Gabriel Weinberg's Blog

The wow effect

2012-02-07T12:06:23Z

There is a startup proverb that says you have to be 10x better than your competition to get people to switch. A related one is that you should concentrate on being a painkiller as opposed to a vitamin.

Certainly if you're 10x better or are a real painkiller, your job of getting people to switch will be easier. Nevertheless, I've come to think there is an easier way to get people to really try out your product. I call it the wow effect.

The wow effect is when you show someone something and they truly go "wow!" or have a substantially similar response. It is genuine amazement because you've gone above and beyond in some way. You've done something new or cool or that someone really cares about regardless if it is core to the product or related to a pain point.

At DuckDuckGo our privacy policy and various goodies often produce the wow effect. Some other ones I've personally experienced recently are using foursquare + AMEX for the first time, Hipster images on Android, and seeing the resolution of the Path app on Android (though they just unfortunately killed it in their latest update).

A good proxy for the wow effect: is it something you want to immediately share on Twitter or with friends? If so, then you're on to something.

Getting to 10x better or being a painkiller maybe difficult or impossible in some markets. Yet generating the wow effect in a variety of ways and situations and for different user demographics is something you can shoot for and achieve more easily.

However, it's just a hook. It's a signal that you're onto something awesome. It gets people to try you out and then you have to do other things to keep people coming back.

Changing the game

2012-01-30T14:38:02Z

I watched Moneyball last night and saw a lot of parallels to startup land, but tying them all together was the notion of competing effectively by changing the game. In the (true) story the Oakland A's competed against big money teams by leveraging undervalued players to achieve real world gains (focusing on runs instead of wins, though which of course correlate with wins).

The parallel is small startups competing with well-capitalized companies, especially ones with entrenched business and culture. The notion of where to find undervalued assets is where it gets interesting to me.

For example, one tactic is to look at customer acquisition channels too small for your competitors to care about. I did reddit ads when they first came out and since there was no one there you could get a huge ROI.

The saturation point was so small that for any major competitor it is a complete waste of time (now that Reddit is bigger, that may have changed). Nevertheless, you as a small startup can capture that ROI to get a beachhead. I put startup micro-opportunities in the same category.

However, neither of these tactics really change the game. They just get you into it.

The canonical way to change the game is famously outlined in The Innovators Dilemma where you focus on the future disruptive product line that the big business cannot focus on because it is so disruptive. Amazon Web Services is a great example of this strategy in the present.

Another way is to treat the bigger business(es) as commodities and layer on something valuable on-top. This is kind of like commoditizing the complement but you're treating your competitors as the complement.

Like the disruptive innovation, this strategy can make you seem like a toy at first, but if you end up closer to the customer you can capture real value. This is potentially risky if there is only one major competitor (which makes it hard to commoditize!), but often there is more than one place to get the same thing. And you could eventually get big enough to replicate the underlying asset(s) yourself. I put DuckDuckGo in this category.

A third way is to reframe the same problem by changing the way the customer interacts with the product, while keeping the same end goal/result. In Internet startup world this is often re-thinking the UI/UX completely. Mint was in this category.

You could also change the metrics that matter (akin runs vs wins). Badoo is doing this in the dating space by making base interactions free and focusing on meeting new people as opposed to strictly dating.

Here's one more game-changing strategy that comes to mind: shrinking the market. Craigslist is a famous example. Take a huge market and then just totally gut it, but find a profitable businesses in there for you (in this case, jobs).

Some of these strategies can overlap, and I'm sure there are others as well. If you think of any more, please let me know.

The other thing that really popped out at me in the movie was Billy Beane not watching games. It reminded me of vanity metrics. Not only did he get better metrics but he didn't waste time watching them.

It's all related. If you're a startup competing against huge companies, by definition you need leverage on something to compete effectively. Wasting time playing the same game is well, wasting time.

Office hours instead of coffee

2012-01-24T12:00:45Z

Between two kids under three and running DuckDuckGo I have a very tight schedule. I try really hard to maximize my productivity through a variety of efforts like online services (just added RescueTime to the mix) and attempting to maintain a makers schedule.

The problem is requests to meet for coffee, usually by local entrepreneurs. It's a problem because I do generally want to meet with these people, but I just can't make it work logistically. Going somewhere to meet for coffee usually literally takes about three-five times as much time as the actual "content time" of the meeting itself. It's highly inefficient.

For a while, I had people come to me (at my house at the time). But that was relatively awkward for a number of reasons (kids around, forcing people to drive out here, a bit of privacy invasion, meetings would linger).

Now I've hit upon something that is working well, which is really an adaptation of what Paul Graham outlined in the makers schedule essay: batching these meetings via office hours.

I've been using Ohours to manage it (mine is at http://ohours.org/yegg). I block off a bit of time a week (this week it's this morning) and open four blocks of twenty min. It's pretty much first come first served in that I haven't rejected anyone yet, but I reserve the right to do so if it feels completely off-topic (non-startup related).

