Monthly Archives: June 2010

WOOT! Sold to Amazon for $110M

The Amazon folks have been in Dallas visiting ShopSavvy, but their real reason for the visits must have been the WOOT! deal. MG Siegler is reporting Matt Rutledge just sold his business for $110M to Amazon. I have tried to meet with Matt over the years, but he would never return my calls. After I read his letter to his employees I really wish I had been able to meet him.

Here is the letter Matt wrote to his staff:

Date: Weds, 30 June 2010
From: Matt Rutledge (CEO – Woot.com)
To: All Woot Employees
Subject: Woot and Amazon

I know I say this every time I find a picture of an adorable kitten, but please set aside 20 minutes to carefully read this entire email. Today is a big day in Woot history. This morning, I woke up to find Jeff Bezos the Mighty had seized our magic sword. Using the Arthurian model as a corporate structure was something our CFO had warned against from the very beginning, but now that’s water under the bridge. What is important is that our company is on the verge of becoming a part of the Amazon.com dynasty. And our plans for Grail.Woot are on indefinite hold.

Over the next few days, you will probably read headlines that say “Matt Rutledge revealed to be monstrous pseudo-human creation of Jeff Bezos.” You might even see this photo making the rounds. Rest assured that these rumors have nothing to do with our final decision. We think now is the right time to join with Amazon because, quite simply, every company that becomes a subsidiary gets two free downloads until the end of July, and we very much need that new thing with Trent Reznor’s wife on our iPods.

Other than that, we plan to continue to run Woot the way we have always run Woot – with a wall of ideas and a dartboard. From a practical point of view, it will be as if we are simply adding one person to the organizational hierarchy, except that one person will just happen to be a billion-dollar company that could buy and sell each and every one of you like you were office furniture. Nevertheless, don’t worry that our culture will suddenly take a leap forward and become cutting-edge. We’re still going to be the same old bottom-feeders our customers and readers have come to know and love, and each and every one of their pre-written insult macros will still be just as valid in a week, two weeks, or even next year. For Woot, our vision remains the same: somehow earning a living on snarky commentary and junk.

We are excited about doing this for all sorts of reasons. One, our business model is so vague that there’s no way Amazon can possibly change what it is we’re truly doing: preparing the way for the rise of the Lava Men in 2012. Also, our deal means that Jason Toon will finally be released from that Mexican jail owned by Zappos honcho Tony Hsieh. No, don’t lie, Tony, we’ve seen the paperwork. And we need a powerful ally in case Steve Jobs finally breaks down and comes after us for all our Apple jokes over the years. Don’t think of it as a buyout; think of it as NATO!

I will go through each of the above points in more detail later, but first, let me get to the top 5 burning questions that I’m guessing many of you will have.

TOP 5 BURNING QUESTIONS:

Q: F1RST!!!!
A: Okay, that’s not a question, but it is a good place to mention that our forums will still be policed by a team of moderators, as before. And also, Woot’s previous and always-in-effect privacy policy will still be just as always-in-effect, so don’t worry, there are no plans to suddenly give up or merge your forum data.

Q: Is Snapster leaving?
A: Are you kidding? He’s out the door about ten seconds after that check clea- that is to say, Snapster will continue as Woot.com CEO, just like before, and the rest of our staff’s not going anywhere either. Woot and all our various sites will continue to be an independently operated company full of horrible, useless products and an untalented jerkface writing staff, same as it ever was.

Q: Will the Woot culture change?
A: Amazon is interested in us because they recognize the value of our people, our brand, and our unique style of deep-tissue, toxin-releasing massage. And they don’t want to start changing things now. Amazon’s hoping our nutty Woot steez continues to grow and develop (and perhaps even rubs off on them a little). They’re not looking to have their folks come in and run Woot unless we ask them to, which incidentally you can do by turning off the bathroom lights and saying the word “Kindle” three times; a helpful Amazon employee will appear in the mirror. That said, Amazon clearly knows what they’re doing in a lot of areas, so we’re geeked about the opportunities to tap into that knowledge and those resources, especially on the technology side. This is about making the Woot brand, culture, and business even stronger than it is today, and we expect that any changes will be for the better or we wouldn’t bother with this endless paperwork.

