People have paid good money to hear Eric Koester‘s advice about running a startup. One of his cardinal rules: Don’t go into business with people you don’t know very well. “Founders—it’s like marriage. You’re basically pinning your hopes on each other,” Koester says.
So much for that bit of wisdom. This time Koester ignored his own counsel to co-found Zaarly, an online buying startup that tweaks some of the current trends in crowd commerce by putting buyers at the center of a name-your-price market. Say you’re in a social emergency and would pay $100 for a decent bottle of wine to be delivered to your hotel by dinnertime. Zaarly lets people put those kinds of bids out to the crowd and see if anyone’s willing to make a quick buck.
The company is coming off a whirlwind debut at the South By Southwest Interactive conference earlier this month in Austin, TX. Basically overnight, it secured $1 million in seed financing, and has quickly put it to work by adding staff and shooting for expansion to cities beyond Austin. Investors include Lightbank, the venture fund from Groupon co-founders Eric Lefkofsky and Brad Keywell, and actor Ashton Kutcher, a pretty active angel investor. The entire thing barely existed a month ago.
Zaarly’s story is in many ways a perfect representation of the current landscape for tech startups. It’s hitting several hot trends at once: Mobile apps, social networking, and supercharged individual commerce. While the underlying reverse-auction idea isn’t pure game mechanics, it certainly adds a contest element to the equation. The company was hatched at Startup Weekend, the high-speed mini-incubator that was just the cover story in Entrepreneur Magazine. And it’s aiming for a mobile-computing user base that can grow exponentially now, and find strong revenue streams later.
All of this should sound very familiar to anyone who’s been paying attention to Steve Blank’s “New Rules for the New Internet Bubble,” which we have cross-posted at Xconomy. Particularly this bit: “Startups that win in the bubble will be those that get wide adoption (using freemium, viral growth, low costs, etc) and massive distribution (i.e. Facebook, Android/Apple App store.) They will focus on getting massive user bases first, and let the revenue follow later.”
To get a window into this phenomenon, I sat down with Koester after he returned from South By Southwest for a little oral history of the Zaarly experience. It all starts in mid-February with a birthday party invitation, a trip to L.A., some big ideas and a snap decision. “Looking back, it’s like—what were we thinking? But it was great and it came together. It was better than I anticipated,” Koester says.
Koester knows Zaarly co-founder Bo Fishback from their work together as members of the Startup Weekend advisory board. But Fishback hadn’t actually seen the competition in action before, Koester says, so the two decided to meet up at an L.A. event that happened to coincide with Koester’s birthday. After batting around some ideas, the pair decided to do more than just give advice. They jumped into the competition themselves with a concept that eventually became Zaarly.
I’m not sure how experienced the other folks at this L.A. Startup Weekend were, but they may have looked at this crew as a pair of ringers. At the time, Fishback was serving as vice president of