The twenty minutes was a hunch from all those previous coffee meetings but turns out to be a great time length. At twenty minutes you have to get to the point. I don't like small talk as it is so I find this works well, and after fourteen sessions it has almost always started to linger by the end. If we need/want more time, we can always schedule an off-office-hours block thereafter.

Apply to Open Angel Forum Philly III

2012-01-23T15:43:39Z

The next Open Angel Forum in Philadelphia will be the evening of March 22 at Morgan Lewis. If you are involved in a startup that is looking for seed funding, please apply (there is no charge to apply or attend if selected): http://ye.gg/oaf

For anyone not familiar with Open Angel Forum, the idea is to get the best regional angels in a room and put some great startups in front of them. Antonio Tedesco and I started this Philly (loosely defined) chapter, and this will be our third event.

We expect a lot of the same investors to show again. If you are an angel investor in the mid-atlantic region and want to come, please let us know. We're also looking for sponsors.

Here's what we're looking for with regards to startups:

US companies. You do not need to be associated with Philly, however. In fact, we've had companies from all over, including Austin, NYC, Minneapolis and Chicago.
A working demo, preferably something already launched with some engaged users. The event format is a five min demo followed by a five min Q/A followed by networking. It's not a traditional pitch event with slides, so a working demo is essential.
Products matching our investor preferences. Our goal is to get you funded, and to do that you can't look too different than things our angel investors generally invest in. This generally means software of some form.
Terms matching our investor preferences. Same as above, our angels are looking for good deals. This generally means reasonable valuations and seed rounds (essentially first money in).

Here is the process:

We're accepting applications for OAF Philly II through Sun Feb 26, 2012.
Antonio and I will then go through and select the companies that best match the above criteria.
We will then try to hold Skype demo sessions with all those companies. We may involve some other angels in this process.
We will then extend invitations until the demo slots are filled. We're aiming to do that by Mar 15h (one week notice).

Feel free to ask questions in the comments, and I'll do my best to answer.

And here's that application link again http://ye.gg/oaf

My investment decision starts at your first email

2012-01-20T14:01:28Z

I few weeks ago someone asked me how early does a decision start to form about whether I would make an angel investment or not. Thinking back and looking at prior nos and yeses I have to say a lot happens when reading that very first email.

Of course there are a ton of nos and hardly any yeses, so it is a different kind of decision than many. Nevertheless, at least for me, it isn't just that I'm looking for ways to say no. If that were the case you should shoot for being as short and vague as possible to get the next meeting.

The goal is still to progress, but you have to do more than that to do so (at least with me). I've come around to the advice I've received many times from more experienced investors that you have to pretty much love everything about the founders and the company or you shouldn't do the investment.

In other words, if I don't have a strong positive reaction to that first email, I might as well stop there. And that's not an easy task given I don't get excited easily!

Vagueness can push you into the meh category. But to actually get into the positive category takes some creativity and resourcefulness.

I was already thinking of this topic yesterday when I read Paul Graham's latest essay on resourcefulness. He highlights that those that have it vs those that don't can often be categorized by their communication skills, which he calls conversational resourcefulness.

Paul writes "all you have to do is give the right sort of founder a one line intro to a VC, and he'll chase down the money." I believe that's what I'm seeing as well in these first emails, especially cold ones.

The good founders have fully researched me and place their startup (and email) completely in my context. The worst are clearly sending form emails. In-between are either walls of text that make it easy to say no right away or paragraphs that I just don't connect with.

In one sense, everyone knows that first impressions matter. But for something like an angel investment, one would expect that they could matter less, especially for investors who invest in lines not dots, which I try to do.

Perhaps if I was less busy or less weird or had a different angel investment process this first email would matter less. But given my day-to-day, most of my first interactions happen over email. While certainly engaging less senses, email is still essentially an infinite space, and initial emails do vary a lot. It may be hard for you to appreciate if you don't receive a lot of unsolicited email, but know that they vary widely.

Having recently raised money myself, I realize how time consuming the process really can be. Crafting a good first email seems like it just adds to that time, but in reality it doesn't. The resourceful founders will make sure they deliver the best first interactions (including warm intros). If you do that you can actually spend less time in the whole process because you can a) contact less total people and b) the sub-processes (with each individual investor) will move faster.

In retrospect, I should have probably trusted my gut more on these first interactions, and will try to do so more in the future. It may seem like I'm shooting myself in the foot here by writing this post and revealing some of the internals of my process. But in reality I think it's the opposite.

I should also point out like I often do that traction trumps everything. If you have it, you can often get away with that short and sweet first email coupled with a good intro. But you see, that is still being resourceful. You got the traction. You did all the legwork to know that I already know about you. So when it comes to write that email you don't have to write much because you know I'm probably already excited. Nevertheless, I appreciate the personal touch.

