Tag: Retailmenot

Go Big Austin

Founder of Silicon Hills News

In a panel titled “Austin’s Brand: Go Big or Go Home” at the Austin Technology Council’s CEO Summit three seasoned tech leaders gave their perspective on building a billion dollar company.

“Something that Austin is not known for is thinking big,” said Mark McClain, CEO and founder of SailPoint Technologies.

Austin companies often don’t go long and take their ventures to the “Thunder Lizard” stage, a term made famous by Mike Maples Jr. with Floodgate Ventures in Silicon Valley. Maples has challenged Austin entrepreneurs to come up with the next big thing and create a $100 billion tech company in the next 10 years, a venture he calls a Thunder Lizard.

RetailMeNot always had a bigger vision, said Cotter Cunningham, its CEO.

“For us, we felt like there was an opening and we could take advantage of it,” Cunningham said.

RetailMeNot is now the world’s largest online coupon and deals marketplace. Cunningham raised about $300 million from investors, including Austin Ventures, Google ventures and others. His intent was always to build the biggest company in the coupon market largely through acquisitions.

RetailMeNot went public last June. Its stock trades under the symbol “SALE” on the Nasdaq stock market and closed at $25 a share on Thursday. It has a market capitalization of $1.2 billion.

Rod Favaron, CEO of Spredfast, a developer of enterprise software for social media platforms previously ran a company called Lombardi Software, which he said was in a niche market. IBM acquired Lombardi Software in 2010. He then joined Spredfast.

At the time, Favaron had no idea that Spredfast was chasing a multi-billion market.

“In 2011 we started to sell to people for $100 a month,” he said. “It was completely unclear how big the market would be. It hit us last summer that this was a very big market. We went from very short term planning horizons to long term planning horizons.”

Spredfast raised $60 million and recently acquired another Austin startup in the social media market, Mass Relevance.

“It’s either going to be a giant fireball or really successful,” Favaron said. “We’re shooting the moon on this one.”

At SailPoint there may be a chance to go bigger and go longer, McClain said.

But it’s often difficult to see that massive potential at the startup stage, he said. Some people may think their market is small but it may develop in ways they didn’t think about, he said.

The key to building a massive company that can scale is product and market fit and market size, the panelists said. The market has to be really big and the startup has to be the leader.

Investors can also keep a company from going big if they don’t think big, Favaron said. It’s really important that investors be in synch with the long-term vision of the company, he said.

The founders also have to have the right mentality to go long and take risks. Some first time founders want to maintain control and that means they don’t raise a lot of money and take risks. For example, the founders of Spredfast were willing to sell the company for $6 million, Favaron said. But he saw a much bigger market and potential.

“Our biggest competitor has raised $70 million,” Favaron said. “I’m underfunded, which is weird. It’s a super big market. I think going big is something we don’t do enough in Austin.”

First time entrepreneurs are more risk averse and tend to sell their company so they can put some money in the bank, according to the panelists. Second time founders are more willing to raise more money and risk more.

“If you’re the founder you can do what you want unless you raise money,” Favaron said.

Austin needs to spin out more first time entrepreneurs quickly and cultivate a set of executives “ready to swing big for the next one,” according to the panel.

Austin has a strong brand as a technology center, which South by Southwest Interactive has helped to cultivate globally, said Favaron. He said he doesn’t have any trouble recruiting tech talent to Austin. In fact, Spredfast just recently hired a Chief Financial Officer and had plenty of qualified candidates, he said. Earlier in the day during a different panel discussion, Chuck Gordon, co-founder of SpareFoot, mentioned his company was having trouble recruiting a CFO to relocate to Austin.

Funded in Austin…or Not at SXSW

Reporter with Silicon Hills News

Josh Kerr of Written, Cotter Cunningham of RetailMeNot and Utz Baldwin of Plum, photo by Susan Lahey

Josh Kerr of Written, Cotter Cunningham of RetailMeNot and Utz Baldwin of Plum, photo by Susan Lahey

In many ways, Written’s Josh Kerr was the poster child for how one gets funding in Austin at the Funded in Austin panel at SXSW Tuesday afternoon.

