FounderDating: Nice concept, dodgy viral mechanism

The other day I noticed that my girlfriend had posted to her Facebook wall about trying to “unlock Berlin” as a city on some dating website. Wondering why she was trying to access a dating website, when she’s meant to be dating me, I took a look at the website, FounderDating.

The concept sounds good – a matching website for entrepreneurs in the Internet startup space, with tight control on who gets to join and an emphasis on at least 50% engineers, presumably so it doesn’t get flooded with those annoying MBA-types with their ideas and “I just need a coder” attitude. Or as they put it:

Seems good. I’m looking for a technical co-founder, so I applied.

As part of the application process I had to link my account to LinkedIn and invite other people to recommend me as worthy for acceptance to this network. OK, that’s fine. Getting people to recommend me  makes sense, and obviously they want to spread their brand to good entrepreneurial people, so win-win.

At this stage I was told that the more people I invite the more chance I have of getting accepted to FounderDating. Hmmm, ok, that got my “slightly dodgy” radar twitching, but nothing too bad. I have over 500 contacts on LinkedIn, so how many should I invite to be sure I get in? I thought maybe 10 would be a good number, but in the end I could not be bothered scrolling through 500 contacts so I picked the first three of my entrepreneurial contacts, who I thought might be happy to endorse me.

A week later I get an email from FounderDating – my Application is incomplete. Oh. Really? I open the email to be told that 2 of my 3 contacts had not endorsed me yet, and that FounderDating  ”can’t continue to review your application without their response“

Hmmm. That seems to be a bit of a conflict. FounderDating tell me to invite as many people to vouch for me as possible, yet my application can’t proceed unless every single one of them replies. So If I had invited 10 people I would have more chance of getting in, but then logically less chance of all of them completing the application.

I tweeted them pointing out that this didn’t make much sense, but they thought I was just confused:

@Major_Grooves you dont invite ppl to join you ask for a vouch. It's how we keep quality high can email us – info@ if you're confused—
FounderDating (@founderdating) April 19, 2013

Well anyway, I decided to send a email to my two outstanding contacts. One of them replied saying they had tried but were unable to access the website. He’s a busy guy, so I didn’t want to push the matter any more seeing as he’d already tried twice. In fact my email to my second contact bounced. I had no way of knowing this as the original request was sent by pasting their email in to FounderDating directly – not by a message via LinkedIn, which might have made more sense. A message through LinkedIn later and she had managed to sign in and vouch for me.

Well, 2 out of 3 endorsed me (at least I hope they did!) – I guess that means I will never get in… shame.

Things got more interesting when I got an email from my girlfriend, saying she’d just got a strange email about FounderDating “from” a friend of hers:

Hey Anne,

I’m starting my next entrepreneurial project and looking for the right people to do it with. So, I’m applying to join FounderDating – a handpicked network of entrepreneurs. As part of the application process, I need people to vouch (aka act as a reference) for me. I’m hoping you can do this for me as they won’t look at applications without it. It’s quick, just click this link
http://members.founderdating.com/miniprofile/….

This is a really important part of the process, so thanks for your help,
[name redacted]

The problem being that she knew her friend would never have sent an email like that.

Oh, so FounderDating have been sending this email in my name to my contacts? That’s definitely not cool. As far as I can remember I was not told that my contacts would be sent reminders and I definitely never got a chance to review this text that they sent on my behalf. The worst thing is that they have written it to really sound personal – “Hey Anne”.

I’m protective of my network. I was probably a bit blasé about giving an unknown service access to my contacts in the first place, so I apologise to those people that I have now inadvertently hassled.

I love good viral mechanisms. They can really make a great company. One of my favourite’s is Fab.com‘s, which I have… *ahem* studied in great detail. I’ve been pushing TransferWise loads recently and have got a few people signed up (if I get 2 more I get £50!). I also managed to get £15 of free bets from my friends at TradeChase the other day just by sharing my bets to Facebook (but they’ve removed their normal referral link! Guys – bring it back!).

Most importantly the company with the viral mechanism needs to respect the trust that you have put in them by allowing them access to your network. I’m sure FounderDating haven’t been malicious in their viral intentions. It’s just bad implementation. In fact it’s probably working well – I see loads of tweets about them, although I’m not the only one who is unhappy with their endorsing system.

I would like to be able to log-in and change the settings or something, but I don’t seem to even be able to log-in and when I use their “forgot password” link, I don’t receive anything.

Hopefully FounderDating will take this criticism well and change their system ASAP. And hopefully I get in soon too and find a nice technical co-founder for Satago.net.

We apologise for the interuption…

It’s been over a year since my last blog post. Naughty blogger.