I keep forgetting to use your app

2012-01-12T14:42:56Z

I've heard a lot in the past few years about how online we're competing for attention and that people will only use x sites regularly. I'm coming to believe that view is slightly wrong.

We're not competing for attention but for memory. People do and will use many sites, but they just forget to do so on a regular basis.

I hear that all the time with DuckDuckGo. It's either part of your routine or it isn't. That's why I think the check-in effect is so compelling.

There are a couple others I've been thinking about as well to overcome this forgetfulness issue. You can think of them as addressing the problem by combatting the out-of-site, out-of-mind mentality.

First, there is presence -- simply being seen on a regular basis. This is pretty straightforward. Many services achieve it with an email or push notification or update. Others (like us) try to get you to set us as part of your browsing experience, e.g. via the search bar or an add-on.

If you're seen at just the right time and with the right periodicity you can be a site users visit without being one of those main x sites. I put BillGuard in this category. They send me an email monthly and I pay attention to it and almost always click through.

Second, and more subtly there is a being a starting point. It used to be people were vying to be your start page or browser. And people of course still do that and it is still valuable. However, the start page seems to have fragmented in the past few years. With mobile, you can have many starting places because you have many apps on your home screens. And the browsers have introduced more features (including native start pages) that make it easier to view a multitude of sites at once in a similar fashion.

I think the key to getting on one of these screens or bookmarks is to have people think of you as a starting point for something. This concept overlaps but is independent from the check-in effect. For example, you may or may not ever want to check-in to a photo editing app, but when you want to photo-edit you can think of that app as a starting point for that activity. It's then the startup's job to meld that association.

With social apps there is a sub-concept related to audience. That is, a social app can be a starting point if they are the gateway to a unique audience. I now use Twitter, Facebook, Foursquare, Posterous and Path all regularly. I do not syndicate everything across them (and actually not much of anything) because they each have different audiences and therefore I find myself starting a lot at each of them.

Path is an especially interesting case since they seem to be trying (via their UI) to be the new mobile social start page. The idea is you have your closest friends there and share everything with them, and then you can broadcast some of that stuff to Twitter, Facebook or Foursquare when you want to. This setup doesn't really work for me though because the audiences are so different.

The check-in effect

2012-01-03T18:17:12Z

A lot of the biggest Web successes in the past few years have been services that have achieved some sort of "check-in effect." By that I mean their users are actively checking in to their services for updates. Check the latest deal. Check my activity stream. Check on my farm. Check if there are more updates or comments.

This seems even more the case for mobile successes, where more traditional traction verticals (e.g. email, adwords) are less useful. The successful apps (more in the non-game space) make the home screens often because people want to check them repeatedly and often.

A lot of services could be recast slightly with the check-in effect in mind. For example, taking data sources and chopping them up into streams and push updates in some useful fashion, or highlighting trending topics. I've seen this most noticeably in LinkedIn's redone app.

DuckDuckGo used to run out of my basement

2011-12-28T15:57:24Z

For the first two years or so, I ran DuckDuckGo out of my basement. Then when people really started using it I set up EC2 for fail-over, and now EC2 is our primary host. We still use these basement servers for a variety of things, however.

Before DuckDuckGo, I operated in a pre-cloud world and had been running my own servers for a number of years. My last company co-located (stored our servers in a data center), which had worked well except for when things went wrong and a reboot didn't solve it. Then I'd have to (usually at inopportune times) drive over to the data center, be escorted in, mess with things, and be charged a lot for doing so.

The main problem with self-hosting (vs co-lo) in my mind had always been crappy Internet. Then in 2006 I moved to our house in a town that approved FIOS a few months later. I had been watching it progress, and we were literally the first person in the area to install it.

I was hopeful and it turned out correct that the crappy Internet problem had been solved. In five years, it has never been fully out except for the time our service got suspended for lack of payment (forgot to update my expired card). Other than that, there is just the usual blip always coincidental with some internal Internet routing thing. In fact, since I have complete network control, the "co-lo" doesn't reboot routers for scheduled maintenance either. The latency is also pretty good.

Note that I'm not advising any of this -- simply telling my story. So why did I do this? Really it was the path of least resistance given my history and experience. I was used to setting up and maintaining servers, and had some laying around. This setup seemed great at the time -- I'd get the benefits of co-location (good Internet) but could mess with things at will. (The other co-lo benefit is power -- I have that covered as well.)

I still like the idea of having a server for non-production use, e.g. this Web site. There is something nice about having it close by. Perhaps it is a false sense, but I feel that the setup is more reliable than any cloud provider. And I get to feel a bit more full stack.