Q: Where can I get one of those vuvuzelas?
A: Are you even paying attention?
Several months ago, when we were all sitting on Jeff Bezos’s bumper drinking orange Mad Dog and trying not to be noticed, we heard a voice in the distance yelling “You kids better not scratch my Mercedes or I’m calling the cops!” We ran. It was later that night when Amazon came by the house and said they liked our style and also wanted to get that money we owed them for messing up the chrome. We like to think that our relationship with Amazon will continue at this level for many, many, many years to come.
But we here at Woot are still a thoughtful company, so, at the end of the day, I watched the sunset, and its golden-hued glory made me think about two questions:

1) Is there really a universal deity?

2) Does such a thing preclude free will or are we humans in control of our own destiny?

After spending a lot of time falling asleep at the library while facing the philosophy books, I determined that the concept of destiny is a construct that allows man a gentle release from facing the terror of his existence, and that a Hyundai full of twenties would pretty much offer the same benefits. And so, I ultimately said YES!

This is definitely an emotional day for me. The feelings I’m experiencing are similar to what I felt in college on graduation day: excitement about getting a check from my folks combined with nausea from a hellacious bender the night before. I remember fondly that time when an RA turned on the lights and yelled “WHO OWNS THESE PANTS?” Except this time, the pants are a company, and the RA is you, and the sixty five hours of community service is a deal that will ensure the Woot.com experience can continue to grow for years and years and years, like a black mold behind the Gold Box. Join us, because together, we can rule the galaxy as father and son. Also, there will be six muffins waiting in the company break room, courtesy of the nice folks at Amazon.com. Welcome to the family!

Matt Rutledge
CEO, Woot

I wish iPhone developers were more like my eight year old. . .

We are in the process of interviewing several candidates for positions at Big in Japan (HTML5 Ad Designers, iPhone Developer, Blackberry Developer, Android Developer, .NET Developer, PHP/JAVA Developer) and it shocks me how many candidates have no examples of their work. Before agreeing to interview an iPhone developer I ALWAYS ask them for a list of applications they have in the iTunes app store. Less than 50% of the candidates who apply can point to an example of their work in iTunes. Imagine showing up at the Dallas Morning News to interview for a writing position without an example of your work (published or unpublished). It just isn’t done. 100% of candidates will bring examples of their writing 100% of the time. Why isn’t this the case in the development world?

Some of the candidates explain that their current full-time position takes all of their time and they haven’t been able to finish an application. Really? If you are serious about becoming/being an iPhone developer I think it would make some sense to build something to demonstrate your skill. Build an app with your resume on it – anything that proves you have the ability to write in Objective C. Other candidates have told me (more than one) that they didn’t want to pay the $99 developer fee that Apple charges! Really? I wish I could tell them that the interview was costing me more than $99, but I try to be nice and escape from the interview as quickly as possible. My eight year old son spent a week in a video game development camp and even he can show a potential employer examples of his work. My advice to would-be developers (iPhone or otherwise) is to bring examples of your work with you when you interview. If you don’t have examples, take a few hours each night to create something – anything – and then use that when you interview.

Groupon is like playing Russian Roulette

If you haven’t heard of Groupon you are likely over 35, married or male. Groupon is a really cool idea. Each day the site makes a single group offer available. What sort of deals can you get? Pretty standard stuff such as:

  • $3 for a bagel that would normally cost you $8
  • $15 for cupcakes that would normally cost you $33
  • $24 for a manicure that would normally cost you $55
  • $49 for a spa treatment that would normally cost you $154

The reason Groupon is so successful is the social nature of the deals. To get them YOU must get your friends to buy the deal so you can get it. It is just a matter of time before EVERYONE has been exposed to Groupon. It is such a simple concept LOTS of entrepreneurs have or plan to launch competitive businesses. Lots of people have approached me about starting a Groupon-killer so I started looking into the business (one such entrepreneur suggested I read Chris Dixon’s post on competition if I didn’t want to fund his deal). Groupon is backed by a Russian investment firm (helpful if anyone gets out of line). The demographics are REALLY interesting:

So Groupons are perfect for young, educated women who have money. Groupon has effectively figured out how to get their attention and before long almost all ‘young, educated women who have money’ will know about the concept. But what happens next?

