8 ms·

How did the founder manage to build a company of 70 employees without a product and securing 30 million fundings after 2 years of not really showing anything? A

by NhanH 11y ago

How did the founder manage to build a company of 70 employees without a product and securing 30 million fundings after 2 years of not really showing anything? And to top that of, it didn't look like the founder has any track record before this company. I'm not interested in mocking or bashing the company, I just wanted to know the possible mechanism that would result in such ... unexpected scenario. Is hustling really that effective and I have been underestimated that all along?

seanmcdirmid 11y ago
Because f*ckedcompany is no longer around to call out this kind of craziness. Pud, we miss you!
- pud 11y ago
  You rang?
hkmurakami 11y ago
I know of several other founders who have a tremendous knack for selling a vision to investors. The same strength works on employees as well, especially after you have raised a round. Imagine a Steve Jobs-like reality distortion field. People are drawn in by that.
mavdi 11y ago
This is how http://www.peri.umass.edu/fileadmin/pdf/working_papers/working_papers_251-300/WP282.pdf http://www.peri.umass.edu/fileadmin/pdf/working_papers/worki... Basically income inequality and a fading middle-class causes a downward spiral of the rich having too much money to care and taking ever greater risks for rewards.
- ArkyBeagle 11y ago
  I figure income inequality is principally fueled by anemic growth, which may well be caused by low monetary growth and low interest rates. The rich now are just "paper rich" (outside of bubbly-again real estate) and the physical portions of the economy remain stagnant. Some kind person on HN actually clued me to this, and that was s serious penny drop. And of course I lost the post... Could be wishful thinking on my part, but I read "Monetary History" years ago and it took root.
bliti 11y ago
Is hustling really that effective and I have been underestimated that all along? There are different kinds of hustle. The good kind, which means working hard to reach a goal. The not so good kind, which means working hard and doing some not so nice things to reach a goal. Finally, the bad kind, which involves doing anything to anybody in order to get something. There is a difference between the not so good and the bad kind. In the not so good you are trying to reach a goal. In the way, you might get lost or not notice that you are doing some things wrong. After all, it is not simple to keep track of how your decisions impact the world over the long term. I'm not trying to excuse anyone here. Just stating that good people with good intentions sometimes do things that hurt others without even noticing. The bad kind of hustle is the one where you dont care who gets hurt or what gets broken. It does not take into account anybody but you. Always do your best to huslte the good way. Keep track of how your decisions affect others. Make a point about reaching goals in more than one way, i.e., not only financially, but morally and/or socially. The good kind of hustle is the one you see baseball players do all year long. They train hard. They play hard. Above all, they go out to do their job as its supposed to be. All while giving fans something positive to look forward to. :)
- carrotleads 11y ago
  Was The Uber guys doing bad hustle then... not knowing who gets hurt... The nature of disruption is that some people will get hurt.. Taxi medallion/Hotel owners folks think they are playing by the rules while others aren't... The market seems to have rewarded the bad hustlers here then as per your definition or have I got it wrong.
  - dylanjermiah 11y ago
    I'm not entirely sure about the hotel industry, but for the most part the taxi industry in most cities lobbied for the laws, which restricted competition. They had dug their own grave by the time Lyft launched (and subsequently UberX).
  - bliti 11y ago
    It's not black and white. I'm not for or against Uber. Have never used the service and know very little about the actual company. Markets are irrational. They are a collection of people who need/want something. They will buy without much thought to the moral status of the seller. You are not wrong, but not exactly rigbt. We can't judge a whole company for the actions of some members. That's why I said there is some not so good hustling. It's hard to figure out this sort of things because you never know the while story. If you feel like this is something worth pursuing over a period of time longer than what this thread will allow feel free to email me. In hardly have all the answers, but I can definitely come up with some good questions. And no, I didn't answer your question because I just don't know.
icpmacdo 11y ago
In an earlier article I think it said his dad was the VP of a large bank, possibly Bank of America. I am sure that makes it easier to put together a nice seed round.