But all that pretty much stops at one server for me. Anything beyond that and it quickly becomes a PITA. Here's a pic from when we bought the rack off of Craigslist:

One million true fans

2011-12-20T18:02:51Z

A few years ago Kevin Kelly wrote a post called 1,000 true fans, in which he argued an artist "needs to acquire only 1,000 True Fans to make a living," and using the power of the Internet it is possible to do so independently.

In the last few years since that post we've seen an explosion in the use Web services and apps by everyday people -- with arguably Facebook leading the way. Chris Dixon just called where we are today an internet of people.

We're at a point now where I see the 1,000 true fan concept regularly applying to startups, albeit a few orders of magnitude higher (depending on whether it is consumer or business). Now it is relatively common for a startup to get 1,000,000 true fans and be both nicely profitable and relatively low profile.

A couple of days ago @startupdigest tweeted a link to a Business Insider article on the story behind Zappos where the founder told this related anecdote:

We would have that conversation over and over again about, alright, no one is going to buy shoes without trying them on. I would say, "No, last year 5% of shoes sold in the U.S. were sold through mail order catalogues," and they'd say, "Yeah but nobody is going to buy shoes without trying them on." And it was like, did I just say that out loud or inside my head, but let me repeat it, "last year, 1 out of every 20 pairs of shoes sold was sold through a mail order catalog." "That may or may not be, but no one is going to buy shoes."

I've had a similar conversation a half-dozen times in the past year. Just because the majority, even the vast majority, doesn't want to do something, doesn't mean there isn't a sizable and passionate minority who does want to do it. And because we are now an Internet of people actually using stuff, that passionate minority is a) increasingly reachable and b) willing to spread services through their online communities.

What's your startup's reserve price?

2011-12-14T14:44:09Z

Here's some acquisition and financing advice: know your reserve price. That's the minimum price (easiest to think about cash in your bank account at close after taxes) that you'd be willing to receive in exchange for your company. Corollary: if it isn't cash, then it needs to be heavily discounted--to zero in many cases.

It's a complicated question, which is why I strongly encourage you to think about it ahead of time, and ideally talk it through with some people who've been through acquisitions and are "richer" than you. In the acquire-hire age, your reserve price can be tested a lot and quickly, especially at the early stages. If you are caught off guard, you can get sucked in quickly to something you may regret later.

Additionally, I think you should know your reserve price before seeking investment of any kind. Investors are generally looking for 10x+ returns. Quite frankly, if you have a valuation/reserve-price combination that doesn't yield such, you shouldn't be taking investment.

And there's nothing wrong with that! In fact, I've argued that no or minimal investment may maximize your financial outcome in some cases, and is at least worth considering.

Talking about reserve prices seems to get into fuzzy math really quickly. Would I take $2M but not $1M or $15M and not $10M? But you should really take it seriously because these differences do matter, especially at the lower end of the scale.

Yes, everything feels different when you have an offer in front of you. And that's the point of thinking about it ahead of time. It's hard when you have no real savings in your bank account to turn down $1M. But that can be the right decision, especially if you have any kind of traction.

API Half-lives

2011-11-29T14:34:07Z

At DuckDuckGo, we use a lot of external APIs and services. Sure, we use more than most, but the trend is clear: startups are building more and more services and other companies are relying on them more and more.

I wholeheartedly agree that it's annoying that these APIs aren't as stable as things that came before, but the bigger problem from my perspective is that their half-lives are tiny. Already we've done several integrations where subsequently the company has either gone out of business, "pivoted" and ditched or abandoned their API in the process, or got acquired and the new company shut down the API.

And its not just startups. I've lost count on how many services Google has sun-setted this year -- not just ones they acquired, but also their own.

Don't get me wrong, I don't fault the individual decision makers. I don't have full background information, and for all I know I'd make the same decisions if I did. But what I do know is that my process for looking at APIs and online services is changing.

At my first company I got asked this question a bunch: how do we know you're going to be around in five years? (We weren't.)

Now five years seems laughable! Almost all entrepreneurs I meet don't think they're going to be doing their startup in five years. Side note: it's a good negative investment filter.

I don't really have good answers yet for what to do about it or how to better evaluate a particular case. I'm annoyed at myself for doing this, but I find myself gravitating to startups that have taken in a lot of funding. I love working with startups because they are hungrier and more flexible, and so this type of startup seems like a sweet spot. They have resources to spare, both to help you out and stay in business.

Some other things I've found myself thinking about in particular cases wrt to this question about API half-lives:

How active is their API discussion forum?
How responsive are they to API bugs/issues?
How core is the API to their business?
How long have they been around already?
What is their runway?
Do they seem like they're passionate about what they're doing?
Are they likely acqui-hire targets?

Another approach is to apply Chaos Monkey philosophy and expect anything to die at any time. We pretty much do that. However, we still need to place bets. With so many startups, there are often several choices in any given category.

Update: good comments on HN, especially this one.

