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How Tilt Went From Hot $375 Million Startup To Fire Sale (fastcompany.com)
tedlistens writes: Not long ago, social payments company Tilt seemed to have it all -- a hot idea; cool, young founders with Y Combinator pedigrees; and $67 million in funding -- not to mention a $375 million valuation. But Tilt was more successful at cultivating its user growth and fun, frat-tastic office culture than at nailing down a viable business model. When Tilt finally ran out of cash, the party ended with the company's sale at fire-sale prices to fellow Y Combinator alums Airbnb in an aqui-hire deal. Where did it all go wrong? Here's an excerpt from the report: "Tilt was based on the premise that 'something like PayPal and Facebook would collide,' Tilt founder and CEO James Beshara says. The company aspired to be a social network for money -- instead of sharing photos and videos, users exchanged digital cash for birthday ragers and beer runs. During Tilt's early years, the pitch was simple, and carefully calibrated for Silicon Valley boardrooms: 'Let's prove that we can dominate the globe.' [...] By early 2013, millions in venture dollars were pouring into Tilt's coffers. Investors were lured by the same strong social metrics (viral coefficient, for example, a measure of user growth) that had marked Facebook as a winner. But the hopes embedded in Tilt's $375 million valuation came crashing down to earth last year. Beshara hadn't built a business; instead, he had manufactured a classic Silicon Valley mirage. While investors were throwing millions of dollars at the promise of a glittering business involving 'social' and 'money,' their Mark Zuckerberg-in-the-making was basking in the sunny glow of Bay Area praise and enjoying the ride with his bros. Revenue was not a top priority -- a remarkable oversight for any company, and a particularly galling one for a payments company. Eventually, with cash running low, Tilt went looking for a buyer..."
that there is a shortage of skilled intelligent STEM workers!
1) Expand universities to recruit even more naive wide-eyed dreamers into STEM. Generate debt to transfer public money into private coffers via tuition.
2) Lobby for more H1B visas.
3) Make fun of over 40 engineers and claim that they're too old to understand what you're doing.
4) Don't forget to shove a broom up your ass so you can wipe the floor on the way out when the bailiffs come to execute the eviction notice on your startup...
Tilt? Never heard of it, literally.
Oh, I'm sure it was huge, but it made less of an impact than a BB hitting a battleship. I'm not exactly a stranger to the internet, but I never heard of it before this obituary.
Just cruising through this digital world at 33 1/3 rpm...
"Revenue was not a top priority"
Well there's your problem.
Just cruising through this digital world at 33 1/3 rpm...
Greedy parasites? Who are they sucking who doesn't agree with it and like it? Go ahead, create a startup without any financial backers (or venture capitalists, as you call them). At least they're putting their own assets at risk. Do you expect to get support from a shy socialist?
"Y Combinator" "frat-tastic office culture" "aqui-hire" "Where did it all go wrong?"
From the very start. The medium is much more than the message. Really, all that bubble-talk business-speak is meaningless bullshit intended to suck in the naive. Even though Steve Jobs is dead, the San Jose valley continues to live in a reality distortion field. For every Microsoft/Apple/Google/Facebook, there's a zillion dead pets.com sock puppets. Is 17 years really so long that people have forgotten what a tech bubble looks like? Hint: this is it.
Who really thinks Snapchat, who has never made a dime, whose business it making pictures puke rainbows and is readily replicated, is worth $24,000,000,000 in market cap? Or that Tesla is currently worth more than GM or Ford?
That show "Silicon Valley" sometimes seems more documentary than comedic farce.
"National Security is the chief cause of national insecurity." - Celine's First Law
Yes they will be next.
Uber has never made a profit. It is run simply by people throwing money at it because "it's going to be big".
All they have to do is run an app and handle payments. And yet they do that at a massive loss. Maybe when the investor income dries up they can sack just about everyone who isn't directly involved in basic platform maintenance and payment system and turn a profit. But if they do, it will be tiny and they won't have the "market valuation" they have now.
Twitter is another one. Twitter is clearly saturated. Yet isn't making a profit.
Facebook at least made nice profits all through its growth and some actual real ways to make money,, and is now doing quite nicely.
That's pretty much all you need to know; it has failure written all over it.
Ford did not ask for, nor did it receive, a government bailout. Ford realized it was in trouble long before the market crash and recruited the CEO of Boeing, who had turned Boeing around in a manner similar to what Ford needed. Ford is doing well, if not as great as it might have once been.
> Why the heck would anyone value Ford or GM more than Tesla. Ford and GM's unrealistically optimistic dream would be "be in the exact same place we are now 20 years from now."
Ford and GM are making $10 billion profit each year, and have been for a long, long time. They've been making money for over a hundred years. The question for Ford and GM is whether they'll make $9.5 billion next year or $10.5 billion. So yeah it would be just terrible for them to "be in the exact same place we are now 20 years from now." I sure hate to be making $10 billion every year.
Tesla, on the other hand, has lost money every year. Tesla MIGHT start making money at some point. Eighty years from now, Tesla might be making $10 billion / year. Also Tesla might go the way of Myspace. We'll find out in a few decades.
Go ahead, create a startup without any financial backers (or venture capitalists, as you call them)
Er...? I'm pretty sure "venture capitalist" is a pretty common, non derogatory term for them.
Anyway you have a point. The VCs are not super smart. A lot of them qualify as "rich but dim", and consider due diligence to be "does the company have a good pitch" and/or "Have my cronies invested I don't want to lose out".
There are a huge number of obviously, and phenomenally stupid investments made. Even in foresight, not hindsight. And they seem keener on people who can pitch a dream rather than create something and follow through. It's their money to waste as they wish, but given they're trying not to waste it, it seems an odd choice to me.
But whatever. The reason SV succeeds and "silicon toilet" or whatever the latest place to be optimistically given the "silicon" prefix (e,g, the laughably names silicon roundabout" in London is that despite everything that silly VC money is one of the key ingredients. By haphazard chance eventually some of the money goes to sane companies which are a success. So at least you stand a chance there.
The VC model by contrast elsewhere is insanely risk averse (it's VC FFS, that's pretty much the *definition* of risky). The sort of propositions you get are "well, develop your product, get certification and manufacturing sorted out and customers and sales and then we'll consider investing an amount that would end up as a less than minimum wage net payment for your time for a controlling interest after the point where you don't need the money".
Yeahhh, no. VCs in SV might be stupid, but they aren't (interestingly) quite that stupid. And that's why SV has so many success stories. Sure there are many failures, but many successes and insanely many failures is a much better way to success than none of either.
SJW n. One who posts facts.
I watched one of Y Combinator's Startup School videos. The presenter was talking about how ideas aren't that important and how so many startups pivot.
VCs don't bet on ideas, they bet on people.
All the 'out-of-the-park' VC successes were based on existing ideas with a new implementation. This is why so many of them have to pivot - the best people realise when the idea is no good. A founder who is fully committed to the idea is a bad idea (pun intended), because if the idea later proves to be infeasible you want someone to ruthlessly kill that effort and focus energy and resources into something that will succeed.
I'm a minority race. Save your vitriol for white people.