- 8_hours_ago 11y ago
  > Clinkle’s first investors were Duplan’s parents. His father is a well-respected software entrepreneur. They told him they’d back his startup as long as he agreed to get a college degree, so Duplan kept his promise, obtaining his bachelor’s in computer science in three years. http://www.businessinsider.com/inside-story-of-clinkle-2014-4 http://www.businessinsider.com/inside-story-of-clinkle-2014-... It looks like his father is Neno Duplan, who founded Locus Technologies.
  - icpmacdo 11y ago
    Thanks for the link, sorry if it was misinformation in my post but I still could have sworn that round had something to do with a high profile family member who was a banker. It stood out as a very annoying advantage and has stuck with me as a data point the past few years.
    - lawnchair_larry 11y ago
      Is it an advantage? Getting investment is a good step towards validation. If you get funded for free, you lose that signal, and might just be extending the runway of your death march. I'd guess it slightly increases your probability of success, but greatly increases the cost of failure.
      - _delirium 11y ago
        It's not only good for the direct money (though that's nice), but also the connections to potential customers, if the source of the money is also well-connected (not all wealthy people are well-connected too, but many are). For example, somewhat famously, Bill Gates's mother served on the board of directors of the United Way at the same time that John Opel, chairman of IBM, also served on that board, which was instrumental in getting the young Bill introduced to the right people.
api 11y ago
Can't speak with authority about Clinkle, but I strongly suspect that the founders have an "extreme alpha" personality type. I have seen people with that personality type be able to just basically tell people what they want and get it. It's really a sight to behold. "I need 50 million." "Okay boss. I think there's two mechanisms at work. One is what you might call the "reptile brain," which reads such signals and simply interprets them as "this is my pack leader." The other mechanism is I think a cargo cultish belief in the power of those personality types to just always succeed no matter what. "Man, he seems like a winner." (This personality type seems to almost always be male, at least in my experience. Definitely not trying to be sexist. Might be being a bit reverse sexist though, since I do not find this trait redeeming.) You would think that VCs would be inoculated against this kind of thing. You would think. But I personally know of two examples of people with off the charts alpha personalities who were sort of serial killers of wealth. Raise, burn, raise again. Their alpha personality trumped any notion of merit or track record.
- michaelochurch 11y ago
  This is an excellent post. Thanks for writing it. It's spot on.
  - lawnchair_larry 11y ago
    This is funny because I actually thought you wrote it, and had to double check the username after I started reading.
  - tptacek 11y ago
    So you really believe that young "successful" startup founders are neurolinguistically programming VCs to give them money? Come on. The bar for your approval has to be higher than "derisive towards VCs and VC-funded founders".
    - achompas 11y ago
      Amen to this. I know you (justifiably) believe there are many bad actors in technology, Michael, but parent's comment is beyond belief.
21echoes 11y ago
As someone who was there for a very long time -- "without a product" is not at all an accurate reflection of the state of things (as the TechCrunch article and plenty of other sources can corroborate). There was a functional product in beta (as in: being used by non-employees) in early 2012. The issue was that Lucas was unable to secure appropriate relationships with banking partners such that the product could actually launch to the mass public until the end of 2014. Both attempted banking partners had extreme restrictions on the number of users allowed on the system until their legal teams signed off on it (due to the timely influx of new regulations from the CFPB), and both times this took more than 9 months to go through their bureaucracy. Even while these public-launch-restrictions were in place, obviously it was possible to demo investors on the real product that moved real money between real bank accounts using real ultrasound technology to buy from real merchants, etc. These features were all also in beta tester hands. As far as why investors were willing to invest in the product.. that's its own discussion that I don't feel like typing up at 6:30 on a Friday. Short answer: mobile payments were hot, the product really was pretty and functional, the go-to-market strategy (assuming a banking license deal went through) was rather pragmatic (debit cards to be backwards compatible & get data from day one), the team (other than the CEO) top-tier, no investor invested particularly much, etc.