Kerr spoke glowingly of the help, support and advice he got from Capital Factory. He talked about building relationships with various angel investors over coffee, lunch or drinks until he gave them the ask. And he gave interesting tips: For example he suggested telling angels he’d love to have them invest even a small amount just to get them involved, and usually they upped the number because the investment he suggested seemed too small.

And the company wound up with $1 million seed round.

By contrast Utz Baldwin of Plum (formerly Ube) said finding funding for hardware like his lighting system that can be operated by your smart phone has found few Austin funders. It did, however, raise nearly $1 million on Fundable.

Finally, Cotter Cunningham of RetailMeNot explained that funding had been a little bit different for his company because his business model entailed buying existing businesses, which is an easier sell in some ways than getting funding for an idea alone. He got a $30 million round.

The panel, moderated by Shari Wynn Ressler, founder and CEO of Incubation Station, explored the process and hurdles of getting funding in Austin. All the panelists agreed that raising money is pretty much the CEO’s full time job, which can be a challenge.

For one thing, as Baldwin said, there were parts of developing the user experience he really wanted to get more involved with because it’s part of the business he enjoys. But he didn’t have time because he was busy raising money. Kerr said his team initially resented the fact that while they were doing the work of creating the company, he was wining and dining investors. Once he got the money though, they forgave him.

Beware the Soft Yes

“It was a little tricky with our model,” Cunningham said, “because it’s difficult to raise money and do an acquisition at the same time.” On the one hand were the funders doing their due diligence and collecting data and on the other were the selling businesses asking “Are we going to do this or aren’t we?”

Kerr said he kept the amount Written was asking for small, so that it looked like they were close to success. Then as more money came in, he upped the raise amount.

Cunningham and Kerr worked on building their networks, asking “Who do you know?” Baldwin wound up raising money from people he knew might be interested in the idea. After a ten minute phone call to a retired Cisco executive, for example, the exec gave him $150,000.

People who initially say no might change their minds if you make tweaks to the product that they suggest or if someone else takes the lead investment position, panelists said. Cunningham said “You have to be persistent. “Some of the people who gave us money told us ‘Until you called four times we weren’t paying attention.’”

But when making the ask, you have to know exactly how much money you want and exactly what you’re going to do with it. You also need to have practiced your pitch “a million times.” Cunningham said. And it’s best not to shoot for your most likely big funder on the early pitches. Practice on less likely candidates so you have it down when you’re shooting your big gun. That was a mistake Kerr made, going to Austin Ventures with his first pitch.

“In a matter of seconds I became uninvestible when they asked what we were doing with the money,” he said.

All the panelists experienced “the soft yes” which is not a definitive no but a “let’s keep talking” that never results in anything. Entrepreneurs need to guard against the emotional roller coaster of thinking a soft yes is the same as a yes.
Baldwin said that after his company won a People’s Choice award at DEMO, Sandhill Road (investor central in Silicon Valley) opened its doors to them. But one investor would say “You don’t want to be a hardware company, you want to be a software company” and another offered suggestions about the company’s business model. Baldwin was changing up the pitch deck after every meeting and he wound up with a garbled story.

“You have to nail that pitch. Exude absolute confidence in what you’re doing, demonstrate absolute domain knowledge and ask at every meeting if there are any red flags. ‘What do you see in this that would keep you from investing in my company?’”

Know Your Investor

While a hardware product like Plum’s, has trouble finding funding in Austin, the others talked about the difficulty of getting funding from outside Austin because investors often want to be able to keep a close eye on the companies they’ve invested in. But Cunningham said he’s had success pitching the benefits of Austin, such as a much lower attrition rate than that of Silicon Valley.

“In Palo Alto, most of the companies have a 20-to-25 percent turnover rate. Someone will be sitting in the office saying ‘I just got a call from Twitter and they’re willing to offer me 50 percent more than you’re paying me. In Austin that doesn’t happen. Our voluntary attrition is under five percent.”

Any form of investment takes a lot of investigation, panelists said. Friends and family may cough up the money but they’ll call every week and ask how their money is doing or require reports you wouldn’t normally have to generate, which is a time suck. There are numerous angels in Austin who go to all the meetings but invest very little. And there are some investors who are more trouble than they’re worth. It’s important to call their references and find out if they’re the kind who like to call you up at midnight with a question.