Fundable vision

2011-11-22T13:30:43Z

When I get an angel pitch, here's my initial funnel:

Is this person a crackpot?
Is this person a wannabe?
Is this vision fundable?
Is this vision fundable by me?
Is this vision plausible?
Is this vision probable?
Are these people capable of executing this vision?

I've been getting a lot of angel pitches lately that I've been quickly dismissing on #3: is this vision fundable? Frankly, the dismissals are pretty much from a lack of communicating any long-term vision. Here's my #3 sub-funnel:

A. Is this a whim project?
B. Is this a side project?
C. Is this (for lack of a better phrase) a lifestyle business?
D. How does this get to 1Min revenue?

E. How does this get to 10M in revenue?
F. Are they thinking big enough?

Product demos are key to a good pitch, but in and of themselves they are static, and really don't get anywhere in this sub-funnel. To do that, you need to tell a compelling story about how you're going to be part of a big market.

Of course I may think you're wrong on market or a variety of other things, but communicating a long-term vision is a necessary condition to starting a real funding conversation.

I realize this is a very difficult request. It's easier to try to find a niche within a niche in the app world. And that may make a great business for you. But it isn't a fundable vision.

Online services our startup subscribes to

2011-11-08T20:30:51Z

A few months ago I posted an entry about online services I subscribe to personally. Since then my startup has been funded and I'm even more so looking for ways to leverage online services for productivity gains.

So some of these are repeats, but a bunch are new. I'm really curious about what other startups are using successfully, i.e. what I'm missing.

Collaboration

hipchat.com

What: group chat.
Why: persistent rooms for congregation/communication.
Love: easy to use UI.
Hate: multiple devices cause sign in/out issues.

yammer.com

What: company activity stream.
Why: distributed team can keep tabs on company.
Love: creates a more social environment.
Hate: AIR client can't do multiple networks at once.

discussions.zoho.com

What: forum.
Why: enable a community among DuckDuckGo users.
Love: nice mix between q/a, idea voting and general forum.
Hate: too easy to post without signing in.

skype.com

What: 3-way video calling.
Why: hate going to meetings in person.
Love: way more personal than phone and hands free.
Hate: often peoples' Internet connections aren't fast enough for good video.

google.com/apps

What: online email.
Why: solved my Gmail issues (slowness, sending limits).
Love: 2-step authentication (though can get that on regular Gmail).
Hate: can't add free (lower) accounts once paid for higher ones; switching between accounts a pain.

github.com

What: online code repository.
Why: easy private collaboration; nice organization support.
Love: easy segmented collaboration.
Hate: nothing.

Back office

hellofax.com

What: online fax.
Why: my home fax sucks.
Love: easy.
Hate: feels expensive.

echosign.com

What: electronic signatures.
Why: scanning and signing stuff is a pain.
Love: nice email workflow.
Hate: can't control the signing date.

quickbooksonline.intuit.com

What: accounting.
Why: can access on multiple machines and easily share.
Love: wizards are pretty smart.
Hate: can't get access to help system.

assistly.com

What: customer service and support center.
Why: manages knowledge base and customer interaction.
Love: keyboard shortcuts.
Hate: can react a bit slowly; seems like it could get expensive.

Productivity

fancyhands.com

What: virtual assistant.
Why: don't waste time on mundane tasks.
Love: can do everything over email.
Hate: they don't do credit card payments yet (on your behalf).

lastpass.com

What: store your passwords.
Why: I can easily log into services across devices.
Love: works.
Hate: glitches here and there on certain sites.

xmarks.com

What: sync your bookmarks.
Why: have my quick launch bar/links be the same across browsers/computers.
Love: works.
Hate: chrome extension has to kick-off manually for some reason.

boomerangforgmail.com

What: get emails out of your inbox and back when you need them.
Why: I like 0-inbox and it helps with reminders.
Love: works.
Hate: it disappears every now and then forcing me to refresh.

Infrastructure

aws.amazon.com

What: cloud services.
Why: run as primary host.
Love: spin up new nodes in minutes across the world.
Hate: dealing with EBS issues; instances fail more than (I think) they should.

linode.com

What: virtual (shared) servers.
Why: shared development resource for community platform.
Love: cheap, root access, no bs.
Hate: larger plans expensive.

dnsmadeeasy.com

What: managed DNS.
Why: speed, uptime, built-in monitoring, failover and global traffic redirection.
Love: just works, cheap, great support.
Hate: nothing.

serverdensity.com

What: server monitoring.
Why: gives alerts when on-server things go awry.
Love: Android notifications; alert types (exact process, system resources); great support.
Hate: new alerts don't remember your default (usual) settings.

Full disclosure: HipChat, HelloFax, DNSMadeEasy, Linode and FancyHands links above have embedded affiliate codes. (I really want some custom emoticons from HipChat!)