- fitzwatermellow 11y ago
  Glad to see you are currently at Patreon, empowering creative workers via crowdfunding. Now there is a corporate mission with a future ;)
  - deleted 11y ago
    [deleted]
    - sergiotapia 11y ago
      Curious what rule did he break?
      - minimaxir 11y ago
minimaxir 11y ago
Clinkle apparently had a pay-by-sound technology: http://valleywag.gawker.com/clinkleleaks-secrets-behind-22-year-olds-25-million-646294646 http://valleywag.gawker.com/clinkleleaks-secrets-behind-22-y... Back then, payments was an instant-fund space. Of course, it didn't work.
anigbrowl 11y ago
I too am baffled by this, since it suggests a complete lack of due diligence on the part of VCs. By a massive coincidence, I'd like to mention that I'm taking a hiatus from strategizing about how to raise money for a feature film to launch a very hot startup that will be disrupting the messaging, retail and payment spaces - simultaneously. It will be like Uber for money, or maybe like AirBNB for shopping. Anyway I urge people with more money than sense to get in on the ground floor of this smoking hot opportunity right now. For every extra digit on your initial investment that separates you from your more timid peers, I will supply a luxurious, hour-long ego massage.
michaelochurch 11y ago
How did the founder manage to build a company of 70 employees without a product and securing 30 million fundings after 2 years of not really showing anything? Stanford Welfare and chicken-hawking. Stanford Welfare sometimes works out. Snapchat wouldn't exist without Stanford Welfare but it's now valued at billions. It may not be good for the world but it would have been a good investment-- assuming it can find liquidity before a Flight to Substance (which is quite possible, because anyone who claims to know when an F2S will happen is wrong; no one knows). Chicken-hawking is when a middle-aged man takes a young sociopath as protege in order to resolve a midlife crisis and live vicariously through him. People like Duplan appeal to such people. When your goal is to live vicariously through someone, you want to fund someone who'll go a bit wild with that money, not someone who'll be committed to the "boring" task of building a business.
- MCRed 11y ago
  This is a really good point. I've heard the term Chicken Hawking in a very, very different context but it works here as well. I think the illuminating bit of information is there is a real difference between the worldview of a VC and a founder. VCs have no clue what's possible or not (and in my experience don't actually understand businesses because most haven't run thenm- they went to Biz School, got their MBAs and that's it.) So, in todays environment where "founders" are usually kids right out of college with no actual business experience, then their perfect "mate" is a VC who also has no experience. The kid is young and ambitious and has no clue on the limits of his own possibilities-- and the VC is just looking for a payoff without real work the size of the kids ego. IT's a great match and it explains a lot. Like why real engineers and real business people building real businesses have a lot more trouble raising money.
  - achompas 11y ago
    I don't doubt the existence of clueless VCs who throw their money around, but that's no different from any other form of business. They'll soon lose that money. The problem is that, given the anecdote of another commenter with intimate knowledge of the situation, Michael's explanation doesn't match reality. I suspect cases like this often defy simple rationalization, but as outsiders we don't have the facts to correct our theories.
kaonashi 11y ago
According to Wikipedia, his parents put up the initial money.
developer1 11y ago
Probably not a popular opinion to pin this against someone nobody knows... but just that photo they used to headline the article makes the guy look like a typical sociopathic marketing type who talks smoothly but has no real game. He probably sold investors with fancy dinners and a great pitch with no tangible skills to back it up with. Just saying.
- protomyth 11y ago
  Picking a picture of a person is an indication of how fair the article is going to be. If a publication uses unflattering photos of people they have an angle. It's generally a good tell of what way an outlet leans. Basically the same scheme as showing a child / baby picture of someone accused of something to make you lean towards that someone's innocence.
xienze 11y ago
> How did the founder manage to build a company of 70 employees without a product and securing 30 million fundings after 2 years of not really showing anything? And to top that of, it didn't look like the founder has any track record before this company. Welcome to the tech industry! We're not in a bubble, it's different this time...

