There are institutions like DuPont, built on more than two centuries of innovation that began with one Delaware man who really knew his gunpowder. And there are upstarts like LaunchKey, built on 54 hours of imaginative chaos channeled by three Las Vegans with mad programming skills. You’ve probably heard of the first company, considering it developed Kevlar, Teflon and other inventions that changed the way we live. The second, just two months old, is poised to beta test an authentication app that would negate the need for “hacker-bait” passwords doing a lousy job of protecting everything we do online. Talk about changing the way we live.
That’s why LaunchKey won first place at July’s Las Vegas Startup Weekend, and that’s why the fledgling company is at Crowdstart-Vegas now. The startup is one of 10 finalists—picked from more than 200 hopefuls—to pitch a project for tonight’s grand prize: an investment of up to $500,000. It’s Shark Tank live, but instead of Mark Cuban, the teams must sway five judges with expertise in everything from venture capital to crowdfunding.
The opportunity comes courtesy of a partnership between LA-based Crowdfunder.com and local business incubator Vegas Tech Fund (which is putting up the cash), with support from Switch InNEVation Center, Startup Weekend and Nevada’s Center for Entrepreneurship and Technology. The goal is for great tech ideas to grow wings right here at the Plaza, which is packed with gladiators and spectators. I’m here to root for the five teams with home-court advantage and see how they stack up against strong contenders from Utah, California and Texas. No matter who wins, the company they build will call Las Vegas home.
THE E IS NOT SILENT
Watching the finalists’ profile videos on Crowdfunder a few days before the live-pitch event, there were plenty of why-didn’t-I-think-of-that moments. A political hub that analyzes web chatter and campaign performance to forecast elections and track candidates’ digital influence. An “indie label” for kids’ apps that weaves educational content with original music by the likes of Michael Franti and Lisa Loeb. A platform for renting an Audi RS4 or a trampoline from your neighbor.
Then I came to tabeso. The name (which Google autofills as Tabasco) was by far the most mysterious, and the pitch language was markedly vague. All I knew was that the product had something to do with events and social media. Then I watched the video, titled “Kids Think Social Media Is Stupid.” I laughed. Hard. I learned that at least one kid thinks hashtags taste like mashed potatoes.
Interviewer: Would you ever accept a friend request from Janet Reno?
Kid: I don’t know.
Interviewer: Do you even know who Janet Reno is?
Interviewer: (whispering) She’s like the hottest woman. Ever.
The final screen told me there’s a new name in social media that everyone will love, but I wasn’t sure how to pronounce it, and I had absolutely no idea what it does. So of course, I decided this was the team that could help me understand the mentality of a startup.
I halfway expected a bunch of kids to show up for our interview, and in a sense, that’s exactly what happened. Don’t get me wrong. Chad Ramos, Joe Herrera, Rodney Ballard, Taylor Prince and Brad Whiting are all savvy businessmen, but get them talking about Justin Bieber and it’s over. Before we got into that, before anything else, I asked what tabeso is.
“We should hit 4,000 Facebook fans today, with people not really knowing,” Herrera said, explaining that the team was waiting for their patents and trademarks to go live before they spilled the beans about their product. So instead, they brought in YouTube sensation (plus corporate attorney/CPA/somebody’s cousin) Arturo Trejo to make the video I watched. It hooked a lot of potential users. But what secured tabeso a spot in the Crowdstart-Vegas final is the idea that, while we have one-stop sites for keeping up with friends, news and random nonsense, we don’t really have one for events.
That occurred to Herrera after planning a trip to Hawaii. He wanted to make the most of it, but finding out what was happening while he was there involved a lot of disparate websites and fruitless searches and issues loading Flash onto his phone. As he wrote on the tabeso website: “For all I knew Weezer or The Killers were playing at Aloha Stadium, and I had no clue. Or maybe there was some Polynesian version of Les Mis at some outdoor amphitheatre, and again I had no idea.”
