Timehop

Thanks to Facebook, Twitter, Instagram and many other social media networks, Internet users are sharing more and more each year (see Zuckerberg’s Law). Taken in its entirety, social media sharing creates a rich story for each of us. It comprises our most noteworthy moments in life. This history is incredibly valuable to people, but all too often it lies buried. It lies buried across multiple networks. It lies buried behind the news feed consumption mode that narrowly focuses on only the most recent 24 hours.

Three years ago Jonathan Wegener and Benny Wong set out to solve this problem. Their mission was to empower people to easily collect their digital history, and to make it accessible, useful and meaningful. newlogo-751e104342da3b2ea3db5a436007c549The manifestation of these efforts is Timehop. As is the case with many of the best mobile experiences, the product is beautiful in is simplicity. Each day you open the app and you are presented with your memories from that day in history. Today we are announcing Shasta’s most recent investment, leading the company’s $10 million Series B financing.

Timehop is one of the fast growing mobile apps in the market. More people open and read their Timehop each day than read the New York Times. Of those that have registered for the service, more than half return daily. In the iOS app store it is consistently a top 50 overall application and a top 10 app in the social networking category. In summary, it’s a rocket ship with off-the-charts repeat engagement.

But even with such phenomenal growth, it’s a company still in its relative infancy. We believe it has the potential to ultimately serve hundreds of millions of people, but they have a long way to go to get there. As such, how they got here was equally important to our investment thesis as their successes to date, since it’s these characteristics that will enable the team to achieve their lofty aspirations. Specifically, they’ve gotten here by:

  • Keeping it simple. They’ve maintained focus on doing just one thing, but doing that one thing incredibly well.
  • Continual experimentation. Less than 15% of what they have experimented with is in the product today. This approach has led to a number of counterintuitive learnings that are critical to its success.
  • Focusing on repeat usage. As previously mentioned, more than 50% of their registered users open up Timehop daily. This is not by accident.
  • Making it social. Our best memories typically include good friends and family members. Naturally there is a strong desire to relive these experiences with others. They’ve made it seamless for anyone to publicly share via social media or to privately share via text messaging.
  • Growing from organic user acquisition. It would have been easy to cut corners and rely on paid customer acquisition to grow. Instead, they incessantly hammered away on the product and sharing features until they unlocked a more sustainable organic customer acquisition engine.

At Shasta, we don’t invest in ideas. We invest in the people that can successfully execute to make those ideas a reality. In Timehop, we found a team that we believe has the right mindset, playbook and DNA to achieve its big vision. We could not be more excited about joining them for this journey.

Whisper

The Internet’s power to connect people is unparalleled.

  • Get married, find a new job, have a baby…share the special moment with friends and family on Facebook
  • Searching for new employees or potential customers…connect on LinkedIn.
  • Have a message for the masses…broadcast it on Twitter.
  • Missing your relatives across the globe…call them on Skype or Facetime.
  • Selling furniture, tickets, or just about anything else…find a buyer on Craigslist or eBay.
  • Move into a new neighborhood…meet your new neighbors on Nextdoor.

Humans have an inherent need for connection, and thankfully the internet enables human connections at an unprecedented scale.

However, we’re missing an important network. Where does one go to share his or her insecurities, fears, and doubts? Where does the husband go if he’s lost his job and doesn’t know how to tell his wife? Where does the war veteran go when struggling with PTSD? Where does the teenager go when he or she is questioning his or her sexual orientation? Even more trivial concerns that in the long-run may seem small need an outlet. For example, where does the teenage girl go when she doesn’t get asked to the prom? Despite there being many others having experienced similar feelings and emotions, these moments of despair make one feel as if they are totally alone; as if they are the only person to ever to face such a challenge.

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Two years ago Michael Heyward and Brad Brooks saw this gaping need and created Whisper. They made it an anonymous network so people would feel comfortable sharing thoughts, emotions, fears, and doubts that they were not open to sharing from their public identities on Facebook. They added private messaging so that members could connect directly, providing a sounding board and an empathetic ear to those in need.

They set up the non-profit YourVoice dedicated to raising awareness of mental health issues on college campuses. They included a suicide hotline for any member expressing suicidal thoughts.

They implemented policies and strong community standards from the very beginning to ensure that Whisper would never become a place for trolling and bullying, a common issue with other anonymous networks. Create a negative comment about any individual and that whisper will never see the light of day. Furthermore, they surrounded you with strangers, ensuring there is little incentive to gossip or troll common connections.

In doing all of this, they built one of the most engaging networks that we’ve ever seen.

This week we announced Shasta’s recent investment into the company and we couldn’t be more excited. We led the company’s $36M series C round, along with new investors Tencent and Thrive Capital, as well as existing investors Sequoia Capital and Lightspeed Venture Partners.

We see a future where every human with a smartphone is a tap away from connecting with others around the world based on shared emotions and experiences. Those connections are profound, and we believe immensely valuable. Michael, Brad, and team have made tremendous strides in achieving this vision already, and we’re thrilled to join them on this mission.