by NhanH 11y ago

seanmcdirmid 11y ago

Because f*ckedcompany is no longer around to call out this kind of craziness. Pud, we miss you!

pud 11y ago
You rang?

hkmurakami 11y ago

I know of several other founders who have a tremendous knack for selling a vision to investors. The same strength works on employees as well, especially after you have raised a round. Imagine a Steve Jobs-like reality distortion field. People are drawn in by that.

mavdi 11y ago

This is how http://www.peri.umass.edu/fileadmin/pdf/working_papers/working_papers_251-300/WP282.pdf http://www.peri.umass.edu/fileadmin/pdf/working_papers/worki... Basically income inequality and a fading middle-class causes a downward spiral of the rich having too much money to care and taking ever greater risks for rewards.

ArkyBeagle 11y ago
I figure income inequality is principally fueled by anemic growth, which may well be caused by low monetary growth and low interest rates. The rich now are just "paper rich" (outside of bubbly-again real estate) and the physical portions of the economy remain stagnant. Some kind person on HN actually clued me to this, and that was s serious penny drop. And of course I lost the post... Could be wishful thinking on my part, but I read "Monetary History" years ago and it took root.

bliti 11y ago

Is hustling really that effective and I have been underestimated that all along? There are different kinds of hustle. The good kind, which means working hard to reach a goal. The not so good kind, which means working hard and doing some not so nice things to reach a goal. Finally, the bad kind, which involves doing anything to anybody in order to get something. There is a difference between the not so good and the bad kind. In the not so good you are trying to reach a goal. In the way, you might get lost or not notice that you are doing some things wrong. After all, it is not simple to keep track of how your decisions impact the world over the long term. I'm not trying to excuse anyone here. Just stating that good people with good intentions sometimes do things that hurt others without even noticing. The bad kind of hustle is the one where you dont care who gets hurt or what gets broken. It does not take into account anybody but you. Always do your best to huslte the good way. Keep track of how your decisions affect others. Make a point about reaching goals in more than one way, i.e., not only financially, but morally and/or socially. The good kind of hustle is the one you see baseball players do all year long. They train hard. They play hard. Above all, they go out to do their job as its supposed to be. All while giving fans something positive to look forward to. :)

carrotleads 11y ago
Was The Uber guys doing bad hustle then... not knowing who gets hurt... The nature of disruption is that some people will get hurt.. Taxi medallion/Hotel owners folks think they are playing by the rules while others aren't... The market seems to have rewarded the bad hustlers here then as per your definition or have I got it wrong.
- dylanjermiah 11y ago
  I'm not entirely sure about the hotel industry, but for the most part the taxi industry in most cities lobbied for the laws, which restricted competition. They had dug their own grave by the time Lyft launched (and subsequently UberX).
- bliti 11y ago
  It's not black and white. I'm not for or against Uber. Have never used the service and know very little about the actual company. Markets are irrational. They are a collection of people who need/want something. They will buy without much thought to the moral status of the seller. You are not wrong, but not exactly rigbt. We can't judge a whole company for the actions of some members. That's why I said there is some not so good hustling. It's hard to figure out this sort of things because you never know the while story. If you feel like this is something worth pursuing over a period of time longer than what this thread will allow feel free to email me. In hardly have all the answers, but I can definitely come up with some good questions. And no, I didn't answer your question because I just don't know.

icpmacdo 11y ago

In an earlier article I think it said his dad was the VP of a large bank, possibly Bank of America. I am sure that makes it easier to put together a nice seed round.

