zero in on startups building mobile apps, tools, platforms, and devices (and, more recently, hardware). “We felt that was where the next big brands would be built,” Renert says. “And it made more sense to focus in one area rather than spreading ourselves thinly.” This summer the company filed announced it’s raising a third fund that could total as much as $100 million.
Tandem doesn’t have a huge network of mentors, but Renert says its partners spend a lot of time with each startup. In addition to Renert and Bhargava, the other principals on the team include Rohit Bhagat, the former Asia Pacific chair at the giant investment firm BlackRock; John Ellis, executive vice president at advertising technology company Turn and a veteran of Xerox PARC and AltaVista; and Joyo Wijaya, who advises Tandem startups on technology and engineering issues and doubles as vice president of analytics at Bash Gaming, a Tandem portfolio company.
Some of the teams admitted to Tandem have a working product. Others just have an idea. But none of them have arrived at the Silicon Valley nirvana of “product-market fit”—i.e., something people think is cool enough to pay for. So startups spend their first month or two at Tandem in close consultation with a principal, “looking at the market landscape, observing what current users are doing, and coming up with ideas around how to adjust or pivot the business so that we can get that market traction.”
The rest of the time is spent on execution: “stepping through the building and delivery of the product and the acquisition of the users. And after you make sure users actually want what you are selling, optimizing the pricing or revenue model behind that.” Of course, the startups themselves—not the Tandem principals—are making the important design decisions and doing the real engineering, sales, and marketing work. But Tandem provides brainstorming, prioritization, and product feedback. “Is this delivering the best experience to the user? It’s about exploring the changes that are going to get you from 500 users a day to 50,000,” Renert says.
He says the model is working so far: 80 percent of the companies in Tandem’s first fund have either been acquired for an amount larger than their starting valuation, or are still growing and continuing to raise money at higher and higher valuations. (By comparison, only about 40 percent of Y Combinator alumni companies have either exited or are still operating with funding, according to one estimate.) The second Tandem fund also “has a very positive return on paper, but it’s too early to know where the cash will end up,” Renert says.
Bash Gaming is one of Tandem’s most prominent alums; it expects to earn $75 million this year on its casino games for mobile gadgets, including Bingo Bash, one of the 10 highest-grossing iPad apps ever. Another is PlayHaven, which helps mobile game developers earn money through in-game ads, and helps them lure players back in through customized push notifications. The company now has offices in three countries and has raised $8 million from Granite Global Ventures and e.ventures. Then there’s PagerDuty, which offers a “911 dispatch” system for IT administrators; it’s attracted $12.6 million in funding from the likes of Andreessen Horowitz, Baseline Ventures, and Harrison Metal Capital.
Despite tentative wins like that, Tandem doesn’t yet have the brand presence of a Y Combinator, a Techstars, or a 500 Startups. To summarize what it does have, Renert reaches for an analogy from the music industry. Joining one of the classic, large accelerators is like competing in American Idol, he says: “You are in there with a lot of candidates and there will be a couple of winners who could do extremely well, but there will be a lot of people who won’t make it, and it’s up to them whether they get there.” Joining Tandem, on the other hand, is like signing with Clive Davis—the record producer famous for spotting and cultivating stars like Whitney Houston, Alicia Keys, Christina Aguilera, Kelly Clarkson, and Jennifer Hudson. Says Renert, “He’s going to do what he can to make sure they get across the finish line.”
