protections imposed in the analyst settlement a decade ago..., allowing them to return to the fraudulent practices of yore.” Jeffrey Stibel, CEO of Dun and Bradstreet Credibility Corp in California, told us previously that many of the relaxations in regulatory structures might allow shady bankers to swindle unwitting investors. “Under this bill, you can now go to my grandmother and say, ‘I want you to invest in a company,’ but the whole thing can be effectively a scam and you’ve just created the air of legitimacy to skirt the law,” he said. “Previously, you had to go to a qualified investor, who has enough sophistication to sniff out fraud.” But Case said he thinks the Senate amendment, as well as other protections written into the law, will be sufficient in order to safeguard investors’ money. “The amendment helps strike a reasonable balance between providing the capital people need and at the same time doing it in a way that provides a responsible way of protecting investors,” he said. “Any time there’s change, there’s going to be concern.”

The $200 million this CEO made today may be a good sign for Wall Street

Below, dozens of Twilio employees in red track jackets cheered and NYSE floor traders prepared to start taking orders for the company’s stock. “Yeah,” Lawson screamed as he rung the NYSE’s iconic opening bell. Hundreds of companies go public each year, following the script of organized chaos that quickly enveloped Twilio’s initial public offering on Thursday. But Twilio’s debut is being watched closely in both Silicon Valley and on Wall Street for whether the cloud software developer could help end a tech IPO drought that has troubled investors and regulators. The eight-year-old company is the first of more than 150 technology companies valued at more than $1 billion each by the private market  — mainly venture capitalists — that investors hope will go public in the next several years. These so-called unicorns have eschewed tradition by staying in private hands years after ballooning in value. That has contributed to what has become one of the worst years in IPO history since the financial crisis. Just 41 companies (not just tech firms) have gone public so far this year, half as many as the same time last year and less than a third the number that made public debuts by this point in 2014, according to Dealogic, a research firm. Twilio is helping “break the ice,” said Lise Buyer, an IPO consultant with Class V Group. “The deal got done … that’s what matters.” Still, Twilio received an upbeat reception on Wall Street, which may be encouraging for some tech companies, market analysts said. The company’s stock closed at about $28 a share Thursday, up 90 percent from its opening price of $15. “It is a very important data point for all the tech unicorns waiting in the wings,” said Kathleen Smith of Renaissance Capital, a manager of IPO-focused exchange traded funds. But it is unlikely to move large companies such as Uber, Airbnb and Snapchat, which are worth $62 billion, $25 billion and $16 billion respectively, according to Fortune. These companies can still raise money easily in the private markets, escaping the rigors — and headaches — of running a public company that must heed the calls of shareholders and government regulators.  Simply building the infrastructure needed to file quarterly earnings documents to the SEC can cost millions of dollars, market experts have said.  But potential regulatory headaches and the demands of shareholders don’t appear to have phased Twilio’s Lawson. “Since the beginning we have been building this company for the long-term. … When you build a company that way, going public” makes sense, he said.  When preparing to go public, “you run a tighter ship. The investment is worth it.”

Commentary: District’s equity crowdfunding proposal would be good for small businesses

In a bold move, the District of Columbia recently proposed new rules to permit equity crowdfunding in the city. Equity crowdfunding is a business financing method that allows companies to sell equity or ownership stakes to a large number of people using online platforms. With this move, the District becomes the latest locality to allow start-ups and small businesses to use this new business funding tool. Twelve states, including Maryland, currently allow equity crowdfunding. Maryland firms can raise up to $100,000 through such schemes. D.C.’s proposal goes well beyond this limit, placing the city at the forefront of efforts to develop locally based, self sustaining, independent business financing methods. For small-business owners and others, this new D.C. equity crowdfunding proposal means the stranglehold venture capitalists and banks have had on access to business start-up capital will loosen a bit. D.C. proposes to allow the creation of a process through which new and existing companies will be able to obtain funding from a large number of small investors. These small-scale investors might purchase shares for as little as $10 in, say, the next Google or Apple. More likely, the process will be used to raise start-up capital for the coffee shop down the street or for the day-care center up the block. This is a wonderful option, currently absent from the small-business funding tool kit. D.C.’s proposal contains a number safeguards: a company can raise up to $500,000 if it has financial statements (balance sheet, income statement, cash flow statements) that have been certified as accurate by the company’s chief executive. Companies that have undergone a financial statement review conducted using standard accounting procedures can raise up to $1 million. Finally, companies that have undergone a full-scale external audit conducted by a certified public accounting firm can raise up to $2 million. For small businesses currently shut out of the capital markets, this is a major advance. If your fan or customer base is strong enough, you may be able to raise enough capital to pursue a dream. For example, Kugler Cycles, owners of Bikespace DC, wants to manufacture bikes in the city. They have started a donations-based (not equity) crowdfunding campaign on Indiegogo. A donations-based crowdfunding campaign allows supporters to support a company by donating money in exchange for some reward, such as first dibs on a new product. With a donation, or reward-based campaign, you are not actually purchasing an ownership stake in the company you are supporting. In Kugler’s case, imagine being able to actually buy an ownership stake, or equity, in a D.C.-based bike manufacturing company. This alone might be enough to trigger a D.C. manufacturing renaissance. (Full disclosure: I helped create the Kugler Cycles donation-based Indiegogo crowdfunding campaign). The D.C. proposal applies only to companies located in the city, and all investors must be D.C. residents as well. While these rules limit both the number of potential firms and the number of investors, we believe the amount of good this may have on the local small-business community outweighs any drawbacks. William Michael Cunningham is an economist, D.C. native and author. He is managing partner at National Crowdfunding Services, which has partnered with the D.C. government to provide donations-based crowdfunding services. **More from Capital Business:** For a daily rundown of Washington area business news, sign up for the “CapBiz A.M.” e-mail newsletter.