8_hours_ago 11y ago
> Clinkle’s first investors were Duplan’s parents. His father is a well-respected software entrepreneur. They told him they’d back his startup as long as he agreed to get a college degree, so Duplan kept his promise, obtaining his bachelor’s in computer science in three years. http://www.businessinsider.com/inside-story-of-clinkle-2014-4 http://www.businessinsider.com/inside-story-of-clinkle-2014-... It looks like his father is Neno Duplan, who founded Locus Technologies.
- icpmacdo 11y ago
  Thanks for the link, sorry if it was misinformation in my post but I still could have sworn that round had something to do with a high profile family member who was a banker. It stood out as a very annoying advantage and has stuck with me as a data point the past few years.
  - lawnchair_larry 11y ago
    Is it an advantage? Getting investment is a good step towards validation. If you get funded for free, you lose that signal, and might just be extending the runway of your death march. I'd guess it slightly increases your probability of success, but greatly increases the cost of failure.
    - _delirium 11y ago
      It's not only good for the direct money (though that's nice), but also the connections to potential customers, if the source of the money is also well-connected (not all wealthy people are well-connected too, but many are). For example, somewhat famously, Bill Gates's mother served on the board of directors of the United Way at the same time that John Opel, chairman of IBM, also served on that board, which was instrumental in getting the young Bill introduced to the right people.

api 11y ago

Can't speak with authority about Clinkle, but I strongly suspect that the founders have an "extreme alpha" personality type. I have seen people with that personality type be able to just basically tell people what they want and get it. It's really a sight to behold. "I need 50 million." "Okay boss. I think there's two mechanisms at work. One is what you might call the "reptile brain," which reads such signals and simply interprets them as "this is my pack leader." The other mechanism is I think a cargo cultish belief in the power of those personality types to just always succeed no matter what. "Man, he seems like a winner." (This personality type seems to almost always be male, at least in my experience. Definitely not trying to be sexist. Might be being a bit reverse sexist though, since I do not find this trait redeeming.) You would think that VCs would be inoculated against this kind of thing. You would think. But I personally know of two examples of people with off the charts alpha personalities who were sort of serial killers of wealth. Raise, burn, raise again. Their alpha personality trumped any notion of merit or track record.

michaelochurch 11y ago
This is an excellent post. Thanks for writing it. It's spot on.
- lawnchair_larry 11y ago
  This is funny because I actually thought you wrote it, and had to double check the username after I started reading.
- tptacek 11y ago
  So you really believe that young "successful" startup founders are neurolinguistically programming VCs to give them money? Come on. The bar for your approval has to be higher than "derisive towards VCs and VC-funded founders".
  - achompas 11y ago
    Amen to this. I know you (justifiably) believe there are many bad actors in technology, Michael, but parent's comment is beyond belief.

21echoes 11y ago

As someone who was there for a very long time -- "without a product" is not at all an accurate reflection of the state of things (as the TechCrunch article and plenty of other sources can corroborate). There was a functional product in beta (as in: being used by non-employees) in early 2012. The issue was that Lucas was unable to secure appropriate relationships with banking partners such that the product could actually launch to the mass public until the end of 2014. Both attempted banking partners had extreme restrictions on the number of users allowed on the system until their legal teams signed off on it (due to the timely influx of new regulations from the CFPB), and both times this took more than 9 months to go through their bureaucracy. Even while these public-launch-restrictions were in place, obviously it was possible to demo investors on the real product that moved real money between real bank accounts using real ultrasound technology to buy from real merchants, etc. These features were all also in beta tester hands. As far as why investors were willing to invest in the product.. that's its own discussion that I don't feel like typing up at 6:30 on a Friday. Short answer: mobile payments were hot, the product really was pretty and functional, the go-to-market strategy (assuming a banking license deal went through) was rather pragmatic (debit cards to be backwards compatible & get data from day one), the team (other than the CEO) top-tier, no investor invested particularly much, etc.