One of our friends owns a spa that uses Groupon to market their services. Once a quarter or so Groupon allows his spa to run a ‘Groupon’ for spa services in a major city. Over the past few days he sold more than 1,500 Groupons generating $70,000+ in revenue for Groupon and $50,000+ in revenue for the spa (Groupon gets to keep between 15-30% of the revenue and send the rest to the spa a few days after they collect it). These services are provided at a 68% discount – and I suspect they are delivered on a break-even basis. The spa will convert a certain percentage of these new customers into active members making the deal worthwhile. My question is how many more times can he use Groupon before reaching the total universe of potential customers?

Throughout the rest of the quarter the same ‘young, educated women who have money’ who were attracted to his spa by the GREAT deal will be seeing other GREAT deals from other spas. Will they learn to ‘wait’ to use these ‘loss leader’ deals or will the abandon the Groupon and commit to our friend’s spa? If deals become commonplace and consumers expect them my friend (and his competitors) won’t be able to continue their practice of offering margin-free services. On the other hand Groupon users settle down and start using their favorite spa and stop taking new deals from new spas the system won’t work anymore. Either way it is just a matter of time before Groupon breaks. Groupon seems to focus on food and personal services – each susceptible to this same problem.

The Groupon model is PERFECT for generating more business for local service businesses (spas, massage parlors, restaurants), but the volume of business is troublesome for many retailers. Take the example of my friend’s spa. Assume that he has 17 treatment rooms and that each room can offer 6 one hour treatments each day per room (leaving room for cleaning and such). This means that his spa (and it is a big one) can handle 100 treatments each day or 700 per week. The last Groupon he ran generated more than 1,500 treatments. Assuming his business has been operating at 50% capacity prior to the sale of the Groupon it would take five solid weeks to fulfill the Groupon. Of course this sort of ‘perfect fill’ would be impossible because most ‘young, educated women who have money’ want to get their treatments in the evenings and weekends. I suspect that more than a few of the ‘young, educated women who have money’ who bought this deal will be surprised that they won’t get a treatment for several weeks. More and more businesses who use Groupon are recognizing this issue. This week Aaron Crowe wrote an article titled, “Groupon discounts working too well, overwhelming small businesses” covering the issue following a Business Week article on the same topic.

There are a LOT of ways Groupon can build on its success and even more ways for it to shoot itself in the head. I wish I had come up with the idea AND had the time to actually execute, but I would be surprised if Groupon is a long term success…

How to keep a secret. . .

Earlier this week I watched as an entrepreneur lied to a venture capitalist about an acquisition only to be proven a liar an hour later. I thought it was worth a post. Lets say you are in talks with a huge ecommerce company to buy your startup. Those talks go well and you close the deal, but you have to keep it secret for a while (i.e. because they are public). What do you do if a VC that you have been talking to emails you and asks, ‘Hey I heard you were acquired by xyz, love to get some of the details.” If you are inexperienced you might be tempted to lie and suggest they must be wrong. The problem with the lie is that you will be found out as a liar in mere moments. VCs have very long memories and they talk to a LOT of folks everyday. No doubt that VC has spent some time working with you and as a result talked to other VCs about you and your company. Those other VCs will hear about the acquisition and call the VC you lied to and ask him about the deal. He will either tell them that he has no information or he will tell them the story about your lie. So what is the right thing to do? Forward the email to your acquirer and sit back and wait – you don’t need to respond to the email. The right answer is the least amount of work and protects your reputation.

Hacker Angels

Are you a coder, developer or a hacker? There is a an angel group made up of self described hackers designed for you. The group is called Hacker Angels and includes Going Inc. founder and current AOL executive Roy Rodenstein, Delicious founder Joshua Schachter, Duck Duck Go’s Gabriel Weinberg, Hotornot’s Jim Young, and Punchfork founder Jeff Miller.