Secure Messaging in the Enterprise

At Shasta Ventures we are incredibly bullish about mobile technologies for the enterprise. Shasta’s very first investment was in Zenprise, a leading mobile device management company ultimately acquired by Citrix. Since then, we’ve continue to put substantial dollars behind this trend with companies like Mocana (mobile enterprise security), SpiderCloud Wireless (enhanced mobile connectivity), WatchDox (secure mobile file sync), Crittercism (mobile app performance management) and StrongLoop (Node.js mobile app platform). And today we are announcing our latest investment into TigerText, the leader in secure messaging for the enterprise.

Between SMS, iMessage, WhatsApp, and a handful of other similar services, consumers have an insatiable appetite for mobile messaging. Compared to email, phone and voicemail, it is simpler and lighter-weight. It saves time, enables multi-tasking and makes rapid back-and-forth communication more efficient. And as a real-time communication channel for priority messages, it is the best way to get a quick response for any time-sensitive matter. Given all of the benefits to mobile messaging, it is no surprise to see employees bring this technology into the enterprise at an astounding rate.

This is fantastic for the individual employee, but it creates some significant challenges for the enterprise, particularly in industries like health care, financial services and the legal industry. Privacy and data security are critically important in these sectors, and often there is even regulation that mandates increased levels of data security. However, in spite of that regulation you can walk into a hospital today and you are likely to see doctors and nurses using their smartphones to message with each other. Legacy pagers are clunky and difficult to use, cell phones typically result in a frustrating game of voicemail tag, and neither supports image sharing. Sometimes these messaging conversations are innocuous, but in many cases they are for clinical purposes and include private patient information, a big no-no for HIPAA compliance. A couple of years back these compliance infractions were rare enough to overlook, but today it has become much too common for hospitals to ignore.

32x32-tigertext-logoThree years ago Brad Brooks founded TigerText and set out to solve this problem. He and his team built a best-in-breed secure messaging product that brings all of the simplicity of SMS, but without the data security concerns. Features like self-deleting messages and message recall put the hospital compliance officer at ease and ensure that patients’ private data remains private. He built an experienced sales team with intimate knowledge of mobility solutions and the health care ecosystem that has quickly become a well-oiled machine. And he built an organization universally committed to customer success which leads to happy customers and strong retention. Three years later the foundation they built is translating into great business success. They have deployed across more than 3,000 healthcare facilities and have generated three consecutive years of triple-digit revenue growth, including 4x revenue growth over the last year alone. As venture capitalists we often ask the question “why now?”, and it is clear from speaking with potential customers that the timing could not be better for the company to capitalize against this massive opportunity.

We could not be more excited about partnering with Brad and the TigerText team. They have come a long way in three years and we look forward to supporting them in the future.

Bringing the power of data to local merchants

For most local merchants payment processing is a necessary evil. Without it they cannot accept credit cards, but beyond that convenience, they get little else in return for the 2-3% of revenue they give up. They get churn and burn sales reps constantly knocking on their doors over-promising and under-delivering. They get convoluted and impossible-to-understand fee structures. And they get a monthly statement that offers little to no insight into their business. There are multiple billion dollar companies servicing this sector, but there has been little to no innovation by the slow-moving giants.

At the same time, online businesses have become increasingly effective leveraging customer transaction data to gain better insight into their business. Which customers return the most? What is the demographic profile of our best customers? What is the longer-term value of newly acquired customers? In turn, they use that insight to improve the quality of their customer experience and ultimately increase revenue. By bridging the gap between payment processing and customer analytics, local merchants should benefit in the same way as their offline counterparts.

swipelyToday we are announcing Shasta’s latest investment into Swipely, a company that fixes this problem. Like the large incumbents in this space, they offer the convenience of accepting credit cards, but they don’t stop there. They provide fully transparent pricing explanations without any hidden fees. They integrate into all major point-of-sale systems so merchants don’t have to tackle the hassle of ripping and replacing hardware and retraining employees. They offer near real-time analytics for owners and managers to assess the health of the business and serve up actionable insights to grow the business. For the first time, a local merchant can see who their best customers are and have a way to communicate with them. They can understand if their marketing campaign actually worked. They can learn what time of day customer traffic is light and launch campaigns to drive business during those hours. It finally brings the power of data to the offline world, ultimately translating into happy customers and more revenue. And they do all of this at the same or lower price compared to a merchant’s existing processor.

When Angus Davis founded Swipely a few years back the company launched with a completely different product. But like all exceptional entrepreneurs, he rapidly iterated the direction of the company. They quickly moved on from failed experiments and doubled down when ideas worked. He did this once before when he and his co-founder transformed the consumer voice service TellMe into an enterprise IVR system, a transformation that ultimately led to an $800M acquisition, and now he’s at it again. He’s surrounded himself with a great team. A team that is building world-class technology products, and a team that knows how to build the scalable sales machine necessary to successfully sell into local merchants. And it’s working. They have signed up merchants processing over $700M in payments annually, up nearly three-fold in just four months. We expect great things from Angus and team, and we’re absolutely thrilled to partner with them to help the company achieve its potential.