The reason for my silence has been a kind of self-imposed personal stealth mode, as I worked on a few things.

Not that I expect the blogosphere has particularly suffered from my absence… nevertheless I would like to get back to blogging my thoughts.

To summarise, the two main events in my professional life have been:

1. I moved to Berlin, Germany to work at the HQ of Rocket Internet.
2. I raised some money through Seedrs to build the MVP for the startup idea I developed during my MBA.

I’d like to blog about aspects of both. There’s lots to say. Until I get back up to blogging speed I’m going to repost a couple of posts I published on my personal blog a few years ago that I think are still interesting/relevant.

London the Primate City

A blog post about Munich is basically an excuse to post pictures of girls in dirindls

I’m in Munich, Germany at the moment, working on a new Internet company that is growing in leaps and bounds. We’re hiring lots and lots of people, both technical (developers) and non-technical. Something in particular about this interests me – Munich isn’t Germany’s first city, it isn’t even its second – in fact Munich is the 3rd largest city in Germany behind Hamburg and the capital, Berlin.

Why does this so fascinate me? Well, can you imagine setting up a brand new Internet company in the UK’s 3rd city? According to Wikipedia, Glasgow is the UK’s 3rd city. In fact, let’s forget Glasgae for a second, can you imagine anyone ever setting up a brand new super successful Internet company in Birmingham, the UK’s 2nd city? Nope, neither can I.

In the UK it seems that unless you’re in London, you’re nowhere. How does one city get to dominate a country so much, and is it good for the UK? According to George Zipf’s theory of rank-size for an ideal distribution of city size the 2nd city should be half the size of the largest city, and the 3rd city 1/3rd the size, and so on. Mark Jefferson described “primate cities” as those that so dominate the country that they capture most of the population and economic activity in a country. Classic Primate Cities include London and Paris, whilst the most extreme example is Bangkok, which is 40 times larger than the next city.

Compare that to Germany, where Berlin has a population of 3.3 Million, Hamburg is 1.6 Million, and Munich is about 800,000. They almost perfectly follow Zipf’s Law. So which ecomony is doing the best out of UK, France and Germany? Yeah I won’t bother answering that…

Although Berlin, where my direct employers are actually based, is itself considered a bit of a European startup hub, I never get the feeling that it dominates Germany in the same was that London dominates the UK. I don’t think many of my non-British friends in the UK would seriously consider living anywhere in the country other than London. In fact, do people even want to visit Birmingham or Glasgow? Not really. Other than a weekend trip to Edinburgh, for most people London is the UK.

Everyone had gone to Bradford for the weekend.

So for someone from a far-flung corner of the UK, that’s a bit depressing. What chance does Dundee have of becoming some kind of gaming hub, when as soon as a company gets successful it will probably up-sticks to Edinburgh, like Rockstar – developers of Lemmings and Grand Theft Auto – did (yes – Grand Theft Auto was developed in Dundee!).

The UK Government acknowledges the London dominance by trying to force some taxpayer-funded organisations to move to provincial cities. Even the BBC is getting in on the act by moving its BBC breakfast programme to Manchester – a move which is proving rather unpopular with the staff.

I doubt London will ever lose its “Primate City” status in the UK. Nevertheless, I think government is obliged to keep trying to encourage companies to invest elsewhere in the country. Which is why you will get some pretty good incentives to start a company in places like Scotland. Here’s a story in which a founder of an Internet company got a £250k grant from Scottish Enterprise. I was also pleased when my MBA classmate, Xavier, told me that one of the reasons he set up the first Better World Books overseas subsidiaries in Scotland was because he was impressed with how helpful Scottish Enterprise was.

Maybe there is hope!

What I did after the MBA

It’s been a while since I did a blog post, so I thought I should really write a quick update on what I’ve been up to since finishing the MBA last September.

So I was trying to get my own little start-up idea going, but, as I’d already blogged about, I was rapidly running out of runway. Then, seemingly out of the blue, via a classmate, LinkedIn and Skype, an opportunity came along that was too good to turn down.

If I could describe my ideal job (if I was not starting my own company), it would probably be something along the lines of “working for an investment fund, helping them start Internet companies”.

…so I am now Venture Development Director at Rocket Internet, helping them start their Internet companies in the UK. I think that worked out quite well then.

Rocket Internet has a particular reputation and it’s fair to say it divides opinion. Its critics describe it as a “clone factory”. Here’s a recent article in Wired, “Inside the clone factory“, where one of the fund’s founders gives a rare interview. Make you own mind up.

All I can say is – it’s fascinating being on the inside. I cannot imagine it would be possible to get a better lesson in Internet startup execution. Even Rocket’s most vocal critics would be hard-pressed to deny Rocket are masters of execution.