Capital Buzz: Entrepreneur lands a Knockout in contest

******Knockout** , a District-based company that makes high-end cotton knickers, won the **Harvard Business School Alumni New Venture Competition** held at the **Pillsbury Winthrop Shaw Pittman** law firm in the District last week. Knockout’s secret is a wicking and odor-absorbing technology that keeps the undergarments from becoming wet and smelly. Knockout was founded by **Angela Newnam,** who beat out several other start- ups, including a termite detector, an online brain fitness firm and an online greeting card company. “The reason we won is that you see a lot of people with interesting ideas, but taking something from concept to actually having customers, retail sales and repeat business ... is the hard part,” said Newnam, 43, whose company has sold more than 20,000 pairs and is in 250 retailers, including such high-end local women’s lingerie stores such as **Sylene** in Chevy Chase and Georgetown’s **Abrielle**. Newnam, a 1996 graduate of the Harvard Business School, said she came up with the idea three years ago. Prices range from $24 to $36 for men’s and women’s underwear and from $50 to $60 for “performance” shirts. Now she goes to Boston April 23 to compete in the HBS national competition for $50,000 in cash, which “would go straight to our marketing budget.” Newnam, a former consultant with McKinsey, said she expects tough competition from some software start-ups in Boston. **CustomInk** , the McLean-based online T-shirt company, served its **millionth customer** this month. It also celebrated its 12th birthday. The company, co-founded by **Marc Katz** , expects to break $100 million in revenue this year. The company is on a tear with first quarter 2012 up 30 percent over the same period as last year. Katz, who has 350 employees, said his goal is to push CustomInk’s revenue to $250 million by 2015. CustomInk is exploring television advertising and is opening a West Coast facility in Reno, Nev., to help make faster deliveries and extend its phone coverage so customers can call into the evening. So is Katz house-hunting in Nevada? “No, but I could see spending a lot of time there,” he said. **Venga** , the District-based start-up that began last year as a marketing platform for Washington area restaurants, has shifted its business model from customer acquisition to customer retention. Under the new model, Venga harvests every scrap of information on a customer’s bill — server, dishes, amount spent — for use in restaurant loyalty programs, guest satisfaction and micro-targeted marketing. Venga hoovered 20,000 checks and 200,000 data items in one recent 10-day period. **Johnny’s Half Shell** , **Taberna Del Alabardero** , **Taylor Gourmet** , **Ping Pong Dim Sum** (Dupont and Chinatown), **Café Bonaparte, Napoleon Bistro & Lounge**, Stir Food Group ( **Zola, Zola Wine & Kitchen, Potenza**) and **Spike Mendelsohn** ’s **Good Stuff Eatery** and **We, The Pizza** have all signed up. **Washington Post** Publisher **Katharine Weymouth** and **BET Holdings** Chairman **Debra Lee** plan to host separate sessions on May 7 kicking off a new leadership series sponsored by **The Economic Club of Washington, D.C.** The programs, hosted in board rooms, are designed to provide groups of 25 or so Economic Club members with the opportunity to gain more in-depth knowledge about local businesses. Other meetings will be hosted by Economic Club President **David Rubenstein** , one of three co-founders of **The Carlyle Group** , the private equity giant based in Washington; **Kathleen Matthews** , executive vice president of global communications and public affairs for **Marriott International** ; and **Carol Melton** , executive vice president for global public policy at **Time Warner**. Dates will be forthcoming. **David von Storch** ’s **Urban Adventures Cos.** opens its Penthouse Pool Club at 1612 U St. NW on April 1. The $2 million, 12,000-square-foot rooftop area includes a 60-foot pool, private sun deck carpeted with synthetic grass, 10 cabanas, a VIP cabana, communal fire pits and a lounge offering full food and beverage. Some 1,000 people have already joined with 200 on the waiting list. Monthly membership costs $199 a month, which includes access to all five D.C.-area Vida Fitness locations; the VIP cabana is $500 a day with a food and beverage minimum. Bethesda-based **KoolSpan** , which develops encryption chips for mobile communications devices, signed a big European carrier.

3M backers pledged $480 M on Kickstarter in 2013

Three million Internet users from 214 countries pledged $480 million on Kickstarter in 2013, according to the crowdfunding site’s year-end report. This is slightly up from last year, when 2.2 million people contributed about $320 million to various projects in exchange for non-financial rewards. Almost 20,000 projects were successfully funded on the platform this year — only slightly more than about 18,000 last year. Kickstarter enforces an all-or-nothing policy, which prohibits entrepreneurs from collecting funds unless they reach their fundraising goal by a particular deadline. A possible signal that Internet users are becoming more comfortable with crowdfunding, the number of people backing multiple projects significantly. Slightly more than 800,000 people backed more than one project and about 81,000 backed 10 or more projects in 2013 — last year it was about 570,000 and 50,000, respectively. The annual report highlighted some of Kickstarter’s most successful projects, including one from a Southeast Washington rap duo who raised more than $10,000 to shoot a music video in North Korea.

IJReview gets $1.5 M funding, led by GOP politico and investor Pete Snyder

Disruptor Capital, a Washington-area angel investment firm, has made its second big move in less than two months by leading a $1.5 million funding round in Media Group of America. The investment will help fuel growth at the the media company, led by Alexandria-based the Independent Journal Review, a two-year-old Web site run and owned two former Republican operatives. Privately-held Media Group of America, which is profitable, is on track to earn more than $30 million in revenue this year. The company is profitable, said Disruptor Capital chief executive Pete Snyder, who will joining the MGA board. The company was founded by Alex Skatell and Phil Musser. Skatell, 28, is a former digital director for the National Republican Senatorial Committee and the Republican Governors Association. Musser, 42, a longtime communications and media consultant, is the former executive director of the governors association and was an advisor to former Republican presidential candidate Mitt Romney. “The bets we are making today with Pete’s help and expertise will be around video content, and creating platforms for independent contributors and thought leaders,”said Skatell, who started IJReview in his Washington apartment. Skatell, a 2008 graduate of Clemson University, said past bets in his business were centered around putting data and analytics at the center of the newsroom. In addition to the Independent Journal Review, the company owns the Website Liftbump, a technology incubator called MGA Labs, and a digital media agency, IMGE. Snyder, a Republican who is considered to be a contender for the GOP Virginia gubernatorial nomination in 2017, called the news site “the hottest company in the hottest sector of media. And they are right in our backyard.” Snyder, who once worked for then-New York Mayor Rudolph Giuliani, lost the Republican nomination for Virginia’s lieutenant governor. In November, he announced that Alexandria-based Disruptor was leading a $5 million investment in a Richmond clothing company called Ledbury. Ledbury, headquartered in a tobacco warehouse in a historical section of Richmond, is co-founded by the son of former U.S. Sen. Paul Trible. Ledbury said it would use the investment to help its e-commerce sales and increase its shirt production from about 65,000 in 2014 to a goal of 100,000 this year. _The story has been updated to say the investment was $1.5 million after additional reporting._ **More from Capital Business:** For a daily rundown of Washington area business news, sign up for the “CapBiz A.M.” e-mail newsletter.

How crowdfunding can help save Silicon Valley from its harebrained investors

Facebook breaks its IPO price, falls sharply in morning trading

Well, that was fast. Facebook opened its second day of trading at $36.66, below its initial public offering price of $38. By 10 a.m., the stock had dropped even lower, to $33.34. The Facebook debut was one of the most highly anticipated IPOs of the year, but it failed to wow investors on Friday, closing just 32 cents above its open. The company’s bankers had to prop the stock up to keep it from going negative on its first day of trading. After facing delays Friday, shares jumped as high as $45 per share, but hit the break-even mark several times throughout the trading day, never going negative. The delays kept traders from learning whether their investments had gone through, with some waiting for hours to learn the fate of their bids. It’s possible that some of the cancellation orders were still coming in on Monday. Nasdaq chief executive Bob Greifeld acknowledged Sunday that that technical problems caused delays in Facebook trading. But he told reporters that there was no indication that the glitches contributed to the stock’s poor performance and called the first day of trading “successful,” the Associated Press reported.  Greifeld said that the stock exchange was “humbly embarrassed” by the glitches and that Nasdaq’s board met Saturday to discuss plans to change its IPO auction process. The Securities and Exchange Commission said Friday that it would review the delays with Nasdaq to find the cause, The Washington Post reported. Analysts said Friday that Facebook’s last-minute addition of millions of new shares likely contributed to the stock’s disappointing performance. They said the company should have kept to its original offering. Related stories: Glitches mar Facebook stock debut Facebook’s market debut draws criticism from lawmakers Facebook’s IPO: What does it mean for you?