Mobile and Online Commerce

Sarah Lacy of PandoDaily recently published an interesting series of videos featuring CEOs from leading commerce companies like OneKingsLane, Warby Parker and BirchBox. The video is broken out into a series of posts (part 1, 2, 3, 4, 5). In the video they discuss a number of topics mostly focused on what will separate the big winners from the wannabes.

I agree with a lot of what is discussed. Competing head to head with Amazon on price or breadth is a fool’s errand. Instead, the winners will create unique brands that transcend price, and then leverage those brands to command fat gross margins (by commerce standards).

But there is also one big omission from the discussion. Today’s consumer is very different than the consumer during Zappos’ heyday. Today’s consumer has a supercomputer in their pocket 24/7. They are always on and always connected. On mobile devices they don’t have to log in time and time again to retrieve stored credit card information – they are just a simple click away from any purchase. They evangelize product recommendations not while walking through the mall, but rather by handing over their phones. The big winners in online commerce will embrace this. They will craft pixel-perfect mobile shopping experiences purposefully designed for touch interfaces. Experiences purposefully designed for two minute mobile snacking. Experiences purposefully designed for notifications received on smartphones. Mobile is the future of everything and online commerce is no exception.

Reinventing a sleepy industry

The floriculture market (a.k.a., the flower market) is a massive $35Bn per year industry. Flowers brighten our day and brighten our homes. They turn a drab office into a warm and welcoming space. We buy them for special occasions and we buy them just because. We buy them for ourselves and we buy them for others. But like the airline business and the consumer banking business, there has been little innovation in this sector. Local flower shops create beautiful arrangements that match our personal tastes, but given their small size and retail store locations they remain an expensive option for most customers and they can’t deliver to friends and family across the country. National flower players like FTD and 1-800-Flowers offer a more affordable option and a national delivery footprint, but the quality of the flower arrangement declines precipitously when leveraging a network of independent florists. Two years ago software industry vets Bryan Burkhart and Sonu Panda identified the dearth of innovation in this massive category, decided to jump in and shake up this old-school industry, and founded H.Bloom. Today we’re announcing that Shasta has led the company’s most recent round of financing.

As any great entrepreneur does, they focused their efforts on the customer. They hired the best-in-class designers to create the contemporary designs that customers were craving. They created a subscription delivery service to eliminate the pain and hassle associated with retail flower buying. They built a world-class customer support organization to ensure every customer is 100% satisfied with the full end-to-end experience. They leverage technology (and a Pandora-like flower genome database) to ensure customers get the perfect floral arrangement for their unique tastes. They eliminated the retail storefront to prevent flower spoilage and to pass on those savings to their customers. They are aggregating demand across multiple markets to drive even lower prices for their customers. And they built a highly automated and technology-enabled operational machine to ensure that the experience always lives up to their customers’ lofty expectations. The end result is an amazing customer experience that I believe will fundamentally change the flower business.

Massive market ripe for disruption. World class team. Insane dedication to an amazing customer experience. All of the elements that we look for in an investment. Bryan and Sonu, we are honored to join you and the rest of your great team on this mission.

Yahoo’s patent lawsuit yet another reason to be bearish

Two weeks ago when news first surfaced that Yahoo was threatening legal action against Facebook I tweeted:

As a former Yahoo I’m saddened to see the patent threat at Facebook. Ideas are a dime a dozen. Execution wins.

Fast forward to today, the lawsuit is now official, the blogosphere is buzzing about it, and my thoughts are largely the same. The lawsuit it BS. And it is an important reminder that our patent laws must be updated for today’s world – at least for the internet sector in which ideas on a piece of paper stamped by the patent office are worthless without the execution chops to bring those ideas to life.

But with the news re-surfacing today it got me thinking about this story from another angle – shareholder value. Simply put, will this make Yahoo a more valuable company for its shareholders? My belief? No, it will not. In fact, this latest development makes me much more bearish about YHOO as an investment. Even if successful with this lawsuit, it would likely translate into a one-time financial gain similar to their agreement with Google back in 2004 stemming from a search patent dispute. It will not positively change the trajectory of Yahoo’s underlying business, product, revenue, or cash flows. The intrinsic value of any company is the present value of all future cash flows, and since one-time gains (and losses) are relatively small compared to the present value of all future cash flows in perpetuity, they are often ignored by investors. Unless Yahoo were somehow able to get a cut of Facebook’s future revenue stream (this is extremely unlikely), I expect investors will ignore this one-time gain as well. Furthermore, the distraction from this lawsuit means that Yahoo’s leadership is spending less time focusing on creating compelling consumer and advertiser technology products, i.e., the types of activities that actually could positively change the long-term trajectory of Yahoo’s revenues and cash flows. Consequently, I believe that this lawsuit nonsense increases the likelihood that Yahoo’s cash flows actually shrink – not grow – over time.

There were plenty of reasons to be bearish about YHOO before today. Now there is one more.