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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...
And someone gave them $67M? Ha ha.
Some other idiot decided they were worth $375 million too. Apparently.
Venture capitalists are greedy parasites. They are arrogant, yet stupid as a bag of rocks. However they got their money, I am pleased to hear whenever they lose their "investment" in a craptastic venture. Yes, I have had an encounter with one of those morons.
A dingo ate my sig...
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...
Social payments sounds a lot like WeChat Wallet / Alipay. Except those also combine the useful features of Apple Pay. Actually, Alipay makes Apple Pay look old.
At least this time I won't have to find someone to buy my leftover Flooz.
SJW: Someone who has run out of real oppression, and has to fake it.
Can Uber and Lyft be far behind? They're cab dispatchers without the cabs. That's it. It is impossible to be worth $28 billion just by shaking down cabbies for a couple of years.
Seeing that Snapchat listed the VCs have been paid out. Now it is regular suckers that will lose.
New Zealanders are well balanced with a chip on each shoulder. One represents Australia, the other the rest of the world
I'm reading "Chaos Monkeys: Obscene Fortune and Random Failure in Silicon Valley" by Antonio Garcia Martinez. The author and his two engineers leave the startup they worked at to create a startup at Y Combinator to create a better version of the Digg toolbar (remember toolbars?) for Google advertisers in 2010. I'm at the part where the author sends his engineers to Twitter while he goes to Facebook in a three-way deal. Fun times.
I doubt this book will replace Startup: A Silicon Valley Adventure by Jerry Kaplan as my favorite Silicon Valley startup book.
And after reading more than half the article, I still had no idea what the company actually did. Guess that I am not one of those thinkfluencers who could see their vision. *shrug*
Your idea is your product, and you need a product that customers are willing to pay for. Sales are incredibly important, but they aren't going to happen without a product that someone will pay for.
While I agree, I somewhat understand what he's saying.
It's sort of like the guy who writes a neat app for storing recipes and ends up developing a fantastic database engine. So while storing recipes isn't necessarily going to set the world on fire, a fantastic database engine might be worth something.
The article had an interesting example of one of Tilt's competitors, WePay, that basically started going down the same road as Tilt. But discovered that the money just wasn't there and "pivoted" into becoming a back-end for others who want to do crowdfunding. It's more boring, but there's good money in it. So while the idea of being a "social payment app" isn't going to work out, it might lead you into some other interesting areas.
That's pretty much all you need to know; it has failure written all over it.
Why all the angst against people trying to make money? Without VCs, many of the big successful companies who produce things you actually use would not exist. These people are not dumb. They take risks. They know more of their investments will fail than will succeed. They're betting that they'll bet on a few that really make it big and that will offset all those that fail. And even some of those failures still get bought out for the engineering teams or technologies they created.
Success requires risk. That's why it's so idiotic that some people want to punish success and even wish failure on people just because they make money.
> 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.
The next bubble.
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
> "Tilt was based on the premise that 'something like PayPal and Facebook would collide,'
And this has happened years ago. It is called Weixin, and the west has completely missed it
>Ycombinator
Don't invest in Ycombinator startups. Ycombinator is a pyramid scheme - saying this with all seriousness.
They claim gynormous valuations for unsubstantial businesses due to big initial financing rounds.
All funds that push Ycombinator early rounds use hot money from sale of shares of earlier Ycombinator companies that they get at discount - this is an industrialised pump and dump scheme on a grand scale.
Some other idiot decided they were worth $375 million too. Apparently.
Same idiots, not different ones. That latest tranche of investment (some large fraction of the $67 million) will have been for a certain percentage of the shares. That implies a certain price per share. Multiply that price per share for the total number of shares issued and you have the valuation.
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.
And this has happened years ago. It is called Weixin, and the west has completely missed it
Most of these technologies are there to work around limitations in the banking system. Paypal arose when it was hard to do person-to-person transfers. Now it's trivial for me to send money to anyone I know from my phone or tablet using my bank's web site or app, with no fees. Why would I use an intermediary to do it, and if I did then how would the intermediary make any money competing with a free service? These things have been popular in places where most people don't have bank accounts or where banking infrastructure makes person-to-person payments hard.
I am TheRaven on Soylent News
Now it's trivial for me to send money to anyone I know from my phone or tablet using my bank's web site or app, with no fees.
Nice try Nigerian Prince,
If I sell you something, or if I'm doing a small transaction, I'll use Square or Venmo.
You're not getting my banking information. Only trusted family members get that. And for utilities and bills, I'll use my bank's Bill Pay feature.
Uber is more like Groupon. It's a service company with a dubious business model, a deteriorating reputation, an overhyped market valuation and a strong likelihood that it could come crashing down at any moment. The only reason people still fund it is they hope to cash out at a profit to some other sucker before that happens.
If your bank is so insecure that giving me a cheque or bank transfer with your details on lets me empty your account, the problem is with your bank. (This is ignoring any additional social engineering done to get your password or whatever).
To have a right to do a thing is not at all the same as to be right in doing it
"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..."
Well - this is what happens when you just throw $65m at someone but don't provide them with a set of targets, metrics, viability tests, check-ups, performance reviews, performance-linked investment etc.
Of course revenue's not a priority if some idiot finances you to the tune of decades of operating income without ever needing to do anything specific to get that money.
