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What’s It Like Being a NonProfit in Y Combinator? Five Questions with New Story CEO Brett Hagler

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Y Combinator Demo Days are a unique event in Silicon Valley. 100 Startups and what feels like 1000 investors all chasing unicorn dreams. But what happens when you’re a startup that never plans to get acquired, IPO or even return money to your backers? A few years ago YC started admitting a small number of nonprofits each class who could benefit from the focus and momentum of startup thinking. Earlier this year I was impressed by, and donated to, Detroit Water Project, which helps pay off water bills for people who need assistance. This class New Story caught my eye – an organization building houses for those desperately in need. Now that Summer 2015 YC has finished, I caught up with New Story CEO Brett Hagler for a quick chat.

Hunter Walk: As a non-profit, how’d you decide YC was the right path for New Story?

Brett Hagler: We started New Story with a mindset to operate just like a for-profit tech startup. To us, there should be no difference in mentality. We built a disruptive model (just like all companies in the batch) and are using tech to scale. We wanted to learn from the best, therefore, YC was the perfect fit!

HW: Was there a particular bond between you and the other non-profits in the class? Between you and the non-profits from classes past? What lessons did they share?

BH: There wasn’t a bond that was unique between the nonprofits, at least in our experience. Since all of the YC companies are being guided by the same overarching principles like “do things that don’t scale” and finding product-market fit, the lessons we learned from companies weren’t differentiated by whether or not they were not for profit.

We have a big vision to turn tent slums into sustainable communities, and it’s encouraging to be surrounded by other companies with big visions that we can learn from and be inspired by.

HW: When you look at where New Story is today versus where you were before YC, what has changed the most?

BH: Our mindset has changed the most. We’ve funded 91 homes ($546,000) during YC, and the cause was the audacity to think bigger, along with the discipline to reverse engineer big goals into weekly and daily goals.

We originally told Kevin Hale that we wanted to fund 50 homes during YC (which would’ve been crazy growth for us), but he challenged us to do 100 homes. Our team was speechless (literally) when Kevin set this challenge, but it sparked the 100 Homes in 100 Days Campaign. We’re currently at 91 homes in 84 days.

HW: Do you see a shift in the culture of the tech community to want to donate time and dollars to causes that matter to them? Sometimes founders get accused of using SF as a playground, buzzing between hot bars in Ubers but ignoring the complexity of the city around them.

BH: The tech community needs nonprofits they can believe in. Nonprofits that are innovating, disrupting status quo models, using tech to grow efficiently, and focusing on building a great product with a formidable team.

We’ve had great support from the tech community because they believe in our transparent, tech-powered model. They can see EXACTLY who they help and know that 100% of their donation will directly build a new home.

HW: How can someone get involved in New Story and contribute?

Start a fundraising campaign. You can “donate your birthday” to help build a home.

Meet a family and help fund their home or fund a full home yourself ($6k/home)

Invest into our operations. This is a private group of donors known as “The Builders” that act as our angel investors. Brad Feld is an example of one of our Builders. Email me, brett@newstorycharity.org, for more info.

 

 

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Public Spaces: Towns Creating Safe Zones to Meet For Craigslist Transactions

You want to buy or sell on Craigslist but worried about meeting up to complete the transaction? Towns are creating safe “exchange zones” with ample lighting and video surveillance to facilitate peer-to-peer commerce. Often in concert with the local police, they’re a fascinating example of the physical world shifting to reflect the needs of the digital one. Are they an aberration while we solve for trust online (craigslist notably lags in this area since they don’t require any real identity in their listings)? Or should each municipality think more deeply about how town squares, libraries and other public institutions can evolve.

Bedford police creating saf (7)craigslist-crop

tom one for one

Has the “Buy One, Give One” Buzz Faded?

A few years back lots of entrepreneurs pitched themselves as the “Warby Parker of X.” Many of those pitches even emulated Warby’s “Buy a Pair, Give a Pair” program where they’d donate a pair of glasses to charity for each pair they sold. But now when someone tells me they want to be the “Warby Parker of X” it usually refers only to a vertically-integrated private label brand in a stagnant, traditional industry that tended to raise prices faster than quality – for example, Casper as the Warby Parker of Mattresses. What happened to the social good component of one for one?

Warby had this baked into its DNA, not just as a marketing gimmick – it’s even a B Corp to support this aspect of social benefit. My guess is that the other startups couldn’t make a cultural or economic argument in the same way. TOMS was the first company I recall popularizing the concept and there’s a number of other small companies which have tried similar.

Folks who’ve followed the retail sector and social benefit corps closer than I have: was one for one an idea that heated up and ran its course, or are companies today still launching with this promise?

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Seed Stage VCs Compete With One Another But Not How You Imagine

There are more than 200 “micro VCs” (fund sizes < $100m), a number which has grown significantly over the last decade and even since just 2013 when we started Homebrew. Folks who aren’t in the trenches of early stage investing often assume that this sheer volume makes “competition” my #1 worry. Quite the opposite – I feel near zero competitive pressure from 95% of similarly sized funds. Most have different strategies, focus areas and networks. They tend to fill in rounds around our lead or fund companies that wouldn’t be a good mutual fit for Homebrew. They can be successful (or not) without impacting my business. Availability of capital does not equal commodification of capital.