It’s not that he can’t look in a friendly neighborhood weekly magazine; it’s that he doesn’t want to have to look. He wants to know everything The Killers are doing, from TV appearances to concerts and album releases, as part of a feed that also includes family dinners and birthdays, the entire Smith Center schedule—anything that matters to him.
“At tabeso, we don’t look at events as just concerts and festivals and sporting events; tabeso will allow people to manage the things happening in their lives, and really, we define an event by a time, a date and a place. So weddings and bachelor parties will have equal place on tabeso as U2 in Ireland or the French Open,” Herrera said.
Tabeso will launch on iPhone (an Android platform and full website are also in the works) with more than a million events in its database thanks to strategic partnerships with major aggregators. The hope is that as people and places discover the product they’ll take ownership of their presence on tabeso and help populate it with harder-to-find details. Events can be searched by location, venue, date range and interests, and filters keep track of those shared by friends and associated with particular places and organizations. They can be tabbed so you’ll remember you’re interested, shared so your friends will know and comment, or put on your calendar or a tabeso bucket list. You can even buy tickets. According to Herrera, that means date night will never suck again, and Ramos won’t miss a minute of being a hardcore Belieber.
“We feel like we’ve taken all of the key components of all the event check ins, bucket listing, exploring, searching out items to do while you’re there or not there, and put it all into one system that allows you to manage everything on one platform,” Ballard said. “It’s big. The demographic is huge.”
What they’ve just told me over more than an hour will have to be distilled into a five-minute pitch for Crowdstart-Vegas. They’ll need to demonstrate team cohesion, traction with users, market potential, the all-important revenue streams and who might play Herrera if Aaron Sorkin makes a movie about tabeso, emphasis on the e.
“We have literally a minute and a half to describe the app. … It’s insane,” Herrera said. But it’s a chance to build on the six months and close to $200,000 the team has already invested in this project. Right then, Ramos got a text about the newly posted company video, the one that does spill the beans: “… think you’re going to be a bajillionaire …”
- Crowdfunding Bootcamp
- What: Want to get a jump on how to crowdfund your startup in advance of the Startup Exemption going live sometime next year? This is your road map.
- When: October 9-11
- Where:Ravella Resort and Spa, Lake Las Vegas
- Cost: $350
- Details: click here
THE POWER OF THE CROWD
Whatever is driving them, I’m sure none of these competitors would mind being bajillionaires. But reality is harsh. It takes money to make money, and while the tabeso guys were able to put up serious capital, many of their competitors can’t. They’re hoping investors will see their potential, but any episode of Shark Tank will tell you that just because people can write big checks doesn’t mean they will. As for the rest of us, the average folks with a modest amount of cash to throw behind a worthy cause for a modest return, we can’t be pitched in a general sense—because crowdfunding, or seeking small contributions from a spectrum of people, isn’t legal. Not yet.
Startups and small businesses can seek donations through platforms such as Kickstarter and Indiegogo, but they can’t freely exchange equity, debt and revenue-based securities for just any investor dollars. Those exchanges are exactly what Crowdfunder is designed to provide, and it will in 2013, when the Startup Exemption takes effect. President Obama signed it into law as part of the American Jobs Act this spring, peeling back consumer protections put in place in 1933 and 1934 when fake stocks and snake oil ran rampant.
The exemption framework came to Washington by way of three frustrated industry veterans: Zak Cassady-Dorion, Jason Best (a Crowdstart-Vegas judge) and Sherwood Neiss. Neiss explained that, under current law, entrepreneurs who don’t want to register with the Securities and Exchange Commission are able to seek capital for their projects, but they have to pay handsomely for private placement memorandums that lay out all the risks, and most of the money must come from “accredited” investors, meaning only those with a net worth of at least $1 million.
