Yahoo! The Next Chapter for Polyvore, My First Matrix Investment

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Today, Yahoo announced its acquisition of Polyvore, a leading social commerce site and the largest fashion destination site in the world.  Polyvore allows its global user-base to discover new inspiration, express their style, and shop all their favorite lifestyle products in one place.

Polyvore was the first investment I made as a new venture capitalist at Matrix Partners in 2009.  We backed a four person founding team who were all software engineers (three were former Yahoo!) and all who had recently rolled out of core roles in developing important web products, including Yahoo Pipes and Google Maps. The basic thesis behind early Polyvore was that (1) lifestyle categories were massive, (2) search as a means for discovery in such categories did not work, and (3) there was an opportunity for a social, community generated platform to fill this void. Since the beginning, this team has continued to build and expand on that basic vision, and today begins the next chapter in Polyvore’s journey.

Polyvore’s strengths are a natural fit with Yahoo’s top strategic priorities. Polyvore provides a huge opportunity for Yahoo to continue building out its native and social arms—core to its “MaVeNS” growth focus (mobile, video, native and social). As a dedicated social shopping platform that knows how to combine technology with community to drive significant value to its advertisers, Polyvore fits nicely into Yahoo’s self-identified focus areas.

Yahoo will also benefit greatly from the Polyvore team joining its ranks, building off of the long-standing relationship between Polyvore CEO and Co-founder, Jess Lee, and Yahoo CEO, Marissa Mayer, who were close colleagues at Google. Polyvore will bring a strong and diverse group of people who have spent years focusing on the very things Yahoo seeks to strengthen in the areas of mobile, native advertising and social. The Polyvore crew delivers a laser focus on building a strong culture and a passionate social community fully engaged with a product that delights. Add in an advertising model focused on 100% native ads from hundreds of advertisers and this acquisition is clearly a strong move in the right direction for Yahoo.

For Polyvore, a company that has been enormously capital efficient and built solely on  organic growth, the addition of the Yahoo audience will be a major booster to every core metric. I expect Polyvore will continue getting better, faster, and doing more innovative things that will further enhance the experience for its loyal community.

I’ve been thrilled to have worked with this amazing team over the past six years, and I couldn’t be prouder of all that they have accomplished. It is a great day for them, a great day for Yahoo, and a great day for every current and future member of the Polyvore community.

PayPal – Without eBay, Can They Reinvent Themselves?

PayPal seems to have lost the mobile payments battle to Apple and Google, at least for now. (Read about this battle in Dana’s article on TechCrunch.) And online, it’s once dominant value proposition offering security and convenience to consumers and low prices to merchants is no longer proprietary. So, where does PayPal go from here as a standalone company? With a core payments engine still fueling growth up and to the right, a flexible tech stack and huge consumer base, it has much to work with. But, will those assets work against it? Can it eat it’s own children and reinvent itself? Will it be acquired – and by who? Will it go big internationally?

Dana Stalder of Matrix Partners and former SVP at PayPal, and Scott Loftesness, a payments veteran and founding partner at Glenbrook Partners discuss what’s in store for PayPal.

Who Could Acquire PayPal?

PayPal Under Attack – Can They Compete?

PayPal- Can They Reinvent Themselves? (Full Video)

Dana Stalder, Matrix Partners, and Scott Loftesness, Glenbrook Partners, discuss what’s in store for PayPal.

 

Building Apps for 4 Billion People

 

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In the next few years, 80% of adults will be online and will have smartphones. That’s almost 4 billion people online using mobile apps. As early-stage venture capital investors, it’s an exciting time as we find and support the visionary founders building critical enterprise software tools and the latest consumer apps.

But, over the last 40 years, Matrix Partners has had a particular focus on backing not just the end products we all hear about and use, but the foundational systems and infrastructure that emerging industries require, and the tools that help software developers be more productive.

Today, we see two foundational areas that are critical to the new types of apps and experiences that consumers now demand in a post uber world:

  1. Tools to enable a broader group of software developers to create apps
  2. Tools to ensure these sites and apps run bug free

A couple weeks ago we announced our second round of investment in Meteor Development Group. Meteor is a great example of a company going after the first area–they are democratizing mobile app development with their JavaScript app platform. They make it easier for developers at all companies to build the type of responsive, data-driven apps that consumers have become accustomed to. And, in doing so, they’ve already become the 10th largest starred project on GitHub.

Today, we are excited to announce Bugsnag’s Series A fundraising and welcome Benchmark Capital to the support team. Bugsnag is focused on the second area, making sure the software running the sites and apps these 4 billion people will use, runs as expected.

As consumers, we don’t think about software until errors and performance issues stop us from doing what we want to do. But, as all companies have realized, when their product stops working, users are quick to leave. In fact, according to AppDynamics, eight out of ten people have deleted an app because of performance issues, and 19% of those who experience an issue tell their friends and family. This has caused companies to spend over $300 billion annually on debugging software–a costly process when over 50% of engineering time is now spent finding and fixing bugs. And, this problem is only going to get worse as users’ expectations of performance go up, as the complexities of sites and apps increase, and as the price of software developers continues to rise in our severely supply constrained labor market. Bugsnag is fixing this problem.