And once the valuation hits 5 times that, which is ludicrous if they don't actually have money or technology at that moment, only "potential", they have even less incentive. Short of a clause or two, they could just sell up and disappear, having made millions doing nothing.
To be honest: Never heard of them, don't care.
Sadly at least in the UK forcing banks to replace the fundamentally insecure direct debit system with something that is actually secure is not something we customers can do.
note: i'm known as plugwash most places but i screwd up registering that here somehow in the past and now can't register
*TADUM* *CRASH* *THUD*
Thank you, thank you, I'm here all week.
Tip your waiter and try the fish.
We suffer more in our imagination than in reality. - Seneca
Never heard of either of these.
I read a recent article that claimed the bubble will burst any moment with the massive layoffs of... 3K people... in Silicon Valley. LinkedIn advertised that there were 133K job openings the week before. That number dropped to 130K job openings the following week.
For historical comparison, 1M people moved out of Silicon Valley after the dot com bust.
Really such as which companies specifically?
You have to be joking! Next thing you're going to expect is they worry about profitability!
Browsing at +1 - no ACs, I ignore their posts. So refreshing!
Oh god, I was watching this semester's version of that Y-Combinator "how to run a startup" class at Stanford, which is really just a big advertisement for Y-Combinator and their shitty companies...and some 20-something kid who founded some crap and then pulled an acquihire exit was up there giving a talk about growth or something, telling us how having declining user engagement is Really Bad. I'm like wow thank you boy-genius, never would have thought that was a problem! These Stanford people are getting an amazing education here!
These things have been popular in places where [...] banking infrastructure makes person-to-person payments hard.
Like in America?
Protect your browser with the Force Safe Search add-on
Office, Submarine
Not sure you know what that means.
Massive was the word that the article used and should have put into quotes.
You govt contractors aren't too bright are ya?
That's relevant to this discussion how?
Why would I use an intermediary to do it, and if I did then how would the intermediary make any money competing with a free service?
PayPal has strong buyer protections, even if they're completely boning the sellers.
If buyers insist on PayPal, there will be sellers who have to go along.
LK
"Hi. This is my friend, Jack Shit, and you don't know him." - Lord Kano
Who's that?
It's fun and easy to mock these cases in hindsight. What a bubble! Fake company! No revenue! Etc. And, I'm with you in the mocking. But what gets lost is that before the crash, really smart people bet on this company. I'm not talking about investors. A friend left his home city and great director-level job to take a higher level position in a new city at this company. He is a smart guy. He was excited. He truly believed he was making the clearly right decision.
My point is that if all we do is laugh, we don't recognize that we could have been my friend. We should be learning from this, not mocking it as a stupidity we could never run into ourselves.
The Direct Debit system doesn't need to be secure, because the liability is entirely with the bank. If there is a dispute, they are required to immediately reverse the withdrawal from your account. The recipient can then take you to court if you actually owed the money, but if they're a scammer then it's unlikely that they will (it's also relatively unlikely that they'll pass the vetting required to be permitted to initiate DD transactions).
I am TheRaven on Soylent News
PayPal has strong buyer protections
Hahahahaha! Oh, you're serious? That's hilarious. At least in the EU, if you buy something using PayPal with your credit card, then you have far more protection from the credit card than from PayPal.
I am TheRaven on Soylent News
The Direct Debit system doesn't need to be secure, because the liability is entirely with the bank. If there is a dispute, they are required to immediately reverse the withdrawal from your account.
Even if the fraud is quickly reversed (apparently whatever the legal requirements say some banks are quite reluctant to reverse direct debits) it's still a big hassle to deal with and that is assuming it gets noticed it in the first place.
So as long as the details needed to set up a direct debit are pretty much the same as the details needed to make a deposit I'm going to be selective about who gets to see said details. That creates a market for services like paypal where all someone needs to know to send me money is my email address.
it's also relatively unlikely that they'll pass the vetting required to be permitted to initiate DD transactions
Afaict just like with card fraud the thief doesn't normally steal your money directly. They use your money to buy goods/services (e.g. mobile phones on contract) which they can then fence.
note: i'm known as plugwash most places but i screwd up registering that here somehow in the past and now can't register
That's why it's so idiotic that some people want to punish success and even wish failure on people just because they make money.
That would be idiotic if anyone actually thought that way. However, outside of a few on the radical fringe, nobody does.
How much your bank is charging for $20 transfer to bank account in Europe?
I'm in the UK and my bank supports SWIFT and IBAN transfers with no fees (though the receiving bank will typically impose currency conversion fees).
I am TheRaven on Soylent News
Well, then if some movies are to be believed, there is also the Yakuza, the Mafia, or the CIA. Those guys will accidentally transfer a very large amount to your bank account for blackmailing purposes or to launder money from stolen accounts, and then they'll be coming knocking on your door to kindly babysit your kids or your mom while you withdraw their money from your bank account.
Tesla looks to me like a likely success. It could easily be more valuable in every way than GM in the future. However, the question is whether it's worth buying the stock at current prices, and I'm not seeing it. It seems to me that it would be too much waiting for Tesla to become that big for too little profit when that happens.
"When you have eliminated the unacceptable, whatever is left, however improbable, must be the truthiness" - Holmes