Entrepreneurs structure deals differently as well. Baldwin said his Fundable investors were happy with uncapped convertible notes and responded to discounts for early investors. Kerr, though, said all his early investors expected caps.
All the panelists said it was crucial to hire the best attorney available, not to scrimp or hire a relative. Kerr suggested finding an attorney who would work for equity.

At the end of the session, one audience participant asked where a new Austin startup could go to find more information about funding and Kerr recommended Capital Factory, which he had mentioned several times through the session. Claire England of Tech Ranch stood and asked a question, prefaced by the comment: “There are a lot of resources out there besides Capital Factory” to which Kerr responded that he wasn’t trying to be an advertisement for the incubator/accelerator.
Baldwin leaned over, looked at Kerr’s Capital Factory t-shirt and said “Nice shirt.”

Persistence and Confidence Key to RetailMeNot’s Cotter Cunningham’s Success

Founder of Silicon Hills News

IMG_1723It’s not a good idea to quit a good job and launch a divorce startup while happily married, said Cotter Cunningham.
“The day you quit your job to go home and tell your wife you’re starting a divorce site is not the best day of your life,” Cunningham said.
At 46, Cunningham left his job as the COO of Bankrate in Palm Beach and wrote a $1 million check to launch Divorce360.com. He also raised $1 million from Austin Ventures. The investment was a good chunk of his net worth.
“It failed miserably,” Cunningham said.
The first year, the startup spent $400,000 and made $19, Cunningham said. The second year, it spent $1.5 million and made $300,000, he said.
“I feel like we failed because of the business model,” he said.
Cunningham recounted his entrepreneurial journey Tuesday evening during an interview with Brett Hurt, co-founder of Bazaarvoice and entrepreneur in residence at UT during a talk sponsored by the Herb Kelleher Center for Entrepreneurship at UT.
Today, Cunningham is the founder, president and CEO of RetailMeNot, the world’s largest online coupon and deals marketplace. The company, founded in 2009, has 300 employees with its headquarters in Austin and offices in the United Kingdom, Germany and France. The company has raised approximately $300 million from investors including Austin Ventures, Norwest Venture Partners, Adams Street Partners, Institutional Venture Partners, JP Morgan and Google Ventures.
Hurt asked Cunningham how he became an entrepreneur. Cunningham and his brother grew up in Helena, Arkansas and later Memphis, after his parents divorced. His dad was speaker of the house in Arkansas and liked to debate politics around the dinner table. Cunningham liked growing up in a small town where everyone knew his name and the kids had a lot of freedom.
“I was driving at 14,” he said. “My dad threw me the keys and said have fun.”
When Hurt asked Cunningham what advice he would give to students, Cunningham advised them to be confident and persistent.
“I think to succeed as an entrepreneur, you have to have a strong amount of confidence in yourself, bordering on arrogance,” Cunningham said. “Persistence has worked for me. It was not something I was born with. I had to develop it as a skill.”
Cunningham said he didn’t have a great academic record. When he graduated from Memphis State, he landed a $14,000 a year job working for Arkansas Gov. Bill Clinton. He then went on to get his MBA from Vanderbilt University.
“I have always persisted,” Cunningham said. “I didn’t give up.”
That’s where passion comes into play, Hurt said. It drives entrepreneurs to keep going in the face of adversity.
“You almost can’t be persistent if you don’t like what you do,” Cunningham said.
Cunningham joked that he was the antithesis of Hurt, who he joked grew up with an entrepreneurial pacifier from birth.
After Divorce360 failed, Cunningham moved to Austin with his family and worked with Austin Ventures to start something new. He met a guy at a cocktail party who was going through a divorce and he found out he owned an online coupon site. The site generated $3 million a year in revenue.
“It was insanely profitable,” Cunningham said.
That sparked him to start Whale Shark Media, later renamed RetailMeNot. With the backing of Austin Ventures, Cunningham cold-called 100 online coupon sites. He interviewed 60 of them. He ended up buying three of them. Together, they had $10 million in revenue. He hired 30 people. He found out that RetailMeNot, the biggest competitor, based in Melbourne, Australia, was for sale. He got on a plane a few days later and flew to Australia to meet with the founders.
“We pursued them for nine months,” he said.
Part of the courtship involved eating kangaroo meat, something that Cunningham did not enjoy. But it helped him close the deal.
The lesson for the students, said Hurt, is that to be successful, “you have to eat kangaroo meat.”
Through all of the acquisitions, RetailMeNot has been able to maintain its corporate culture by treating employees the right way, Cunningham said. It got 60 employees through the acquisitions.
“We believe people work hard for us, so we need to work hard for them,” he said.

