“We think the most disruptive aspect [of Kickstarter] is the removal of the investment component,” Chen said. “People are supporting projects because they want to see them happen. It’s so different than giving money because you want to make a profit.”
In case you were curious how you can spend $232 million in financing from investors such as Grotech, Lightspeed, and USVP - the answer is selling half price amazon gift cards and super bowl commercials while chasing the market leader.
It's a different sales pitch than big companies though - our pitch is we'll cover your living expense and give you the chance to work with a small team and see if a startup is the right fit for you.
Instead of equity - many of the TEC participants get to own an entire product or initiative. Ali Shah out of NYU came on board and over the summer designed and built the entire VodPod iPad App. Andrew Boni at BC was a core part of the team that helped design and push code to the GigaOM site redesign.
At an internship for a major tech company, you're pushing some live code, but its for a small part of a major property. Much like joining a startup early, you get to own major parts of product and get to understand how your work fits into the broader company building process.
P.S. Doesn't feel antagonistic at all - I'm just trying to shine a light on how we think about the situation internally. We know we don't pay participants as much as Google, Apple, etc - but we think it actually helps attract the right type applicants to the program.
The goal is to try to make this cost-neutral for the students participating in TEC.
When we talked to students who were considering taking an internship at a startup versus a big company, the big issue in many cases was that most startups weren't offering cash compensation. The problem being that even if students really want to try working at a startup, it is really expensive to live in the Bay Area - even for 8 weeks.
So the goal was not to compete with big companies directly on cash compensation (which most startups would never do even for a full-time hire), but rather enable anyone who wants to have experience working with a small team - the opportunity to be able to afford to do so.
I now work at True and was a part of the first TEC class in 2009.
Was curious if you could go into more detail about why VCs shouldn't run these types of programs.
Our main goal is to help college students connect with startups so they can discover alternatives to the traditional big company career paths they hear about all the time at school. In the end, more people graduating and looking to join startups is good thing for the ecosystem, no matter who is running the program.
I'd propose the opposite, that all venture funds should be running these types of programs. Both to help their portfolio companies recruit and to help educate students about opportunities at high-tech startups.
P.S. If you're looking for the West Coast equivalent to HackNY - you should check out Startup Roots.
If you have a ton of excess time, you are far less efficient and it simply takes you longer to complete relatively simple tasks.
Having tons of money before you can prove product-market fit just leads to misallocated spending and inefficient uses of money (because people force themselves to spend to justify the amount of money they've raised.)
This is the reason programs like YC & TechStars work - it doesn't take a ton of money to build an early product and prove your model works.
Once the model works - then you should spend like crazy to scale - but because you've spent the time with very little money - you understand the value of each dollar and the positive affect of each additional dollar.
Edit: For examples, check-out most of the startups that blew up in the late 90s. They raised a ton of money because they could, but it was spent on domain names, really expensive office space, executive talent, and building proprietary software for non-core functions.
My favorite example is the story of the Industry Standard - Check out "Starving to Death on 200 Million" by James Ledbetter if you want to learn more.
"Re: business model. We make money by selling the platform to corporations as a way to manage their employee volunteering programs."
Non-profits do not pay to use the platform or for any tasks completed. Large companies pay an annual fee to enable access for their employees and related reporting metrics.
The lack of IPOs in the market is more myth than fact:
From PWC:
With 154 IPOs completed, that raised a total of $37.5 billion year-to-date, 2010 activity represents a 123 percent increase in volume and 49 percent increase in value, compared with the $25.2 billion raised from 69 IPOs in 2009. In addition, PwC says the surge of activity in the fourth quarter of 2010 confirms the IPO market has recovered from the doldrums of 2008 and 2009.
Since the beginning of 2010, 37 technology companies have gone public, with total proceeds of $5.1 billion, according to Renaissance Capital, an IPO research firm. That's a big uptick from the same period last year, which saw 17 IPOs priced.
Rather than expense the costs on payment (like every other publishing company), they are trying to amortize it (like a machine or factory) over a four year period.
If they treat costs like every other company in their industry, they are losing a significant amount of money each year. (More importantly, in real world cash accounting, they are burning through significant amounts of cash each quarter.)
If they go public, investors who don't understand the underlying risks of the Demand Media Business (like Google changing their algorithm) or understand why this type of accounting artificially inflates profits will get burned - and it will hurt the overall technology ecosystem (much akin to the everything.com IPOs of the late 1990s)
Stick with WordPress and use some of the third party themes specifically designed for this - WooThemes has some great themes designed specifically for this case use.
Still for most startups - though outside the realm of this board - cleantech, life sciences, and enterprise hardware startups still require major VC and PE backing over their life cycle.
For example - Better Place - a provider of Electric Car Service Stations just raised a $350 MM Series B with HSBC as the lead investor. HSBC doesn't bring management expertise - but they did bring $150 MM of investor dollars.
http://allthingsd.com/20121105/kickstarter-ceo-no-ipo-for-us...
“We think the most disruptive aspect [of Kickstarter] is the removal of the investment component,” Chen said. “People are supporting projects because they want to see them happen. It’s so different than giving money because you want to make a profit.”