MapBox, mapping start-up behind Foursquare, closes $10M financing round

MapBox, the start-up behind the map function in Foursquare and car-service Uber, announced Wednesday it closed a $10 million financing round from Denver-based venture firm the Foundry Group. The Washington- and San Francisco-based start-up customizes interactive maps for Web sites and apps. In addition to supporting smartphone technologies like Uber, MapBox’s platform is used by media outlets to visualize data for readers — for instance, Financial Times used it to create a map illustrating regional conflict in Syria. NPR, USA Today, and Slate have done similar projects on the platform. This round of funding will be used to add more people to MapBox’s 35-member team, particularly engineers, according to chief executive Eric Gundersen. “We’re only going to win if we have the fastest mapping technology,” Gundersen said. The Foundry Group has invested in several data-centric start-ups including FitBit, which relies on special wrist gear and other wearable monitors to track fitness. “While the digital mapping and satellite imagery industry has long been dominated by large companies, governments, and a proprietary data mindset, the open-source and open-data movements have made inroads into the mapping world,” Foundry Group managing director Ryan McIntyre wrote in a blog post announcing the financing. This is MapBox’s first round of early-stage financing. Until now the start-up has relied on $649,000 in grants from the Knight Foundation. Last year, MapBox won a Knight Foundation news challenge by proposing to improve OpenStreet Map, an online world-map any user can contribute to, by making it easier to add building locations, street names and points of interest.

Top start-ups chosen as 1776’s global Challenge Cup competition comes to a close

A San Francisco company that uses crowdfunding to help the homeless took top honors in the first annual Challenge Cup, a business competition organized by start-up hub 1776 that brought young companies from across the globe to Washington this past week. The awards ceremony Saturday night was the capstone of a months-long process that saw event organizers and sponsors travel to 16 cities around the globe, from New York to Cape Town to Beijing, to judge pitches from technology start- ups. Each of those companies had to serve up a fresh, commercially viable idea in one of the four sectors where 1776 has carved out a niche: smart cities, education, energy and health care. Formed last February, 1776 provides office space for start-ups in the District, as well as events and seminars designed to educate entrepreneurs and promote the local tech economy. The group is now developing a venture capital arm, and each of the Challenge Cup finalists walked away with an investment. Meet the Challenge Cup winners and finalists: **Smart Cities** _Challenge Cup & Category Winner: HandUp _ Investment: $150,000 The competition’s big winner hails from San Francisco. HandUp allows people from around the Web to make small donations to homeless individuals or other neighbors in need. Its community partners, such as shelters or service organizations, help the homeless to create profiles outlining their plans for the money. _Runner-up:Mellowcabs _ Investment: $50,000 The Cape Town company is manufacturing a fleet of miniature, electric-powered cabs that can provide inexpensive, eco-friendly transportation around cities. The company makes money primarily from advertisements on its vehicles, rather than the passengers it carries. **Education** _Winner:eduCanon _ Investment: $100,000 The only District-based upstart to make the finals, eduCanon offers interactive lessons delivered via video so students can pause and rewind to learn course material at their own pace. _Runner-up:Lingua.ly _ Investment: $50,000 The Tel Aviv-based company promises a fresh approach to learning a foreign language that combines traditional flash cards with an online dictionary to teach students new words in their proper context. **Energy** _Winner:PlugSurfing _ Investment: $100,000 Berlin-based PlugSurfing offers a Web site and mobile app for drivers of electric vehicles to more easily locate charging stations and pay to fill up, so to speak. _Runner-up:Water Lens _ Investment: $50,000 The company’s patent-pending system allows real-time chemical analysis of the water that results from hydraulic fracking when digging wells. It hails from Austin. **Health Care** _Winner:CancerIQ _ Investment: $100,000 Based in Chicago, CancerIQ allows oncologists to collect genetic information from cancer patients and compare that information against a large database of similar patients. The goal is to identify high-risk patients and offer preventative treatment. _Runner-up:MediSafe _ Investment: $50,000 Also from Tel Aviv, MediSafe uses a mobile app to remind patients when it’s time to take prescribed medication, reducing the likelihood of inconsistent doses that may lead to further health issues and medical expenses. Follow reporter Steven Overly on Twitter: @StevenOverly

Facebook’s Mark Zuckerberg rings the Nasdaq bell

Facebook co-founder and chief executive Mark Zuckerberg rang the Nasdaq's opening bell Friday, flanked by chief operating officer Sheryl Sandberg and Nasdaq chief executive Bob Greifeld. Zuckerberg opened the tech index trading while outside the company’s headquarters in Menlo Park, Calif., in front of a cheering crowd of Facebook employees on a stage that looked like it was set up for a rock concert. The 28-year-old Facebook co-founder traded high-fives and hugs with Sandberg and other top executives. On his own Facebook page, Zuckerberg added this update: “Mark Zuckerberg listed a company on NASDAQ,” tagging Sandberg, vice president of product Chris Cox, chief financial officer David Ebersman, deputy general counsel David Kling and vice president of finance and treasurer Cipora Herman. According to photos Facebook employees posted on their profile pages, Zuckerberg spoke ahead of the bell-ringing and received a standing ovation from his employees. Markets opened up on Friday morning, in anticipation of official Facebook trading set to begin at 11 a.m ET Shares of the company are listed on the market and opened at $38 per share, giving the company a valuation of $104 billion. That valuation shoots the social network into the short list of the country’s most valuable companies, ahead of Amazon.com ($98 billion), Disney ($78.3 billion) and McDonald’s ($91.7 billion). Related stories: Analysis: Facebook board must learn to deal with genius CEO Facebook IPO: Five things to know Facebook’s market debut draws criticism from lawmakers Facebook’s IPO: What does it mean for you? Slate: The mystery of the vanishing IPO

Facebook IPO: How big will it be and what’s the significance?