fitzwatermellow 11y ago
Glad to see you are currently at Patreon, empowering creative workers via crowdfunding. Now there is a corporate mission with a future ;)
- deleted 11y ago
  [deleted]
  - sergiotapia 11y ago
    Curious what rule did he break?
    - minimaxir 11y ago

minimaxir 11y ago

Clinkle apparently had a pay-by-sound technology: http://valleywag.gawker.com/clinkleleaks-secrets-behind-22-year-olds-25-million-646294646 http://valleywag.gawker.com/clinkleleaks-secrets-behind-22-y... Back then, payments was an instant-fund space. Of course, it didn't work.

anigbrowl 11y ago

I too am baffled by this, since it suggests a complete lack of due diligence on the part of VCs. By a massive coincidence, I'd like to mention that I'm taking a hiatus from strategizing about how to raise money for a feature film to launch a very hot startup that will be disrupting the messaging, retail and payment spaces - simultaneously. It will be like Uber for money, or maybe like AirBNB for shopping. Anyway I urge people with more money than sense to get in on the ground floor of this smoking hot opportunity right now. For every extra digit on your initial investment that separates you from your more timid peers, I will supply a luxurious, hour-long ego massage.

michaelochurch 11y ago

How did the founder manage to build a company of 70 employees without a product and securing 30 million fundings after 2 years of not really showing anything? Stanford Welfare and chicken-hawking. Stanford Welfare sometimes works out. Snapchat wouldn't exist without Stanford Welfare but it's now valued at billions. It may not be good for the world but it would have been a good investment-- assuming it can find liquidity before a Flight to Substance (which is quite possible, because anyone who claims to know when an F2S will happen is wrong; no one knows). Chicken-hawking is when a middle-aged man takes a young sociopath as protege in order to resolve a midlife crisis and live vicariously through him. People like Duplan appeal to such people. When your goal is to live vicariously through someone, you want to fund someone who'll go a bit wild with that money, not someone who'll be committed to the "boring" task of building a business.

MCRed 11y ago
This is a really good point. I've heard the term Chicken Hawking in a very, very different context but it works here as well. I think the illuminating bit of information is there is a real difference between the worldview of a VC and a founder. VCs have no clue what's possible or not (and in my experience don't actually understand businesses because most haven't run thenm- they went to Biz School, got their MBAs and that's it.) So, in todays environment where "founders" are usually kids right out of college with no actual business experience, then their perfect "mate" is a VC who also has no experience. The kid is young and ambitious and has no clue on the limits of his own possibilities-- and the VC is just looking for a payoff without real work the size of the kids ego. IT's a great match and it explains a lot. Like why real engineers and real business people building real businesses have a lot more trouble raising money.
- achompas 11y ago
  I don't doubt the existence of clueless VCs who throw their money around, but that's no different from any other form of business. They'll soon lose that money. The problem is that, given the anecdote of another commenter with intimate knowledge of the situation, Michael's explanation doesn't match reality. I suspect cases like this often defy simple rationalization, but as outsiders we don't have the facts to correct our theories.

kaonashi 11y ago

According to Wikipedia, his parents put up the initial money.

developer1 11y ago

Probably not a popular opinion to pin this against someone nobody knows... but just that photo they used to headline the article makes the guy look like a typical sociopathic marketing type who talks smoothly but has no real game. He probably sold investors with fancy dinners and a great pitch with no tangible skills to back it up with. Just saying.

protomyth 11y ago
Picking a picture of a person is an indication of how fair the article is going to be. If a publication uses unflattering photos of people they have an angle. It's generally a good tell of what way an outlet leans. Basically the same scheme as showing a child / baby picture of someone accused of something to make you lean towards that someone's innocence.

xienze 11y ago

> How did the founder manage to build a company of 70 employees without a product and securing 30 million fundings after 2 years of not really showing anything? And to top that of, it didn't look like the founder has any track record before this company. Welcome to the tech industry! We're not in a bubble, it's different this time...