According to Audrey Watters Rodenstein described the Hacker Angel strategy: “We do focus on people that are hackers and are really pushing the product forward rather than just pure concepts or people looking for co-founders to execute. The ideal scenario for us is getting in very early because we can provide a lot more support and advice. We’re comfortable with a little more high risk.”

From the Hacker Angels website:

We are hackers who are also angel investors.

Let us know what you’re looking for, and please
include a prototype if at all possible.

This is an informal association and not a fund.
If inclined, we may provide feedback, advice,
mentorship, hacking, investment and/or serve
as advisors or independent board members,
on an individual basis.

If you’re a hacker angel too, please introduce yourself!

Sport the Startup Happy Hour 2.0 Badge

I just posted the Startup Happy Hour 2.0 badge over on the Big in Japan blog. If you are a sponsor it might make sense to put the badge on your website/blog (I have asked Jose to add it here). If you haven’t joined the group, go ahead and join now. Our first ‘new’ meeting will be in October, but look for summer-style events in the coming weeks. For directions on how to add the badge visit this link.

Should you leave Dallas to get funded?

Back in the 1990s my father told me to move to the Valley if I wanted to raise money. I proved him wrong, but he was right. It would have been a LOT easier to raise money for my startup in San Francisco. Ryan Roberts, my very own startup lawyer, points to a great paper titled, “Buy Local? The Geography of Successful and Unsuccessful Venture Capital Expansion” just published by Henry Chen, Paul Gompers, Anna Kovener, and Josh Lerner.”

The paper concludes that Non-local investments made by venture capital firms based in the Valley, Boston, and New York outperform their local investments.”

I was on Sand Hill Road a few months ago and the guys at Sequoia explained that my startup was a no brainer to fund, but I would need to relocate to the Bay Area. Maybe I should send them a link to the paper on Scribd. Thanks for the post Ryan.

Dallas TechFest, Sign Up Now!

Bradley Joyce has the scoop on the Dallas TechFest. The popular event hosts more than 400 developers here in Big D on July 30th at the University of Texas at Dallas. The event is sponsored by Microsoft.

Sessions include: Silverlight, HTML 5, MVVM, TDD, MonoTouch for iPhone, ASP.NET, TypeMock, Clojure, Java, Zend Framework, PHP, API, MySQL, Flex, Degrafa, AIR and Sqlite.

Speakers include: Amir Rajan, run Gupta, Caleb Jenkins, Brian Blood, Casey Watson, Chander Dhall, Chris Cornutt, Chris Patterson, Craig Walls, Devlin Liles, Jeremy Brown, Jim Armstrong, Kenny Yates, Kevin Schroeder, Kyle Kelin, Matt Hinze, Paul Holser, Seth Bienek, Ted Neward, Todd Anglin and Tommy Falgout.

How much should startup CEOs make?

More than a decade ago I asked for $145,000 as CEO of the startup I founded. The investors didn’t balk. I would have been embarrassed to ask for more, but I bet I could have asked for more. Ryan Roberts, the Startup Lawyer, suggests that $300,000 is an unreasonable yearly salary for a CEO to request/demand. Comstudy has a report titled, “Compensation & Entrepreneurship Report in IT” that provides compensation details for startup CEOs, here are some of the interesting numbers:

  • Only 33% of startups in later stage funding rounds still have their founding CEO
  • By the second round founding CEOs own 18% of their company
  • Average base salary for founding CEOs is $237,000
  • Average total compensation for founding CEOs is $286,000
  • Average total comp for non-founding CEOs is $339,000
  • Average ownership for non-founding CEOs is 5.46%

Given that the average startup CEO salary is between $286,000 and $339,000 I am not sure $300,000 was that unreasonable.

Free Barcode Scanner License

We thought it might make sense to create a distinct home for our free barcode scanning libraries and thought http://www.freebarcodescanner.com would work. If you need a scanning library for your mobile app and you don’t have a lot of money, consider using our free library. We use it for ShopSavvy – the world’s leading price comparison application – I bet it would work for your project too.