_The social-networking Web site is reportedly planning to file paperwork for an initial public offering with the Securities and Exchange Commission on Wednesday. Just how big would the IPO be? Hayley Tsukayamareports:_ Facebook’s rumored to be filing its paperwork for its initial public offering Wednesday and is reportedly trying to raise $10 billion, which would give it a valuation of $100 billion. How do these numbers match up? Historically speaking, if Facebook has raised that much for its initial public offering, it would: • be the sixth-largest U.S. IPO ever, sliding between AT&T Wireless and Kraft Foods. • be the 15th-largest IPO in global history, behind Glencore International and ahead of Japan Tobacco. • have an initial public offering more than six times that of Google. Google currently holds the record for the largest technology IPO, according to Renaissance Capital, of $1.66 billion. • come in with more hype than other technology companies, thanks to a per- share valuation that at least one investment firm predicts will open “north of $100,”Forbes reports. For example, when Apple went public Dec. 12, 1980, it was priced at $22 per share, climbing to $29 by the end of the trading day, according to Walter Isaacson’s biography of Steve Jobs. The Wall Street Journal reported that Apple made less than $100 million by selling stock to the public. Google, according to archives from The Washington Post, was valued at $85 per share, surging to over $100 a share by the end of the day for a market capitalization of $27.2 billion. • have a market capitalization larger than Disney ($70 billion) or General Motors ($38 billion), if reports that its market cap is expected to be between $75 billion and $100 billion ring true. Compared with its technology peers, however, its market cap would be on the low end of the list, as compared with Google ($187 billion), Microsoft ($248 billion) or, of course, Apple ($422.47 billion). It would, however, outstrip Amazon, which has a current market capitalization of about $87 billion. _Dominic Basultoexplains why the company’s valuation is estimated at $100 billion:_ One way to value Facebook is to take a “comp” — comparable company — and use that company as a proxy. For now, Facebook appears to make the lion’s share of its revenue via advertising, so a comparable company might be a media company. The argument that Facebook plans to make its money by advertising is obviously not what Wall Street really wants to hear. Advertising and page views have a way of drying up over time, just ask any media mogul. (More from The Washington Post: Petition calls for 'ethical' iPhone 5 Lawmakers say questions remain about Google’s privacy policy) What Wall Street wants to hear is that you have a model for “monetizing” each and every one of those 800 million users. Consider that the average person spends an average of between 7 and 8 hours on Facebook per month. The site, in Web parlance, is “sticky.” With its new Timeline Apps, Facebook has made the site even “sticker.” For bankers, the real future of Facebook is not advertising but the ability to leverage apps and gaming platforms for revenue. Just as cable companies are valued at a dollar value per subscriber, Facebook needs to convince Wall Street that it can monetize its user base through games like Farmville on a consistent basis. If Facebook can convince Wall Street of this, it may be worth well more than $100 billion — just as Google wound up being worth well more than its initial $23 billion investment. Whatever the final Facebook IPO valuation, there will definitely be consequences for other companies, such as Twitter, looking to go public soon. The Facebook IPO will become the new standard for other Internet players trying to go public before the IPO window slams shut. If you’re a young Internet CEO — even if you’re directly competing with Zuckerberg — it might be worth it to wish for a big Facebook IPO this spring. _The company’s chief executive Mark Zuckerberg isn’t the only company leader who would be thrust into the spotlight as a result of the IPO. Bloomberg Newsreports:_ Facebook Inc.’s Sheryl Sandberg recently threw a fundraiser for President Obama, dining with Lady Gaga and the president himself. Last week, she was a highly visible co-chair of the World Economic Forum in Davos, Switzerland. As Facebook prepares to raise $10 billion in the largest- ever technology initial public offering, Sandberg, the company’s chief operating officer, is about to be thrust even further into the limelight. Since joining the company in 2008, she’s become the public face of the Menlo Park, California-based social media giant, forging ties with advertisers, policymakers and partners. With the IPO, likely to be heralded by a regulatory filing this week, Sandberg will be taking on a larger function helping senior management represent the company to a broadening investor base and to Wall Street analysts. “She’s going to play a crucial role in everything that happens over the next few months,” said Matt Cohler, a special adviser to Facebook and general partner at Benchmark Capital in Menlo Park. “She is very deeply connected” in political and business circles, said Cohler, who served as a Facebook vice president from 2005 to 2008. At 42, Sandberg serves as the outgoing and more seasoned foil to Chief Executive Officer Mark Zuckerberg, a 27-year-old coder who sets the company’s strategy even as he shuns publicity. During a career that has spanned Google Inc., McKinsey & Co. and the U.S. Treasury Department, Sandberg has honed what friends, colleagues and former employees say is a penchant for brokering alliances, fostering loyalty and setting priorities. More from The Washington Post: The challenge of a Facebook IPO FTC settlement gives Facebook leverage Social media’s rise to power

A ‘Shark Tank’ appearance can lead to millions — but is it real?

The investors laughed him off the stage. But that didn’t seem to matter. In the two days following his Jan. 10 appearance on the hit television show “Shark Tank,” C.J. Isakow’s start-up racked up more sales than it had during its entire five-month existence. “It was a total whirlwind,” said the District entrepreneur, who created Eyebloc, a Webcam cover that prevents hackers from peering in. “There is absolutely nothing like this in the real business world.” Reality TV shows such as ABC’s “Shark Tank,” NBC’s “The Apprentice” and AMC’s “The Pitch” have brought boardroom proceedings into American living rooms, and have catapulted small businesses to overnight fame. But while they give audiences a taste of entrepreneurship, analysts and venture capitalists say the shows paint a distilled picture of what it’s really like to start — and run — a successful business. “It’s a very shortened, sound-bite-filled version of what we do,” said John Backus, co-founder and managing director of New Atlantic Ventures, an early-stage venture capital firm. “On TV, they’re making a decision in minutes. In real life, we make decisions in months.” ****On “Shark Tank,” budding entrepreneurs pitch their businesses to a panel of millionaire — sometimes billionaire — investors. Hopefuls rattle off the merits of their company — annual sales, profit margins, distribution deals — and within moments are given an answer: Y _es, I’ll invest $70,000 for a 20 percent stake in your company_. Or, _No, I’m out._ At least that’s how it works on TV. In real life, local entrepreneurs who have appeared on the show say the process is much more rigorous. Many of the negotiations last more than an hour. There are detailed questions about valuations and royalties. Even after entrepreneurs and investors shake hands on air, there are weeks of due diligence in which every part of the business is parsed and analyzed before the contract is finalized. A portion of the deals made on air end up falling through for one reason or another. “At least 50 percent of the people that show up on [‘Shark Tank’] don’t get deals, and some of them, frankly, get shredded,” said Clay Newbill, the show’s executive producer. “There are times when the sharks don’t like their ideas and it doesn’t go well. It’s one of the things we do try to represent. We like to be honest about what’s happening.” For the current season, the show’s producers received 35,000 applications. Of those, 157 — that’s 0.4 percent — were selected to film in front of the sharks. In the end, Newbill estimates that 112 pitches will actually make it to air. For the companies that do appear on TV, the prime-time exposure can lead to millions of dollars in revenue. Already this season, two businesses managed to snag $1 million in sales within 48 hours of appearing on air, Newbill said. “The show puts everything on fast-forward,” said T.J. Hale, creator of Shark Tank Podcast, which specializes in follow-up interviews with entrepreneurs. “When a company gets five years worth of publicity in 10 minutes, it becomes very, very dramatic.” At Pork Barrel BBQ in Alexandria, phone calls and e-mails rolled in by the hundreds after a successful run on “Shark Tank.” As soon as real estate developer Barbara Corcoran agreed to invest $50,000 during a September 2009 episode, the company was in high demand. Costco called the next day to inquire about stocking the company’s products. NASCAR teams approached with partnership opportunities. Country singer George Strait asked if the sauce and rub maker would sponsor his tour. “It was literally overnight,” said Heath Hall, who started Pork Barrel BBQ with Brett Thompson in 2008. “We had spent eight months trying to get into Whole Foods. After the show aired, they picked us up immediately.” With about $4 million in annual revenue, Pork Barrel BBQ has become one of the show’s successes. At the time the episode aired, the company’s barbecue rubs were sold in three stores. Within a year, that number skyrocketed to more than 1,000 locations. Today, 3,500 stores in the U.S., Europe and Canada carry Pork Barrel BBQ’s rubs and sauces. “I can’t imagine that we would’ve been able to do all of this without ‘Shark Tank,’” Hall said. “We got millions of dollars of free air time.” The “Shark Tank” appearance was Hall and Thompson’s first attempt at finding outside funding. Since then, the pair has secured $1 million in venture capital, a process they say was much less nerve-wracking. “Normally, when you meet with an investor, they’ve already looked at your pitch and have expressed interest,” Thompson said. “On TV, you have a very short time to catch their attention and state the value of your company.” Industry insiders say there are other differences, too. “Shark Tank” investors tend to offer deals that rely on loans or royalty payments. In the case of Pork Barrel BBQ, for example, the company must contractually pay royalties to ABC, Disney and Sony on all future sales. “Those terms are not standard,” said Diana Kander, a senior fellow at the Kauffman Foundation for Entrepreneurship. “Most early-stage investors are much more hands-off. They don’t expect any returns until the company is sold.” Corcoran has continued to be involved. Hall and Thompson say they exchange e-mails with the real estate developer at least once a week, and have Skype meetings every quarter. When the duo opened their restaurant in 2011, Corcoran showed up wearing a pig costume. “To this day, we talk to her all the time,” Thompson said. “Barbara has become the biggest champion of our company. It’s hard enough to find that in business, but on reality TV? What are the odds?” Part of the success behind “Shark Tank,” which averages between 7 million and 8 million viewers every week, is in its timing, Newbill said. The show debuted in August 2009. The country was in recession and Americans were looking for ways to start anew. “It really came about at a time when the country needed it,” he said. “So many people were losing their jobs, their 401ks, their homes — they were losing all the security they thought they had.” When Donald Trump signed on to host “The Apprentice” 10 years ago, he said the outlook was much different. “People said to me, ‘A business show will never make it on prime-time television,’” Trump said. “But it resonated very well with the audience. ‘The Apprentice’ went on to became the number one show on television.” Today, a number of series, including “The Profit” on CNBC and “Restaurant: Impossible” on the Food Network, are trying to recreate the show’s success. On “Shark Tank,” the show’s line-up of investors, which currently includes Dallas Mavericks owner Mark Cuban and FUBU founder Daymond John, have funded hundreds of ventures. The producers would not disclose the success rate among the companies that appear, but said that several have gone on to become multimillion dollar enterprises. Isakow, 34, hopes his Webcam blocker becomes one of those success stories — even though all five sharks turned him down. The biggest problem, they told him, was that his $9.99 plastic gadget was overpriced. “I can take a piece of gum, I can take a Post-it note, I can take anything and pop it over [my Web cam],” Cuban said on the episode. “Honestly this, to me, a buck,” TV personality Lori Greiner echoed. Isakow, who created his first prototype last summer using a 3-D printer in a D.C. Public Library, took that advice to heart. By the time the show aired, the Eyebloc had been marked down to $6.99. Within 48 hours, he sold 2,000 units, doubling the company’s overall sales. “In many ways, getting on the show was the goal,” he said. “The funding was secondary.”