So does that mean I’ve abandoned my own entrepreneurial ambitions? Of course not! Sometimes it only takes an unexpected spark of inspiration to get me thinking about it all again. What I do know, is that I ever do get back in to another startup of my own, I will be immeasurably better as an entrepreneur thanks to the Rocket experience.

Does Oxford University have any claim to MBA startup ideas?

Copyright PharmaVentures Ltd 2010

Another question that was asked by the incoming MBA class to the entrepreneurship panel I was sitting on the other day.

“Does Oxford University have any claim to startups that originate from the MBA class?”

The short answer is “no”.

Normally, when some Intellectual Property (IP) is developed as a part of research at a university, the university has a significant claim to the IP – afterall it has been developed whilst working there. The split can be very fair though – the scientist who originated the IP can get 1/3 to 1/2 share of IP rights with the university.

This can be very lucrative for the university and the scientists involved if the IP ends up becoming part of a successful company or product. For example Remicade, an arthritis antibody treatment, was developed at New York University School of Medicine. In 2007, Royalty Pharma paid $650 Million to buy the royalty stream from NYU. Can you imagine your university suddenly getting a $650 Million cash injection? Nice!

Of course Oxford University tries to commercialise as much technology as possible, mostly through its technology transfer arm, Isis Innovation.

I’m told that one of the biggest royalty streams to Oxford University is thanks to Ed Southern’s “Southern Blot“, a molecular biology technique. However, I’m not actually sure if the patents are still valid.

The Said Business School has an arrangement with the University that any business ideas developed by MBA students are exempt from any claim by the University. Afterall, what right-minded entrepreneur would come to a business school that would lay claim to his ideas just because he was there for a year learning about Porter’s Five Forces and the Laffer Curve?

The exception would be if your business was based on IP developed elsewhere in the University. We do some projects with Isis Innovation so that is quite possible. One of the recent Oxford MBA startups, Lab Minds, is based on technology developed by two people from one of the science departments, so I presume the University has some licensing arrangement there.

So don’t worry about coming here with your amazing startup idea. I think the University is hoping that you’ll make it big and give some money back of your own free accord.

Next post, also a question at the same panel, – should you keep your startup idea secret?

Who says MBAs can’t start companies?

We don't just have jargon. We have frameworks baby. Yeah!

In the startup community there is this “MBAs can’t do startups” opinion, which is often quite strongly expressed. People do seem to love bashing MBAs! In fact, I was on the entrepreneurship panel for the incoming MBA class at Oxford the other day and one of the new class made a similar comment, asking for the panel’s opinion. I won’t speculate here on why this opinion is so popular, but I do suggest you read this post by the Humbled MBA.

In response to the never-ending “MBAs can’t do entrepreneurship” quips I thought I’d do a couple of blog posts about MBA entrepreneurs – one highlighting companies that had been started by MBAs and gone on to some success, and later a post about up-and-coming MBA startups, maybe with an Oxford focus. Luckily, I found that most of the work looking for successful MBA companies had been done by another blogger(*1) and in this Quora post, so I’m going to use them and highlight a few of the companies.

So here, in no particular order, are some successful companies started by MBAs(*2):

Zynga – founded by Mark Pincus (Harvard MBA 1993). Zynga was recently valued at $11.15 Billion. Zoiks!

Geocities – founded by David Bohnett (University of Michigan Ross School of Business 1980). Sorry, GeoCities has closed.

Sun Microsystems – founded by Vinod Khosla and Scott McNealy (Stanford MBA 1980). That worked out quite well.

Nike – founded by Philip Knight (Stanford MBA 1962). Nike make shoes and seem to have been fairly successful. According to Forbes, he’s worth $12.7 Billion now. Not bad. He does sound like a bit of a git though.

Victoria’s Secret was started by Roy Raymond (Stanford MBA 1977?), but there’s quite a sad story to him. In his honour I interrupt this flow of MBA startups for a picture of a Victoria’s Secret model.

Adriana Lima wearing Victoria's Secret bikini. Nice finishing.

If that last company has made you feel amorous but you have no-one to be amorous with, then check out Match.com founded by Gary Kremen (Stanford MBA 1989).

If you visited the previous company, but decided that hot girls probably prefer guys with loads of money, why not make lots of money on the stockmarket with E-Trade*(3)? The company was founded by William A. Porter, who got his MBA from the MIT Sloan School of Management in 1967.

Both ProFounder and Kiva.org  were founded by  Jessica Jackley (Stanford MBA 2007). They’re both relatively young companies, but Kiva in particular seems to have got quite wide adoption in the US with its microfinance model for entrepreneurs in developing regions. I visited their offices earlier this year and was very impressed by the company. Since being founded in 2005, the company has apparently raised $249 Million in loans for the entrepreneurs it helps.

