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. 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,†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,†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,†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,†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€Go to next page to continue reading and watch video of Schleier-Smith’s mentorship tips…
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- On Pivoting:
“That was a tricky time in 2006 and 2007. We recognized that FaceBook was enormously innovative. They had fantastic resources, fantastic traction, and a great product. While we could see ourselves doing all of those things, they were ahead of us, and they were really good at what they were doing,†says Schleier-Smith. “There was a chance we could overtake them if they messed up, but our business plan was not based on other people making mistakes. We were trying to figure out what this business should be. That is something a lot of startups go through. It’s very rarely a linear path. It does happen, where you have the perfect idea and you just do
it, but that is a small percentage of the time. It is more often that you have a general opportunity, but a whole lot of the details need to be figured out as you go along. Be really well studied on your business plan. Think diligently and honestly about what it is you’re trying to do. Ask yourself all of the questions someone could ask and all of the ways someone could challenge it. Think about competitors, risks, and all the ways it could go different than you think it would.â€- On Finding Advisors:
Johann and Greg spent a lot of time working with their advisors. One advisor, Reid Hoffman, founder of LinkedIn and a former executive at Paypal, was key to helping them decide to pivot their business plan towards social discovery. “He was one of the people who challenged us, asked us the hard questions and forced us to really get a plan together,†says Schleier-Smith. “You want to find someone who has relevant experience. Someone who has been there and done it before, someone who you get along with well on a personal level, and you feel you can relate to.â€
- On Being an Outsider in Silicon Valley:
“Meet lots of people. Be open with them. Silicon Valley is a very open and sharing culture where people like to talk about what they
are doing. Certainly there are some things that are your core secret sauce that you may not want to be sharing broadly, but there are a lot of things you may be doing in your business that are fine to discuss with people. The more you can be open about you are doing, it sparks interesting discussion. I tend to be very open and people open up to you and you can discover where common passions lie. That is where you are going to forge connections that are meaningful ones.â€- On Why Moving to the Valley Worked for his Startup:
“So many of the people who are passionate about starting tech companies have ended up here. If you want to meet and connect with those people you want to be here. Some of the challenges is there are a lot of great stuff going on so there’s a lot of competition, for hiring in particular. Finding the best product people, engineers, designers can be really challenging. There are a whole lot of talented software engineers and developers, however, there are even more entrepreneurs with business ideas, Venture Capitalists, small and big companies like Google and Facebook sucking people up. It remains very competitive to get talent.”