How the tech-unsavvy Jack Ma took Alibaba public and became China’s richest man

Five years before billionaire Jack Ma strode through a euphoric, 1,000-strong New York Stock Exchange crowd to preside over the world’s biggest initial public offering, China’s richest man stage-managed a show-stopping appearance in his home town of Hangzhou. The venue was an arena called the Yellow Dragon Stadium. The occasion: the 10th birthday of Ma’s e-commerce behemoth, Alibaba Group. Ma materialized before 16,000 cheering employees in a platinum-blond wig with mohawk spikes, black lipstick and a nose ring. Then the 5-foot-4-inch Internet tycoon launched into a soulful rendition of Elton John’s “Can You Feel the Love Tonight.” With hindsight, Ma’s speech was even more striking than his campy cabaret act. At the time, Ma headed an Alibaba Group unit called Alibaba.com that was listed on the Hong Kong stock exchange. He used the party to emphasize the low status he ascribed to fund managers who held Alibaba.com’s shares before he took the business private in 2012. “Let the Wall Street investors curse us if they wish!” Ma shouted in Chinese. “We will still follow the principle of customers first, employees second and investors third!” Ma toned down the rhetoric — and the glitz — at the NYSE on Sept. 19. Wearing a staid black suit and beaming at admirers, he was there to hawk what investors had been drooling over: stock in the entire Alibaba Group. “I don’t want to disappoint shareholders,” he said. “I want to make sure they’re making money.” Alibaba, named for the “Arabian Nights” character who uttered “Open sesame” to get into a treasure cave, did just that. The IPO raised an unprecedented $25 billion, eclipsing the $22 billion for Agricultural Bank of China in 2010. Propelled by a 38 percent surge in Alibaba’s shares in their New York debut, Ma, who’d once scraped together $20 a month teaching English, joined Warren Buffett, Bill Gates and Mark Zuckerberg among the world’s 25 richest individuals. As of Nov. 9, he was No. 18, with a $29.7 billion fortune, according to the Bloomberg Billionaires index. Investors backing Ma are finding a very different entrepreneur than they’re used to. At 50, he’s about twice the age the Facebook and Google millennials- turned-billionaires were when they took their companies public. Far from flaunting his tech credentials, Ma portrays himself as computer illiterate. “I have never written one code, never made one sale to a customer,” he said at a conference in 2010. And by infusing his record-breaking IPO with ambivalence toward shareholders, Ma underscores the potential riches and the risks of investing in China. Pursued by three other Chinese tech billionaires, he dominates the nation’s e-commerce industry. Not content with that crown, the adherent of tai chi and admirer of fictional folk hero Forrest Gump wants to transform Alibaba into a global marketplace — while keeping the company under his thumb. “Shareholders will have about as much say in how their company is run as the people of China do in the running of their country,” says David Webb, a Hong Kong-based investor, shareholder activist and former director of the Hong Kong stock exchange. Before the New York IPO, the Hong Kong bourse had declined to list Alibaba Group under a structure that gave Ma and his managers control even though he wound up owning less than 8 percent of the stock after the offering. That didn’t seem to bother fans when the shares started trading on the NYSE. Alibaba’s $231 billion market capitalization suddenly made the company Ma had founded in his apartment with $60,000 in seed money more valuable than Facebook and larger than Amazon.com and eBay combined. Among tech icons, only Apple, Microsoft and Google had larger market values. By Nov. 9, after better-than-forecast second-quarter results, Alibaba’s capitalization had risen to $282.4 billion — overtaking General Electric and Wal-Mart to become the world’s seventh-biggest company. Ma took time from his victory lap around New York to accept former president Bill Clinton’s invitation to address another passion: philanthropy. After stepping down as chief executive in 2013 while remaining executive chairman, Ma is devoting time — and $3 billion of his IPO profits — to such causes as the Nature Conservancy’s China program, which he chairs. Clinton told reporters that Ma has the clout to highlight China’s environmental and social problems. “Jack has the chance to totally change the landscape,” Clinton said before the Clinton Global Initiative’s annual meeting in New York. Ma wants to tackle the entire planet. “In the past decade, we measured ourselves by how much we changed China,” he wrote to potential investors Sept. 5. “In the future, we will be judged by how much progress we bring to the world.” Ma already enjoys being a big deal in the world’s most populous country and second-biggest economy. Alibaba has a larger potential customer base than the population of any nation except India. Some 632 million Chinese out of the nation’s 1.37 billion people use the Internet, according to government data. By next year, the government projects that number will reach 850 million. Of the 322 million of these netizens who shop online, 279 million, or 84 percent, were active Alibaba buyers as of June, the company reported. In the 12 months that ended Sept. 30, Alibaba reported that its active buyers had risen to 307 million. Alibaba Group connects these legions in a variety of ways. Alibaba’s Taobao (“search for treasure”) Marketplace serves small businesses and individuals. Tmall.com provides electronic shop fronts for Nike, Microsoft and other companies to sell to Chinese consumers. Juhuasuan operates flash sales of everything from trousers to furniture. Alibaba.com mainly links Chinese suppliers to foreign buyers. Alipay, a privately owned affiliate that’s not part of the listed Alibaba Group, functions as the equivalent of PayPal in processing 75 percent of the group’s transactions. Alibaba’s customers trade anything and everything, from silkworms to Boeing 747s. The family of Ma Yu, a Starbucks barista in Ma’s home town, buys cooking oil, sacks of rice and toilet paper. “It’s even cheaper than supermarkets,” she says, “and you get way more choice.” Some $248 billion flowed through Alibaba’s retail portals last year, equal to 2.6 percent of China’s $9.38 trillion gross domestic product. On Nov. 11, 2013, the Chinese twist on Valentine’s Day known as Singles Day, Alibaba logged $5.75 billion in transactions. By contrast, Cyber Monday 2013, the biggest U.S. e-commerce day, rang up less than $2 billion. For this year’s Singles Day, Alibaba was even more ambitious, staging the promotion globally. According to Bloomberg Intelligence, it was targeting $8.2 billion in transaction volume — it hit $9.3 billion. And Alibaba is making money: Profit tripled to $3.7 billion in the year ended March 31. While profit fell 39 percent in the three months ended Sept. 30, in part as a result of the cost of integrating new businesses, revenue jumped 54 percent in the quarter — beating analysts’ estimates. “The growth potential of Internet companies in China is many multiples greater than in the U.S.,” says Shane Oliver, who helps manage $131 billion at AMP Capital Investors in Sydney. “Businesses which can take advantage of that, such as Alibaba, seem incredibly attractive.” Ma isn’t the only billionaire tapping China’s Web-savvy consumers. Robin Li, 45, was China’s second-richest man as of Nov. 9, with a fortune of $17.2 billion, after founding the search engine Baidu. Ma Huateng, 43, who was worth $15.6 billion on that