I met James Smith and Simon Maynard, the founders of Bugsnag, in the summer of 2013.  Friends from university days, they were rolling out of a friend’s consumer startup. They’d both directly experienced, at every company they’d worked at, the impact of software errors–specifically the impact of lost revenue and a decreased ability to ship new features as their teams were bogged down trying to triage and fix errors. Tools were available, but most, including Splunk, offered passive monitoring environments. Errors happen, you use a tool like Splunk to mine the log files to figure out what happened.  It can be a long and tedious debug process.

James and Simon had a very different vision for a platform that could substantially increase the productivity of developers–one that was active vs passive, and worked on all platforms and with all languages. They wanted to make it seamless for developers and dramatically reduce the time spent on monitoring and fixing errors.

As we started talking it became clear to me that James and Simon were on to something big. Matrix ultimately led the Seed financing in Bugsnag in that summer of 2013.

As native mobile clients exploded, the industry evolved and others like Handlebar, Crashlytics and Critticism emerged as players in the space. Crashlytics was ultimately acquired by Twitter and expanded as a free product that would give Twitter a means to have its SDK installed in as many native mobile apps as possible. (A strategy that worked well for Google with its free Google Analytics offering.) However, all of these solutions offered limited features sets, required data sharing in the case of Crashlytics, and were mobile only solutions.

Bugsnag stands apart as the only full-stack, cross-platform error monitoring tool that offers both a SaaS and on-premise solutions. Time will tell, but their growth to date has certainly shown the extent of the problem and the hunger companies have for great tools. Bugsnag now processes 250 million crashes per day, up from 5 million per day less than 2 years ago. And revenue has increased 20X during this same time period as thousands of companies, including Square, Slack, Shopify, GitHub, and VMware, use Bugsnag to ensure their users have as much of an error-free experience as possible.

We congratulate Bugsnag on their Series A round and we welcome Benchmark to the team and Eric Vishria to the board. It’s an exciting time as companies strive to deliver the best experiences to billions of connected individuals. We’re proud to be backing the companies that make these experiences possible.

See Bugsnag’s post for more details.

Recruiting – The 3rd Crucial Startup Skill

I used to believe that there were two critical startup skills:

  1. Building a great product that has clear product/market fit.
  2. Building a sales and marketing machine.

At Matrix Partners, we’d argue about  whether you could get away with just having a great product. Or whether you could take an organization that was spectacular at sales and marketing and sell anything. Ultimately, for most companies, I personally concluded that you’d need both of these skills to be really successful in the B2B world.

In the last two or three years, I’ve witnessed something new: a hiring crisis so severe that it is crippling startup’s abilities to get products built on time, and starving them of the talent they need to market and sell those products. There is an intense skills shortage that has been created by the explosion in startups over the past few years.

Something important has changed in the recruiting process: the best people are almost never on the market, and you are going to have to develop recruiting processes that find passive candidates that are not looking to leave their current job. In many cases, it will take months or years of relationship building with these candidates to find the right moment when they are open to considering a change. And closing them takes greater selling efforts than in the past due to the intense competition over the good candidates.

This leads me to believe that there is now a third crucial startup skill that needs to be developed: Recruiting.

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Much like sales and marketing, recruiting is a funnel process that needs attention at the top of the funnel (ToFU) -Sourcing, middle of the funnel (MoFU) -Evaluating, and at the bottom of the funnel (Selling), as well as in a fourth phase, On-Boarding, after you have successfully hired someone.

Click here to read the full post on my blog, forEntrepreneurs, where I’ll take you step by step through the Recruiting Funnel from sourcing to close, and how to use it to build your brand, leverage your VCs, and hire the best executives for your team.

Banks and Entrepreneurs: Breaking the Logjam

There is a massive innovation happening in fintech right now. What’s intriguing is that banks are not leading this trend. While they remain strapped from the financial crisis with even tougher regulations and balance sheets, not to mention the lengthy development cycles common to all large corporations, upstarts like LendingClub, Poynt, Coinbase and others are pushing the boundaries.

However, as any seasoned fintech entrepreneur knows, banks still hold the power. And, as Hans Morris, former President of Visa and partner at Nyca Partners said in our recent video interview, you can’t actually disrupt the entire financial system. You may still need credit licenses, access to working capital, the ability to settle transactions, etc. This creates an opportunity for banks and entrepreneurs to work together. Easier said than done? Banks, and particularly their vendor approval departments, are notorious for red tape and excruciating business development cycles.

To break through this logjam, entrepreneurs need to focus on the most pressing consumer and banking problems. If a problem is urgent, or better yet, your solution addresses a mandated fix, bank executives will find a way to make the partnership work.

In our latest Talks forEntrepreneurs video, Dana Stalder of Matrix Partners and former PayPal executive, talks with Hans Morris about the challenges of innovating with banks and where the best opportunities exist for entrepreneurs.

Banks and Innovation: What Entrepreneurs Need to Know (15 minutes)

If you’re a fintech entrepreneur, you’re pushing boundaries. But, you can’t actually disrupt the entire financial system. Learn how to make the system work for you.

  • What prevents banks from innovating
  • How to partner with and sell into banks
  • Where are the best opportunities

Watch and subscribe to more Talks forEntrepreneurs videos here.