WhaleShark Media seeks to dominate the deal industry

CEO and Founder of WhaleShark Media Cotter Cunningham

By Eoghan McCloskey
Special Contributor to Silicon Hills News

The popularity and success of daily deal sites such as Groupon and Living Social have created opportunities for others like WhaleShark Media.
The Austin-based startup connects consumers with multiple daily deal and coupon services like Deals.com and CouponShare.com as well as deal sites outside of the U.S. like Gutschein-Codes.de.
Founded in 2010, WhaleShark Media has received $300 million from several venture capital firms including Austin Ventures, Google Ventures, and Institutional Venture Partners. In less than two years, WhaleShark Media has evolved into a profitable and quickly growing company, generating 30 percent growth in site traffic and 50 percent revenue growth. WhaleShark Media’s rapid growth stems, in part, from a series of major acquisitions of other coupon vendors, most importantly RetailMeNot.com, the single largest online coupon site in the world, and VoucherCodes.co.uk, the UK’s top online deal site.
WhaleShark makes money from advertising on its sites from more than 300 million visits to its web properties, said Brian Hoyt, WhaleShark Media’s communications director. It also makes a small commission off thousands of retailers whose offers the company helps merchandise and facilitate sales for via the coupons and deals clicked on its site, he said.
“This relationship goes beyond big box retailers and includes thousands of other large and midsize merchants,” Hoyt said.
Last year, WhaleShark Media made more than $70 million in revenue as part of the $1.7 billion in sales generated for its merchant clients.

WhaleShark's workplace

WhaleShark Media’s workplace just south of downtown Austin on Congress Avenue is vibrant, laidback and youthful. Employees get a budget to decorate work areas with art, most employees dress casually and CEO Cotter Cunningham occupies a modest desk in a corner of the common work area, a symbolic reflection of his personality and the company’s philosophy. Cunningham’s personality and his success as an executive ultimately helped investment firm Austin Ventures decide to back the company. Cunningham previously served as CEO in residence at Austin Ventures, founder and CEO of Smallponds and Chief Operating Officer of Bankrate Inc.
“We originally invested in WhaleShark because of the enormous potential for growth we thought was there, as well as the ability to innovate within the online coupon and deals space,” said Austin Ventures Partner Thomas Ball. “We also had a relationship with Cotter, who we believe is a great executive.“
Jules Maltz, General Partner at Institutional Venture Partners (IVP), reflected Ball’s view.
“IVP looks to back premier late-stage companies and management teams,” said Maltz. “WhaleShark is the leading online coupon company with strong profitability and tremendous growth potential. We’re excited to back Cotter and help WhaleShark continue to expand.”
WhaleShark Media is also focused on hiring technology talent locally and worldwide to fuel its expansion, Hoyt said. The company has 170 employees worldwide, including 120 in the U.S., with most of them based in Austin. Last week, it announced that Matt Howitt would join the company as vice president of engineering.
“We recognize there is a limited talent pool in Austin and we want to keep them in Austin,” Hoyt said.
WhaleShark Media plans to hire another 50 people this year, he said. The company is also taking over another floor at its downtown headquarters. It currently occupies the seventh floor at 301 Congress and it’s expanding to the eighth floor.
Late last year, WhaleShark Media received $150 million in venture capital, which it plans to use to increase its market share in the retail deal industry. The company plans a series of product innovations and is concentrating on expanding its presence in the mobile coupon and deal market, Hoyt said.
“We’re looking at growth inside the U.S. and Europe,” Hoyt said. “We’re also looking at the Asia market.”
WhaleShark Media doesn’t have any short term plans to go public, Hoyt said.
“Right now we’re focused on building our business.”

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