Update: We also heavily use Asana (for project management). I didn't include it because it is free, but it is worth noting.

Update 2: more good comments on HN.

What I learned from raising venture capital

2011-10-24T14:00:24Z

Takin' VC Money (Money Cash IPO's) by Smixx

Forewarning

Be forewarned, this post is long. You can tl;dr it by reading the section titles.

It's long because I'm compressing the last four months into one post. I don't normally do that, but I didn't want to influence my funding by blogging about it in the middle of it. And historically I've been bad at doing serial posts, so here you go...

I'm new at this.

I recently raised venture capital for the first time. I'm going to relate what happened below and highlight my mistakes/takeaways in the bold section titles. However, please bear in mind my lack of experience in these matters and that this post is written from the company/entrepreneur perspective.

Background.

DuckDuckGo raised a series A round from Union Square Ventures and a handful of awesome angel investors. While we did talk to over 30 VC firms, I realize our path both ended successfully and was relatively quick and painless. So first off, I want to say I sympathize with everyone who struggles with the funding process.

The funding process is not to be taken lightly.

Even though our round went relatively smoothly, it was still a massive time sink. It was the top idea in my mind, and it pretty much consumed my life for the past four months. In other words, it seems like you should commit to being all-in, all-consumed for a while, or you might as well not do it.

This reality is especially troublesome for two inter-connected reasons. First, you're distracted and so your business suffers. Second, every VC expects you to keep making forward progress (as if you're just talking to just them and have the rest of the time to work on the business -- yeah right).

Save up good news for the middle of the process.

We did not do this, but it ended up working out that way anyway and so I saw the value in it first hand. I started raising right after releasing dontbubble.us, which is demarcated by C in our traffic graph. Then in the middle of the process, we got picked as one of TIME's top 50 web sites for 2011 (annotated as D in the graph). It was nice recognition (and traffic growth) at just the right time.

A similar (also unplanned thing) happened when selling my last business. In the middle of that process, we had released a feature that really exploded our user growth. I don't think it was completely random these things happened at the right time, however. I generally try to operate in such a way as to maximize my luck surface area.

People would talk to me because of traction and track record.

I waited three and half years before seeking funding, much longer than most people would. I basically waited until we had significant (not huge, but significant) traction in a large market. As I've said before, traction trumps everything.

I'm not suggesting it's great to wait, and I realize most people cannot wait for a variety of reasons. I'm just highlighting that we did and it clearly helped to get VCs talking to us.

We probably could have raised earlier.

If you checked out our graph, it's nice, but looking back it is unclear to me how much things would have been different if I had tried to raise after reaching 1,000,000 direct searches a month instead of 7,000,000. When talking to people, for most, it didn't really seem that it would have made a huge difference, though there is of course no control.

However, the business difference is those two numbers is large. Granted they're both still very small numbers when considering the search market as whole, but moving orders of magnitude is really de-risking the business a great deal.

If you try to raise between significant milestones, unless you can show other reasons why you're killing it (the nice graph in our case), you're risking getting hit on valuation (or lack of funding) because your momentum is unclear and/or people can't perceive the real progress your making. On the other hand, after just reaching a milestone people care about, your momentum is large and people generally extrapolate what you're doing in your favor.

The sub-text here is that it has to be a milestone people care about and not just one that you care about, even if you have great reasons to care.

There are a lot of VCs.

Let's get to some numbers. I talked to 31 VC firms, 5 seed funds, and about 14 angels. These numbers do not include firms or people that I never actually connected with on the phone, on Skype video or in person. There were countless more I didn't get to or weren't on my radar though are probably great.

In the end we got funded by a big name, but I met plenty of lesser names I would gladly be funded by. In a second I'd choose someone I like/respect/trust/think is a good fit at a no-name firm vs someone I don't at a big name firm.

Your VC is essentially buying in as a co-founder.

Would you chose a co-founder that sucks? Of course not willingly. It is a major reason startups die.

I treated the VC decision in a similar way. They're going to be with me long-term. They have a significant equity stake and other significant terms.

But I'm not just thinking negative here. Like a great co-founder, they can also help me in strategic ways at the right time.

I realize a lot of people don't think they have choices, but that's a bit of a fallacy because you are making choices by deciding who to talk to in the first place.

It's good to know people ahead of time.

I only knew a handful of VCs coming into the process, but I wish I had known more. I just never made a concerted effort to meet them.

There is conflicted advice in the blogosphere about whether to take VC "informational interviews" or not. But from my perspective the reality is people take you much more seriously if you are known quantity. You see firms backing the same entrepreneur again and again. And more generally I think people do invest (at least more easily) in lines, not dots.

To blast or not to blast.

I also got conflicting advice on how to seek VC intros. You can either a) get intros in concentric circles based on who you think is best (first tier, second, etc.) or can b) try to get introduced all at once to everyone you want.