US biotech giant Genentech (now part of Roche) was founded by Robert Swanson, a VC with a MBA from MIT Sloan School of Management (1970). But it wasn’t MBAs that made Genentech big – it was the mAbs. Geddit?! If you get that I want you to know my Twitter handle is Major_Grooves and you should get that too.

Tony Hawkins is a voice artist with over 15 years of experience. He sounds a bit like a robot*(4). He does not, however, have an MBA. Trip Hawkins does though! He got his MBA in 1978 from Stanford and founded computer games company Electronic Arts.

All these companies have been US companies founded by US MBA graduates. Mostly from Stanford. So here’s a token Brit! Lonely Planet was founded by Tony Wheeler (London Business School MBA 1972) but he doesn’t mention his MBA on his profile page*(5). He probably doesn’t think it’s very cool.

I was going to start this post with Fedex as I’d heard that the Fedex “hub and spoke” model was based on the founder’s poorly rated MBA project. However founder Frederick Smith doesn’t appear to have done an MBA. Quite how he managed to start a company without an MBA is really beyond me. Despite their company founder not having an MBA, Fedex does value its MBA employees:

So next time someone tells you that “MBAs can’t do startups”, quote a few of the above companies or send them this blog post.

*(1) I think this list maybe has some mistakes, and some MBA founders that I don’t quite consider “pure” founders – i.e. they they bought in to a company or similar (like Mitt Romney and Staples). Also I’ve not mentioned any of the finance firms here because they are boring.

*(2)Note I’m only highlighting the MBA founders here. Many(most?) of these companies had non-MBA co-founders who were instrumental in the companies’ success. The point here is just to show that MBAs can be involved in successful entrepreneurship as company founders.

*(3) This WannabeVC does not give investment advice. Don’t do shares kids. If you want to try trading, you should see that startup I write about in the follow-up to this post.

*(4) Seriously, he really sounds like a robot. Is it his voice used for those instant animation movies with voice over that people have been posting on YouTube recently? What I mean is… maybe it’s the robots that sounds like him!

*(5) Back then, in the olden days, it wasn’t called an MBA – it was actually a MSc in Management that Tony received. Still doesn’t sound cool.

A Solution to the MBA/Entrepreneurship Paradox

As cunning as a fox that's Professor of Cunning at Oxford University

There’s a paradox that comes with doing an MBA and then trying to be an entrepreneur.

I’m not talking about whether or not MBAs make good entrepreneurs, or whether anything you learn on an MBA is useful for a startup. Sure, most MBAs go off to become management consultants or work in finance, but from my school I think there’s at least 10% that go off and start companies after their degrees.

No, I’m talking about the paradox of leaving a degree with a shed-load of debt and trying to “bootstrap” a startup. You can reduce many costs to try and extend the metaphorical runway, but the massive £500-600 a month loan repayments that kicks in 3 months after you finish the course makes for quite an elephant in the room.

The problem is that when you explain to investors what your personal bootstrapping cash burn-rate is you have to inflate it from a fairly reasonable £21k to around £30k (gross salary equivalents before tax), which doesn’t sound much like bootstrapping to an investor.

Put bluntly, the MBA loan repayments make it damn difficult to live cheaply after your course finishes. Of course not everyone has to take such a big loan to do the MBA, but I think I’m far from the minority (Note: my running out of runway problem doesn’t even include my loan repayments as I’ll have run out of money before they even start. Ha!).

Fear not though, I have a cunning plan that might cure this paradox!

Problem: Business schools want to encourage entrepreneurship. MBAs are expensive and most students have to take chuffing huge loans to pay for them, which impedes entrepreneurship.

Solution: business schools refund the MBA loan to the bank and converts it to convertible debt based on the startup the student has started during the course. The loan would convert to equity in the startup at the first qualifying financing round. If they don’t raise any finance within a certain time-period, then the loan reverts to a normal personal debt, with interest accrued.

There would of course have to be some safe-guards to prevent wide-scale abuse and people setting up fake companies after the degree, but I’m sure with some more thought it could be possible.

Of course it will never happen. The amount of money the school would “lose” in the short-term would be massive. Perhaps a benefactor could finance the scheme?

I know it sounds like a fairly hare-brained scheme, but put it this way – if a business school really believes its MBA programme is compatible with entrepreneurship and it really believes in the students it recruits, then it should have confidence in the businesses they start. If they got one or two home runs, then they could make a good return.

Potentially true

I was considering titling this post, “would anybody like to pay off my student loan for me?”, but that seemed a bit too blunt.