So what about the other 5% of funds? In my worldview there are ~10 seed funds that focus exclusively on this stage of company, in areas we’re interested in and also credibly seek to lead rounds. Some also have operating experience (since Satya and I believe that’s an important part of our value proposition). Most have been around longer than we have and have proven to be good investors. But yet I still think of them holistically as coopetition, not pure competition. Why?

1. Many seed deals have two leads, which means we are collaborating with them as often as we’re competing

2. You spend a lot of time together in the marketplace and have chance to share notes about what’s changing in the environment, how to help entrepreneurs generally. Seed stage is cordial and relationship driven.

3. Most opportunities we don’t all see/agree on – that is, out of every 100 seed startups, you can expect consensus on very few so it’s not often that we and our peer funds are all looking at the same deal and trying to win it.

So for me the competition at seed stage isn’t about winning deals, it’s about seeing deals. I want to be in that handful of funds that a founder (or their advisors) want to talk with about their NewCo. It’s not enough to be thought of as a generally nice guy; fund returns are made on being able to be among the first to see opportunities. Our Fund I was heavy marketplaces, API/SDK, SaaS and Direct to Consumer. In Fund II besides extending in those competencies we’re spending an increased amount of time on enterprise/industrial hardware and enterprise collaboration (among others). And we think a lot about what we need to do in these areas to be in a founder’s Top Five. And it’s not trying to be all things to all people but rather concentrating on sets of relationships, competencies and companies. For a new VC, this is probably the hardest aspect of building dealflow.

Posted in VC 3

Quickie Homebrew Update: Clementine Acquired by Dropbox & UpCounsel Raises $10m Series A

News from Homebrew this past week!

  • Our very first investment, an enterprise mobile communication company called Clementine, announced they’d been acquired by Dropbox. It’s a great fit for the team and tech, a solid outcome for investors and now we have a stake in a unicorn :)
  • Our second investment UpCounsel announced they’ve closed a $10m Series A financing that we were happy to support. UpCounsel has really started to prove that labor marketplaces have real value not just for consumers but in the enterprise as they help connect businesses looking for legal assistance to high quality independent attorneys.
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A++++ : Is eBay’s Reputation System a Hidden Gem?

Imagine if 10 years ago eBay had opened up its account system to all commerce sites. By encouraging people to sign-in with eBay, any other site could have accessed eBay’s reputation system and, let’s say, discounted fee PayPal. For me it’s one of the biggest missed opportunities of the decade, one which could have put eBay at the center of P2P commerce.

So now, in 2015, having spun off PayPal is it too late? What if eBay opened up its reputation system today atop a Bitcoin wallet/exchange? Playing the bet that in a virtual currency environment, a realname (or pseudonym-based) reputation system could be valuable.

I’ve seen lots of startups pitch these sorts of reputation systems to me but they lack distribution or data to solve the coldstart problem. And I don’t believe P2P market leaders like Uber or airbnb want to either share data back into the ecosystem or adopt 3rd party reputation systems. Trust and ratings are a competitive advantage for them.

What creative steps could eBay take with its reputation system that thinks about the broader ecosystem, not just transactions on their platform? What if eBay decided it wasn’t in the transaction business, it was in the trust business?

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Sales Lessons From 13 Year Old Who Sold 22,000 Boxes of Girl Scout Cookies

I’ve got a term sheet waiting for this girl as soon as she’s ready!

How To Sell The Most Cookies (via NYTimes)

Smile. ‘‘No one wants to buy from a person who is frowning,’’ says Katie Francis, 13, who sold 22,200 boxes of Girl Scout cookies this year, breaking the world record she set last year. Look and act like a professional, even if you’re just a child. When making the rounds in Oklahoma City, Francis wears her troop uniform and passes out business cards. Don’t waste time trying to convince naysayers; instead, ‘‘move on and find the yesses.’’ On school days, Francis works past dark, and she logs 12- to 13-hour days on the weekends.

A saleswoman cannot know the heart of consumers at first glance. Whatever it takes, secure their attention first. Francis goes door to door even in snowstorms. When she sets up a booth in heavily trafficked areas — outside a Walmart, say — she sings songs from the movie ‘‘Frozen,’’ with lyrics adapted to praise the virtues of cookies. Once you have potential customers in earshot, your verbal pitch should appeal to multiple motivations simultaneously: their hunger, impulsiveness, pity, inner philanthropist, sweet tooth. ‘‘There is more than one way to sell a cookie,’’ Francis says. Know what you’re selling: Francis can rattle off lists of ingredients and point out which cookies are ­gluten- and nut-free. What Francis refers to as her ‘‘cookie-­selling career’’ has led to multiple job offers and motivational-­speaking gigs. She recently addressed a university’s entire business department and will be the July speaker at Oklahoma’s Professional Sales Association.

Don’t neglect to cultivate your behind-­the-­scenes support crew. Francis’ mother stores up to 10,000 boxes of cookies in her garage at a time during the two-month cookie-­selling season. At night, she helps Francis count money and load inventory into the family’s S.U.V. and drives her to prime selling locations that change with the time of day. (A saleswoman needs to be something like a predator tracking her prey’s movements.) When her mother is not available, Francis has recruited adults willing to shuttle her around.

As for snacking on cookies while on the job, which some girl scouts do, Francis disapproves. ‘‘It’s better,’’ she says, ‘‘not to eat your product.’’