The idea behind the former is that you give the best people a sense you're coming to them somewhat exclusively because of fit, which they like and will be more inclined to listen/fund, while the idea behind the latter is you get people moving along faster because you try to make yourself a "hot" deal.

Don't pitch ideal VCs first because you'll mess them up.

Ultimately, I decided to blast, but not after messing up some early pitches with people I really wanted to work with.

Quite frankly, I didn't have my pitch down and I'm not sure you can get it down without giving it to some real VCs and seeing what resonates and what falls flat.

Get your story straight.

Another reason I messed up my early pitches is I was a bit wishy-washy on how much I wanted to raise and what I would do with the funds. Bad idea. People like confidence. Perhaps it is a good idea to have those exploratory meetings ahead of time, but I learned they should not be combined with a pitch because it is just communicating either you're not serious or you're not ready.

It's awkward to pitch people you know, but give them the real pitch.

Yet another reason I messed up my early pitches is I treated people I knew too casually. I should have given them the real pitch. You can still ask them (because you know them) to intro you to others that may be good fits after the fact, which is one of the reasons I wanted to talk to them about it as well.

But by changing the pitch into a friendly conversation, I was again sending a signal that they shouldn't take me seriously. And they didn't.

Use AngelList.

I got significant value out of AngelList. Most importantly, I got high quality inbound requests from people I would have never gotten to otherwise.

I also think we were perceived as somewhat hot by the VCs who hang out on AngelList because our startup was getting a lot of followers/introductions, and so was going out on a lot of the associated emails.

Intro channel breakdown.

Of the connections made, I broke them down into categories of how I got the initial introduction:

I knew them and reached out: 4 VCs, 2 seed funds, 4 angels.
Suggested intro from someone: 14 VCs, 2 seed funds, 5 angels
AngelList inbound: 9 VCs, 1 seed fund, 5 angels
AngelList outbound: 2 VCs
Cold inbound: 2 VCs

Of the VCs, I broke them down into categories of how far I got with them:

Talked with non-partners: 9
Talked with a partner: 12
Talked with multiple partners: 7
Got a terms sheet: 3

Of the VCs I got to the multiple partners (MP) / terms sheet (TS) level, the original categories broke down like:

I knew them and reached out: 2 MP, 1TS.
Suggested intro from someone: 3MP, 1TS
AngelList inbound: 1MP, 1TS
AngelList outbound: 0
Cold inbound: 1MP

Getting to the right partner initially really really matters.

Pretty soon after that first meeting, you need a partner to convince their other partners this is a deal the partnership should move forward with. Not one of the partners I talked to handed the deal off to another partner to manage, which says to me you have to figure out a priori which partner at a given firm would be most likely to get excited about your deal, or otherwise it is likely to be dead on arrival.

Often times the right partner is unclear without talking to someone else.

Like I said, when I started raising this round, I only knew a few VCs personally, and I also thought that they may not want to fund or be a right fit for DuckDuckGo. Sure, I had heard of a bunch of VC firms, but when I went to their Web sites and looked at their team pages, I may have heard of one of their 2-10 partners. For all I knew, this guy I've never heard of would be the best fit for us.

So what I did was try to find the right partners by:

Asking the VCs I knew.
Asking the angels I knew.
Researching related investments.

Having a good network to get intros really matters.

As you can see from the intro categories, #s 1 and 2 yielded most of my intros. If I didn't know these people, my job would have been much, much harder. Not only would it be harder to get to people, but I wouldn't have known (as easily) the right people to target.

A warm intro >> cold intro.

Obvious.

Principal intro is OK if not right partner intro.

Less obvious, and I think there is conflicting advice here too. Some say don't bother if you can't get a partner intro and partner intros always trump non-partner intros.

First of all, my funding stands as a counter-example because I was introed to Christina at USV, and that led to my funding.

But more broadly, if you don't know the right partner or don't have a partner intro, and you get introed to a well-respected principal/associate/analyst and they get excited about what you're doing, they can help a) determine the right partner; and b) rope them in to the next meeting with good framing.

I never walked through my 6 slides.

I have no idea how my demeanor or pitch varied from the countless ones VCs get. All I know is what I did. I had a six slide deck that I would send beforehand.

Then I would spend my time telling my story, starting well before DuckDuckGo (briefly), and then taking them through what had happened until now, why I was raising money now, and what my future plans were.

I got very few NOs.

Like people say, most people just stop emailing you. They don't say no. I just kept moving forward, so beyond a thank you note after a meeting, I didn't really press people. Ultimately I wanted to see who was excited about me, so I figure the least they could do is follow-up like they said they were going to do.

Some firms did follow-up promptly with nos and specific reasons, and I was really grateful for that. They were:

Having multiple term sheets really matters.

I realize most companies can't get multiple term sheets. But if you can, they can really be used as a forcing function to move people along, and that's what happened in my case.

