July 8, 2011
The Keys to Tech Startup Success
Johann Schleier-Smith‘s mother bought him his first computer when he was six or seven years old. Since then he’s been passionate about computers and became an avid programmer in his spare time. He met Greg Tseng, while working on school projects in middle school in Virginia.
The two teamed up in college to launch several internet companies, including a price comparison site to help students at Harvard save money on text books. They started Tagged in 2004 (around the same time that Facebook and MySpace were getting started) and received $7 million from the Mayfield Fund, a prominent venture capital firm in 2005.Â However, instead of gearing their website towards connecting with friends and family, Tagged focuses on meeting new people for dating, social gaming, and sharing common interests.
Today, the social discovery website projects that revenues will reach past $40 million in 2011 as a result of their three distinct revenue channels: virtual currency micro-payments, premium subscriptions, and advertising. Schleier-Smith and Tseng will be mentors for participants of the NewMe Accelerator, a program that brought eight tech startups to Silicon Valley where they will learn about ways to improve their companies and raise angel investments and venture capital this summer. The two co-founders spoke to the group yesterday about their challenges, and how they built Tagged.
Black Enterprise caught up with Schleier-Smith at his office and got his advice about things new start-ups should consider on everything from raising capital to moving to Silicon Valley.
- On Innovation:
You need to get people excited about the idea. You need to give people a compelling notion of what you’re building, why it’s important, why people should care, and why they’re going to use it. “The big difference between a tech start up and a car wash is that you’re doing something that no one has ever done before and in that sense it requires more emphasis on innovation,â€ says Schleier-Smith. “In some sense you’re proposing to create something that doesn’t exist and you have to justify why it needs to exist.â€
- On Raising Capital:
“Raising capital is hard,â€ says Schleier-Smith. There are a lot of things that you have to do in order to be successful but one of the things that investors are looking for is momentum. Investors want to see that you’ve got business, customers, and revenues. “When you can show that the idea is moving, that it’s in some sense proven and it just needs to be built out, then money tends to follow pretty quickly, along with talented people who want to work at your company,â€ adds Schleier-Smith.
- On Building the Team:
Pulling together the right group of people is imperative to finding success in the tech community. “If raising money is challenging, which it is, building a successful company and getting everything right is even more challenging. Investors are keen to seeing groups of smart motivated people who are going to do what it takes to make it through the company building process,â€ says Schleier-Smith. “You need to find people you get along with really well. Greg and I know how to collaborate really well. Some teams are marriages of convenience. If people aren’t fully aligned. That is going to be a prescription for problems sooner or later.â€