date, has expanded Tencent Holdings into China’s top instant-messaging service. Jack Ma differs because he’s determined to look beyond China. He’s created sites in English, Portuguese and Russian and made Alibaba the leading e-commerce portal in Brazil and Russia, even though it doesn’t have a single employee in either country. Alibaba is trading American seafood and cherries in California and Washington, and Ma is bent on U.S. expansion. “We’re coming here to help a lot of small businesses,” he said before the IPO. Ma wasn’t available to comment for this article, according to Alibaba spokesmen. Ma may not find it easy to replicate his achievements overseas, says Don Gimbel, global portfolio manager at Geneva Investment Management. “Jack Ma is one of a kind — a visionary in China,” says Gimbel, whose firm manages $8 billion. “But he is entering the world of the international big boys, where competition becomes larger and margins become smaller.” Ma has battled — and beaten — one big boy, albeit on Chinese turf. In 2002, eBay, led by then-CEO Meg Whitman, burst into China by acquiring a local e-commerce business. Ma and his partners waived fees on their Taobao site — letting customers do for free what eBay charged for. Ma positioned himself as the homegrown hero. “EBay is a shark in the ocean; we are a crocodile in the Yangtze River,” he told his troops. “If we fight in the ocean, we will lose, but if we fight in the river, we will win.” Ma won in 2006, when eBay announced it would close its site, which by then was unprofitable. As Alibaba grows, Ma is pushing the company outside its comfort zone. Since 2012, Alibaba has announced deals totaling more than $16 billion, taking stakes in U.S. ride-share service Lyft and the Singapore postal service. In China, it agreed to buy half of the Guangzhou Evergrande professional soccer team. It also bought 60 percent of movie producer China Vision Media, which it renamed Alibaba Pictures Group. On Oct. 27, Ma told a conference in Laguna Beach, Calif., that he’s looking for partners in Hollywood to help acquire more content for smartphones and tablet computers. He and Apple CEO Tim Cook said at the same conference that they’re open to collaborating on projects involving mobile payments. Alibaba’s finance affiliate is expanding as well. In April, it created Zhao Cai Bao, a platform for small businesses and individuals to borrow directly from investors. In September, it acquired a bank license in Ma’s home city, Hangzhou. “You can’t exaggerate how much influence Jack has,” says Guo Guangchang, a fellow billionaire who heads Shanghai-based conglomerate Fosun Group, which is a partner in the banking venture. Some shareholders are leery of Ma’s omnipresence — not least because “customers first” has become an Alibaba mantra. “Putting the shareholders first is capitalism’s biggest mistake,” Ma told Chen Xiao-Ping, a professor at the University of Washington’s Foster School of Business, last year. “Shareholders do not have a long-term vision for the company.” Ma explained his philosophy in his pre-IPO letter. The only way to ensure long-term rewards for shareholders is to sustain value for customers, making them No. 1, he wrote. Employees come next because they’re crucial to satisfying customers. “We respect and are grateful for investors who support us with their precious capital,” he wrote. And yet, Ma has made sure no outside shareholders can threaten his control, even though Japanese billionaire Masayoshi Son’s SoftBank holds 32.4 percent of the stock and Yahoo owns 15 percent after the IPO. According to Ma, his management partnership ensures decisions aren’t made based on short-term revenue or profit. “It exists to safeguard our mission, values, vision and culture,” Ma wrote. In an interview with Bloomberg Television on the day of Alibaba’s IPO, Ma was diplomatic in assessing his relationship with China’s leaders. “Being a global company, dealing with any government is difficult,” he said. His solution: “Always try to stay in love with the government, but don’t marry them.” The normally garrulous Ma has also said little publicly about his early life. The son of traditional musician-storytellers, he was born in 1964, two years before Mao Zedong’s regime plunged into the Great Proletarian Cultural Revolution. The anti-capitalist movement uprooted millions, slowed economic growth and threw the country into turmoil. When Mao died in 1976, order was slowly restored and adventurous tourists began to trickle into the country. Ma was lucky enough to live in Hangzhou, 100 miles southwest of Shanghai, where the West Lake, with its stone bridges and pagoda-studded hillsides, ranks as one of China’s prime attractions. In 1977, at age 13, Ma heard that foreigners had arrived in the city. For the next nine years, he woke at 5 a.m. and cycled to the Hangzhou Hotel — now a Shangri-La — to master English by acting as a tour guide, according to TV interviews he has given. After twice failing university entrance exams, Ma won a place at Hangzhou Teachers College. He studied English and met his future wife, Zhang Ying. Ma graduated in 1988 with a bachelor’s degree in English and taught the language at Hangzhou Dianzi University. His charisma and passion for dancing and singing in English made him popular, says former colleague Yu Lili. “The first time I heard a foreign song that’s not Russian was from him,” she says. In 1992, reformist leader Deng Xiaoping urged entrepreneurially minded Chinese to start businesses. Two years later, Ma, who was 30 at the time, quit teaching and began a translation company. He named it Haibo, meaning “vast like the sea.” The English name was Hope. To subsidize early losses, Ma bought plastic flowers and toys to sell in Hope’s office. By the end of 1994, the company broke even. Ma had kept in touch with foreigners he’d met giving tours. In 1995, he visited Seattle and encountered his first computer. When he typed beer into a search engine, he found no reference to the beverage in Chinese. Returning to China, he created a simple Web page with his translation company’s contact number and price list. Within a day, he got five inquiries from overseas. It was then that he grasped the power of the Internet. Ma, his wife and 16 co-founders, including Vice Chairman Joe Tsai, set up Alibaba.com as an online yellow pages in 1999. He persuaded SoftBank, Goldman Sachs and other big names to help raise $25 million the next year. In 2002, Alibaba became profitable. In 2005, at the height of his eBay war, Ma persuaded Yahoo co-founder Jerry Yang to invest $1 billion for a 40 percent stake. However much Ma changes global commerce, his impact on his home town of 8 million is clear. A main thoroughfare, Wenyi West Road, is now a 10-lane superhighway bordered by construction that crowds out rice paddies. Alibaba’s 1.6-million-square-foot campus, designed by Hassell architects, is a centerpiece. Ma monitors the well-being of his 22,000-strong global team, logging on to the digital bulletin board under his pseudonym, Feng Qingyang, a swordsman from his favorite martial-arts novel, says Mary Cao, a former Alibaba executive. When employees complained online that Alibaba had stopped providing shuttle buses, Ma swiftly quelled the protests, Cao says. Rather than restoring the buses, Ma offered the vision that one day Alibaba would make employees rich enough to commute in their own cars. “It was brilliant,” she says. “He draws up blueprints to motivate people. And, of course, a lot of those goals he manages to realize in the end.” The full version of this Bloomberg Markets article appears in the magazine’s December issue.