“The unaccredited investor is 98 percent of America,” Neiss said from his office at Crowdfund Capital Advisors, the consulting firm he founded with Best. While they believe in the SEC and think regulations and disclosures are vital to confidence in the marketplace, they want to change a staggering statistic. “Small businesses and startups, according to the Small Business Administration, account for 50 percent of the jobs in the U.S. but they only have access to 1 percent of the capital,” Neiss said. “Crowdfund investing needs to open up the capital so that small businesses can create more jobs, and that is what our country needs.”
And the upside is huge. Neiss points out that in 2013, events like Crowdstart-Vegas could have crowdfunding platforms attached such that all participants might find angel investors, accredited or otherwise.
“We’re beyond excited, because we see what this is going to do for Main Street America. Not necessarily what this is going to do for tech startups,” he says, “but how it’s going to allow those people that don’t have access to capital, that don’t live in New York City or in San Francisco, to be able to go to their communities, to be able to go to their customers, and say, ‘You know what? I’ve got an idea; what do you think about it?’”
Community feedback is at the heart of Crowdstart-Vegas, because none of these startups plans to fold if they don’t win the golden ticket. After the first five pitches, I ask judge and Zappos Director of Website Systems Rick Duggan if the defensiveness I detect in some of the responses to the panel’s questions is real.
“I view it as passion,” he says. “So they’ve got this great idea; they’ve been living and breathing this dream for six months, a year, two years, and so they’ve thought through a lot of the questions that we ask. And we expect that. We know that they’ve thought about this a lot more than they can possibly present in five minutes.”
Next to Duggan is Tom Thomas, managing partner of investment management and commercial real estate development company Thomas & Mack. They agree that just because more capital will be available when crowdfunding goes gonzo, it won’t necessarily be easier to get, especially given the Internet’s notorious flash-in-the-pans. Thomas admires the creativity of startups, but he’s seen their tendency to “overestimate the love that they’re going to receive in the market.”
“You look at the investment community, where there is money, a lot of that is in mature investment hands, and they’re mystified by 600,000 apps. They’re saying to themselves, ‘What’s the likelihood that I’m going to pick the right one to back?’” Thomas says. “How do you simplify your product so that somebody like me can go on, click, click, click, done?”
These products have that element nailed. I want all of them, but at the same time, I’m almost at my saturation point. I recently vowed to close the floodgates behind Facebook and Twitter, because there are just too many cool things for me to do online. Duggan smiles.
“Five years ago, Twitter was just getting started. No one was on Twitter. Now almost everyone is on Twitter,” he says. “There are certain things that come along, and even if you’re doing all the previous things, you still add the next thing.”
TV didn’t kill radio; the Internet didn’t kill TV. There is more space in our lives than we can possibly imagine, but we still need convincing. And it’s hard to do that in five minutes. “What I will say for the five teams that we’ve heard from so far is that they’re not just the next social network. Each of them articulated a clear need for their product,” Duggan says.
But only one can win. The top five are assured an audience with a group of accredited investors known as the Vegas Valley Angels, and there’s a prize for crowd favorite based on Twitter votes during the event. That honor goes to tabeso. They make Vegas (and me) proud, even though the grand prize goes to Salt Lake City-based Text Me Tix, which sends targeted fire-sale offers on tickets and merchandise to consumers. LA-based community action tool ThrdPlace comes in second (ha!), LaunchKey is third, tabeso is fourth and political buzz site PoliticIt out of Logan, Utah, takes fifth.
“I think the consensus among all of us was, every team here should keep going,” Best says. Who knows what the market will say, but for now, the love is not overestimated
LaunchKey (Las Vegas)
As co-founder Geoff Sanders joked during the pitch: “If you’ve been keeping track of the news lately, every 12-year-old kid in Russia is hacking our accounts.” We have too many passwords, and as security measures go they’re antiquated and inherently vulnerable. With LaunchKey, no matter where you are or what site you log in to, single-click authentication happens on your smart phone. And you can monitor and lock down all accounts remotely. Link to LaunchKey.