It's a double-edged sword though. I'm confident it both moved people to yes more quickly, but also some to no more quickly. They may have always been nos, but sometimes people feel things are moving to fast for them and they couldn't catch up.

Blasting matters to align time-lines.

The process takes time, but once you get the term sheet there is more pressure to move quickly. To get multiple term sheets, you need to get people somewhat aligned in process, and the best way to do that is to start them all off at the same time.

I did not do that very well for a couple of reasons.

I didn't blast right away.
I tried this in July/August.

VCs really do take vacations in August.

Some of my initial meetings were delayed a month or more because of vacation schedules. Ultimately I have no regrets of course, but it should give you pause to raise in August IF you are trying to align everyone time-wise.

Some partners I really liked.

I met a lot of people I really liked in this process. Here are a few (besides everyone at USV of course).

Todd Hixon and John Backus at New Atlantic Ventures
Michael Dearing at Harrison Metal
Saar Gur at Charles River Ventures
Dan Beldy at Steamboat

And I already knew these partners but can't speak more highly of them:

Antonio Rodriguez at Matrix
Gilman Louie at Alsop Louie

I did not push for a bidding war.

I did have multiple term sheets at the same time, and that did work as a forcing function. But I did not try to actively use it to create some kind of bidding war. Instead, I went in with terms in mind that I thought was fair for everyone, and I tried to stick to those terms.

I focused on what value the VC would bring.

I really did try to get the right VC in the deal, and so I tried to focus on figuring out how individual firms and people could be particularly useful to DuckDuckGo over the life the company.

I did reference checks.

I talked to a bunch of portfolio companies that had various VCs on their board, and asked them all sorts of questions about that relationship and their experiences with the particular partner and firm in general. This information was very interesting. Entrepreneurs really do stick together, and I found people would speak freely -- even if I didn't know them very well (or at all) ahead of time.

I didn't travel much.

I'm sure I could have gotten more interest and higher terms if I did a huge road show. But I hate travelling and so did most of this entire raise on Skype video and on the phone. I did make two trips to NY and one to DC. And a few VCs came down to Philly to meet me.

I'm really not sure how much that turned people off or not. I'm sure it seemed different :). I got a sense for most West-coast VCs it was a big turn off and that location does matter, even though they do invest in NYC now a decent amount.

Having a mentor really helped.

Someone who has been there, done that a lot is great. I actually talked to a bunch of people and picked their collective brains, but my uncle (again) proved very invaluable throughout the process. I was talking to him constantly. I suggest you get someone like that. If you've previously raised an angel round, it's probably one of those angels.

Congratulations.

I got more congratulations from this funding than any previous DuckDuckGo milestone. I understand why, and thank you to everyone!, but it still feels wrong somehow.

Conclusion.

I realize that's a lot to take in, and I don't expect anyone to make it this far. I wanted to write all this up for people in the process. Feel free to ask me anything in the comments, and I'll try to answer if it is not confidential and won't impact anyone negatively.

Update: some good comments on HN.

DuckDuckGo is growing - welcome USV et al.!

2011-10-13T14:15:03Z

DuckDuckGo has been growing in a number of ways this year: traffic, team and now investors (was previously just me). I'm really excited to announce that Union Square Ventures has led our first round of financing (Brad Burnham will join our board and just blogged about us). Scott Banister, Jim Young, Jeff Miller, Joshua Schachter, Kal Vepuri, Joshua Stylman and Peter Hershberg also invested in the round.

My original plan was to delay raising capital until I saw a compelling reason to do so, perhaps forever. For better or worse, I stuck to that plan, which ended up being about a 3.5yr delay.

So why now? At the end of last year I noticed that the search engine started to really click with a greater percentage of people in a way that it hadn't before. Don't get me wrong -- we still have a long way to go to reach our vision -- but it was obvious that some things were really starting to become compelling, e.g. our Zero-click Info, privacy policy and goodies.

As these things have started to click, the list of obvious ways to fruitfully extend DuckDuckGo has grown rapidly (e.g. more sources, vertical goodies, etc.). In fact, the list has far outstripped our capacity to build them in reasonable time given current resources.

We've been trying to address this issue from a number of angles. We leverage external APIs as heavily as possible. We've been slowly open sourcing things and recruiting developers to help us integrate data and goodies. (If this piques your interest, start here!)

And now we've started to build out the team. With a slightly larger team I think we can get a lot more done, and that's one thing I hope this financing round will bring us.

Of course we're also getting (IMHO) the best investors out there, and so I also hope that some of their experience will rub off on us in ways that will help us move the product vision much further, much faster.

In any case, I promise to do at least one post on the fundraising process. It was indeed a huge time sink. If you have any particular questions you'd like me to answer about it, please comment them below and I'll try to either comment back or include them in my post.