Can a happy, crunchy company like Etsy really survive on Wall Street?

When American companies go public, most make a promise — that they will “maximize shareholder value” — without saying exactly what those three words mean. Does that include paying hard-working employees minimum wage? Jacking up prices? Or cutting jobs even when they make a profit? Then there's Etsy, the online bazaar of often bizarre artisanal wares that set Thursday for its stock debut. When it announced its initial public offering last month, the Brooklyn-based craft marketplace made it clear that it valued social consciousness more than making sure stockholders made the most dough.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico “For decades now, the conventional and dominant retail model has relentlessly focused on delivering goods at the lowest price, valuing products and profit over community,” Etsy chief executive Chad Dickerson wrote in securities filings. “I do not believe that this race to the bottom is a sustainable, successful model. ... If we succeed, then other companies might replicate our model. We think the world will be a better place for it.” Etsy's share price roughly doubled on its first day on the market, ending Thursday at $30 and helping the firm raise about $300 million. Valuing the company at about $3 billion, investors made Etsy one of the largest initial public offerings for a tech company this year. Etsy leaders said they hope the offering will give them more visibility in a crowded tech marketplace and leave them with cash they need to grow. But Etsy's long-term success on the stock market will be determined largely by just how much conscious capitalism Wall Street investors are willing to bet on. If too many are turned off by all the hand-holding and altruism, Etsy's stock price could sink — or, as some Etsy regulars worry, the firm could give in, and become exactly the type of company they hoped to avoid. Etsy was founded in Brooklyn in 2005 by Rob Kalin, a carpenter and photographer looking for a place to sell computers he made out of wood. But the hipster marketplace now boasts more than 1 million active sellers, nearly 20 million active buyers and online aisles stocked with more than 26 million vintage trinkets and handmade crafts, including $500 cat battle armor and $30 planters that look like feet.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico Etsy found a lucrative marketplace among the more than 50 million American freelancers seeking to sell their wares, and about $1.3 billion in merchandise was sold through the site in 2013. To make money, Etsy charges a 20-cent listing fee, takes a small cut off each item sold and offers ad space and payment services, all of which helped the company grow revenue by more than 50 percent last year, to nearly $200 million. But none of that craftiness has produced any profit. Even with the sales bump, Etsy ended last year even further in the red, with a $15 million loss. The company said in filings that it had a history of losses and might not turn a profit anytime soon. Etsy leaders warned in filings that they could choose environmentally friendly steps — like investing in cleaner shipping methods or "low-impact" data centers — even if they cost more money, and said their general "adherence to our values" could hurt how the e-commerce firm performs. "We may take actions that we believe will benefit our business," the company said, "even if those actions do not maximize short- or medium-term financial results." That flowers-in-her-hair sensibility would seem an easy fit for a crunchy company like Etsy, but the marketplace has already struggled with loyalists over its own identity crisis as it seeks to grow beyond its arts-and-crafts niche. When Etsy in 2013 started allowing sellers to use outside manufacturers and shipping services to help them offload their stuff, the move was decried by its home-grown sellers as a step toward hyper-corporatized, mass-market, eBay- ness. Jill O'Leary, whose Fiberluscious store sells handmade pincushions, wrote on an Etsy message board, "I feel like I've just got punched in the stomach."    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico Etsy will become the second and largest business to go public that is also certified as a "B corporation," a label given by the nonprofit B Lab to companies that pledge to meet high-minded social and environmental goals. Hipster eyeglass maker Warby Parker and outdoor outfitter Patagonia are also in the ranks.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico The designation is not just lip service: Shareholders have ways to punish the leaders of a B Corp they feel has ditched its pledge or lost its halo, including suing the directors for failure to pursue a stated public benefit. In turn, those investors are expected to understand that a company like Etsy will be far less voracious in pursuing traditional business motives, like swollen profits, over a greater social good. Etsy has already made waves on the stock market by setting aside some of its shares for its customers and mom-and-pop investors, breaking with the Wall Street tradition of reserving early access to shares for the stock debut's managing bank and its top customers (who benefit from the stock's first-day pop). And Etsy's chief executive, Chad Dickerson, has written in filings that Etsy won't give quarterly or yearly guidance on how much the company is earning, as nearly all other public firms do. “We are more focused on creating long-term results for us and our community than short-term results that lack that promise," Dickerson wrote. No one can blame Etsy for not putting their money where their mouth is. The company offers employees bikes for commuting to work, has removed its individual employee trash cans and composts 600 pounds of food waste every month on the back of an orange bike.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico For what it's worth, Etsy's most prized asset, its sellers, are torn over the effect Wall Street will have on their online market. On one Etsy message-board discussion, a South Carolina seller of "free spirited bohemian luxury" jewelry guessed the offering could lead to a flood of new customers, while another worried the end was near.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico "I predict Etsy's environment will change drastically with an IPO — and I don't feel the inevitable changes will be as benign to our community as Etsy (or investors) would have us think," wrote Jessica Rankin, the California purveyor of handmade jewelry maker LyricRabbit. "I don't want a shop that fades into the woodwork of the internet, that blends in with competition, that disappears. Finding another home for my shop(s) may be the only way I have a hand in preserving it."    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico

Obama beckons entrepreneurs for White House’s first ever start-up Demo Day

Over the past six years, entrepreneurs across the country have opened their doors to welcome President Obama. His motorcade has made stops at start-up incubators including Cross Campus in Santa Monica, Calif., Capital Factory in Austin, Texas, and 1776, just a few blocks north of the White House in Washington. This summer, Obama will return the invitation, opening his doors to them. The White House on Thursday announced its first ever start-up Demo Day, in which entrepreneurs from all around the country will be invited to come share their stories and how their companies contribute to the nation’s so-called “start-up economy.” The event is intended to highlight in particular the success of minority-owned and women-led start-ups, as well as showcase best practices that can help other current and aspiring entrepreneurs start and grow successful businesses. “Our entrepreneurial economy is the envy of the world,” Megan Smith, the U.S.’s chief technology officer, and Jeff Zients, director of the National Economic Council, wrote in a White House blog post announcing the event. “But we need to do more to make sure that we are tapping America’s full entrepreneurial potential.” It has not been decided exactly which day the event will be held. The White House has set up a Web site for individuals interested in attending to apply for an invitation, soliciting details about how they promote “inclusive entrepreneurship.” In their blog post, Smith and Zients note that only 12 percent of the country’s venture-backed business founders are Asian, and fewer than 1 percent are African-American. One in 30 of those firms have a female chief executive. They also bemoaned that promising companies built outside of traditional start-up hubs like Boston, New York City and Silicon Valley still struggle to raise money. “This is not good for our economy and it wastes talent,” they wrote, later adding that “to maintain our lead as the best place on the planet to start and scale a great company, we must ensure that vibrant startup ecosystems emerge in every corner of America, and that all Americans… are both encouraged and able to fully contribute their entrepreneurial talents and access resources.” _FollowJ.D. Harrison and On Small Business on Twitter._    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico

Kickstarter.com helps video game developers reboot old titles

Earlier this year, a group of filmmakers came to Tim Schafer with a pitch to make a documentary about his video game development company, Double Fine. His people would make a game and they’d film the whole process. But nobody knew how to pay for it. As it turns out, the economics of video game development are very Michael Bay- esque. You have to go big — seek heavyweight investors to finance a large- scale endeavor with enormous profit potential — or go home. And Schafer’s project was pretty small potatoes. So he turned to the masses. To fund the documentary project, Schafer turned to Kickstarter, a Web site that uses crowdsourcing to churn up modest amounts of cash (anywhere from a hundred to, in rare cases, a few hundred thousand dollars) for independent arts projects. At the time, the site was populated mostly by filmmakers, musicians, and visual artists. Using it to fund video games seemed like a bit of a stretch. “I kinda pooh-poohed it at first,” Schafer explained, speaking by phone from his San Francisco office. “Kickstarters have generally been a lot smaller — averaging $5,000 per project. I thought, ‘I don’t think I can make a game for that.’” He set the budget for the whole kaboodle at $400,000, a number he thought was optimistic, but attainable, and filmed a few chuckle-laden videos to sell the project to backers. They called itDouble Fine Adventure, after the style of product that they wanted to build — a type of slow-paced and story-driven game that was popular in the ’90s but has since been squashed by the industry’s migration toward twitchy combat-oriented fare like “Halo” and “Call of Duty.” The funding drive was launched on Feb. 7. Within six hours, Schafer had met his goal. By the next morning, donations had reached $1 million. At the end of the 30 day funding period, the project had racked up $3,336,371, then a record-breaking haul for Kickstarter. The windfall is all the more impressive because Schafer didn’t even promise backers a specific game — there was no prototype art and no plot. All he offered was a genre: The adventure game, a product which, allegedly, hasn’t been commercially viable in 15 years. The enthusiasm for Shafer’s project was the latest sign that Internet crowdsourcing is beginning to provide an alternative economy for video game-making. Rather than seeking help from publishers who demand a high rate of return and, thus, a product that appeals to a broad group of gamers, developers can turn directly to their most devoted fans. And if enough of those fans are willing to pony up cash for the promise of a game that suits their tastes, it gets made, regardless of how quirky or niche-oriented it is. During the mid-’90s, Schafer was sort of the Buster Keaton of adventure games — working up a style that was offbeat and self-aware, with innovative design ideas cribbed from the realm of underground comic books. Among these was 1993’s Day of the Tentacle, a game he co-designed, where players guided a gaggle of college nerds as they traveled through time in electrically charged porta-potties. Obviously, it wasn’t meant to appeal to everybody. Mainstream publishers tend to favor big-budget action games for consoles like Xbox and Playstation 3 because they sell a lot of copies. But the Double Fine Adventure proved that there’s still a substantial audience stuck somewhere in the middle. They don’t want to court PTSD every time they flick on their Xbox, but they also want a more nuanced story line than, say, “Angry Birds.” Following Double Fine’s lead, other production companies have dusted off their own pet projects — and taken to Kickstarter in search of financing. Jordan Weisman, of the Seattle-based development studio Harebrained Schemes, spent the last several years looking for a way to reboot Shadowrun, a cyberpunk-themed role-playing game that he had helped develop during the late ’80s, first as a tabletop game and then as a video game for Super Nintendo. When the franchise last saw the light of day, in 2007, the game’s original calling card — turn-based combat where players could micro-manage their fistfights one jab at a time — was deemed too snoozy for mainstream success. It was recast as a multi-player shooting game and, ultimately, failed to take off. Weisman wanted to get it back to the original format, but publishers were not biting. So, Weisman went to Kickstarter, too, asking for $400,000 to build a basic version of the game. In the end, donations tallied up to $1,836,447, all of which he has promised to dump into buffing up the project’s graphics and gameplay. Not that Shadowrun is going to get too much of a facelift. Weisman is aware that his backers want the old-school experience. “There’s a pent-up demand for that style of game that is hitting those kind of playstyle touchstones,” he explains. “People want to see it come back.” But Kickstarter can’t fund every game. At some point independent developers have to run on their own steam. But Kickstarter does provide a method by which start-up developers can side-step the big-budget arms race of mainstream video games to make more offbeat products. In a sense, it does what the Sundance Film Festival did for Hollywood in the late ’80s — allowing creative people a place to showcase diverse and quirky ideas that, sometimes, find purchase with the masses. Stoic, an Austin-based studio staffed by former employees of video game behemoth BioWare, was already developing its own indie project, The Banner Saga — a Viking-oriented role-playing and strategy game with vintage Disney- style animation — when Double Fine’s haul persuaded them to get serious about their own Kickstarter effort. The Banner Saga isn’t a reboot of an established franchise, but, like Double Fine Adventure, it’s a nod to an older era of gaming. “Our first priority has always been to make a role-playing game that feels and looks fresh and plays like the classic tactical strategy games of our childhood,” the company wrote on its Web site. Stoic sought $100,000 to help push the project over the finish line. In the end, it raised $723,886, enough to hire composer Austin Wintory, who wrote the uber-relaxing theme for the recent Playstation 3 hit Journey, to score the game. Big-budget video game developers and their thickly lined wallets probably aren’t going anywhere soon. But at least there will be a little more variety in the gaming world. “You still can’t crowdsource Skyrim, but now you at least have the option of deciding what you do want to see,” says Stoic’s creative director, Alex Thomas, referencing last year’s high-budgeted mega-hit. “This opened up the ability to take a risk.” ****