PoliticIt (Logan, Utah)
With neural network software that never stops learning, PoliticIt tracks and predicts (currently with close to 90 percent accuracy) elections across the country, measuring the impacts of commentary in mainstream and social media and scoring politicians’ individual digital influence. By correlating chatter and campaign performance, it gives politicians real-time analytics and gives the public insights into the machine. The motto: “If you want to know what the media is saying, Google it. If you want to know what people are thinking, PoliticIt.” Link to PoliticIt.
ShareTown (Las Vegas)
Community is something Vegas could use more of, and ShareTown is about building it through the friendly, practical exchange of goods and services. Dave has a grass clipper; Jeff needs one. Dave makes a little cash; Jeff saves some. Every item is covered for damage, from a trampoline to an Audi RS4, and if you don’t see what you need, you can post a request. It’s a digital neighborhood “where sharing is caring, and sharing makes cents.” Link to ShareTown.
Bundling existing resource channels for funding and volunteers with project management tools, the ThrdPlace model mobilizes and manages community actions by for-profits, nonprofits and private individuals, from starting up to staffing. During the pitch, co-founder Mike Colosimo said the company has even talked to humanitarian giant USAID about building civic-engagement gaming software that would encourage philanthropy on a massive scale. Link to ThrdPlace.
NeedTo (Austin, TX)
Founder Wade Floyd cited grim economic statistics: One of five Americans is unemployed or underemployed; 60 million are seeking extra income. His solution is a site that connects those who need a job with those who need a job done, from plumbers to lawyers. Both sides post what they’re looking for, and offers are selected based on profiles that list qualifications and customer reviews.” Link to NeedTo.
Gabuduck (Las Vegas)
Apps are big business, and 72 percent are purchased for kids (who already have smart devices and know how to use them). Gabuduck, an “indie label” for youth content, creates musical games and episodic entertainment that leverage the talent and fan bases of major recording artists such as Lisa Loeb and Michael Franti. “We want to tell stories that parents trust, that parents believe in,” founder Angela Abshier said. Link to Link to Gabuduck.
Text Me Tix (Salt Lake City, Utah)
If you’ve ever watched a basketball game in a mostly empty arena, you know the feeling behind the fact that a lot of big-event tickets don’t get sold, not to mention offsets like snacks and merchandise. Through partnerships with media outlets, Text Me Tix sends their audiences targeted, up-to-the-minute offers. “Did you know that 90 percent of text messages are read within three minutes of delivery?” founder Jeff Harmsen said. “That creates the perfect fire-sale platform for organizations, and that’s what we do.” Link to Text Me Tix.
Founded in 2006, BakeSpace already has a huge following and slice of the market, recently losing to Twitter in the Webby Award category for Best Social Network. The site enables anyone to create, publish and share a cookbook for free, as both a native iPad app and ebook with recipes and how-to videos. New funding would allow development of the sales team and crucial search engine optimization. Link to BakeSpace.
Chexplore (Las Vegas)
“People use Chexplore to own their city, not just check in,” said co-founder and UNLV graduate Dominique Remy. It’s a social bucket list for visitors and residents that helps them find leisure-based attractions (and deals) and share what they’ve experienced. “It goes beyond five-star ratings and checking in and instead gives you gender splits, average age and atmosphere tags,” Remy said, adding that the plan is to expand into 20 top metro areas before crossing the pond. Link to Chexplore.
tabeso (Las Vegas)
We have one-stop sites for keeping up with friends, news and random nonsense, but what about events that matter, from family dinners to free ice cream at Springs Preserve and U2 concerts in Ireland? Launching with more than a million aggregated events, tabeso lets users plug people, places and organizations into their feeds, where they can tab, share, bucket list, comment on and buy tickets for every kind of happening. “It’s proactive event knowledge, not reactive,” co-founder Joe Herrera said. “You don’t have to go searching.” Link to tabeso.