Startup Mafias, The Reluctant Billionaire, and Scooter Madness at SXSW

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DAYLIGHT  

At this year’s SXSW, the most notable performance may be the effects of scooter madness: The scooters, nonexistent at last year’s festival, are everywhere in Austin this week, with thousands of vehicles concentrated in the roughly 1.5-square-mile area stretching from the Texas Capitol to the intersecting Colorado River. The result is attendees operating them at high speeds both through dense crowds on the sidewalk and among busy automobile street traffic. No one is wearing a helmet. And messy heaps of scooters are scattered across Austin’s sidewalks and public spaces.

“Some of the astounding sights I’ve seen in the past few days include multiple vicious-looking wipeouts, a man cranking the accelerator and doing donuts in a crowded parking lot, and scooters littering the gutters of East 6th Street while throngs of people avoid tripping over them. At one point, I read that a man was found riding one down the shoulder of an Austin highway. Riders here are disregarding all manner of street signage and traffic lights; some people flagrantly speed the wrong way down streets.”

SILICON VALLEY

One of Silicon Valley’s most prominent voices for ethical investing has been implicated the college admissions bribery scandal: “Prosecutors charged Bill McGlashan, a founder and managing partner at TPG Growth—which has made landmark investments in companies like Uber and Airbnb—on fraud allegations for trying to engineer the admission of his son to the University of Southern California.

“What is particularly damaging for TPG is that McGlashan has positioned himself as a leading voice in Silicon Valley for social responsibility. In addition to overseeing TPG’s late-stage growth investing arm, McGlashan has partnered with other conscious leaders like Bono and Laurene Powell Jobs at The Rise Fund, a TPG investing arm that tries to make the world a better place through investments in things like dairy farms in India.”

GOING PUBLIC

Riley Newman, a former head of data science at Airbnb, has created a venture capital fund specifically to back former Airbnb colleagues who start their own companies: “It’s part of Silicon Valley’s often-incestuous circle of life. The startup world projects a meritocratic image, but in reality, it is a small, tight-knit club where success typically hinges on whom you know.

“In this model, employees of tech startups frequently leave the companies once they have been enriched by their firms’ initial public offerings. Then networks of alumni from these companies — called mafias—support their peers’ new businesses with hiring, advice and money. …

“‘It’s going to trigger a massive explosion in entrepreneurship,’ said Howard Lindzon, an entrepreneur in Phoenix who invests in five to 10 venture capital funds a year. He said he particularly wanted to put money into funds with connections to the Uber and Airbnb networks.”

Another thing to look for with companies going public is a real estate boom in the HQ city: “Back in 2004, Google’s IPO played a role in the 11 percent increase in prices in the San Francisco and Bay Area. The economic success of the region, especially it’s recovery after the great financial crisis, has generally tended to push prices up.

“Another example is Facebook. Its IPO helped its employees make significant down payments on mortgages and early employees invested in more than one single-family homes. While Facebook chose a historically poor area for its HQ, the prices of the neighboring Palo Alto and Menlo Park went soaring after the company went public.”

MARKETING

Craig Newmark, the founder of Craigslist, built a thriving business and wound up a billionaire despite eschewing conventional Silicon Valley wisdom: “Investing heavily in early growth to lock in market dominance is the strategy of pretty much every venture capital-backed startup. But Newmark … didn’t want to do a lot of consumer marketing. About five years into running Craigslist, he tried running a couple of ads for it, but quickly decided it didn’t feel right. ‘Aside from that, it’s been purely word of mouth,’ he said. ‘Word of mouth, and then more word of mouth.’

“Nor did he want to ask Craigslist’s users to look at banner ads. ‘They slow the site down and they strike me as kind of dumb,’ he said. ‘So I decided no ads like that, no advertising in any conventional sense.’ Amid the dot-com gold rush of the late 1990s, leaving easy revenues on the table struck a lot of people as downright bizarre. ‘VCs and bankers would talk to me and tell me I could make a huge amount of money doing the usual Silicon Valley thing,’ he said. ‘But I was a nerd, and I realized I wouldn’t know what to do with a billion dollars.’” Twenty years later, he’s a billionaire anyway.

Perhaps surprisingly, Millennials are buying more frozen food, so Gorton’s is upending its 170-year-old brand to sell them fish sticks: The company changed its recipe and its marketing approach, adding half-man, half-fish “mer-bros” to its roster of mascots. This year, a new mer-bros ad features the muscular beings shedding purple tears as they tout the “ridiculously fresh-tasting” quality of the fish. And now, Antoni Porowski, the chef from the Netflix series Queer Eye, is going to promote Gorton’s to his 2.6 million Instagram followers. So far, the campaign seems to be working: “The spokesbros have translated to a 6 percent increase in sales, or about 700,000 more boxes of fish sticks sold in the past year.”

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STARTUP

After rebuilding a busted Tesla Model S for a mere $6,500 with no repair information from Tesla, Rich Benoit is opening what he says is the first repair shop on the East Coast dedicated to electric vehicles—with the goal of servicing vehicles while teaching owners how to care for the cars themselves: “The shop is under construction in Seabrook, NH, and he has enlisted a former Tesla mechanic to join him.”

Tesla’s aversion to allowing anyone outside the company to work on its vehicles has created an opportunity for Benoit, a “backyard mechanic” who currently “spends most of his tinkering time helping other Tesla owners who don’t want to deal with, or wait for, Tesla. There have been complaints of long lines at the limited number of service centers … and reports of parts shortages.”

RETAIL

The world’s largest furniture manufacturer, Ikea, has a problem making furniture for those with disabilities. To solve it, Ikea Israel is teaming up with two Israeli nonprofits to design pieces called ThisAbles: “A total of 13 designs are available today. They include items like the EasyHandle, a big, Rubbermaid-looking grip that can be added to the seamless door of a Pax shelf, and the Glass Bumper, a plastic pad that protects the bottom of a glass-doored Billy bookcase from the bump of a wheelchair. Each object is illustrated in a charming campaign, featuring people with disabilities helping to advertise the simple genius of the designs, while quickly illustrating the method of installation.”

Neiman Marcus is about to open a flagship store on New York’s West Side: Greeting customers at one of the new store’s three entrances isn’t a traditional department-store beauty counter. New York’s City Bakery and Irving Farm coffee shop will serve coffee and pastries on one side. On the other side, Neiman’s first full-functioning kitchen is set to stage live cooking and mixology demonstrations and host chefs while a chocolate bar allows consumers to order beer and wine while indulging on their sweet tooth.

“On the upper floors of the three-story flagship are two full-service restaurants and bars in what the company described as its biggest combined showcase of food and drinks. One of them overlooks New York’s 10th Avenue with a glimpse of the Statue of Liberty in the distance while the other overlooks Hudson Yards’ centerpiece, a spiral staircase called the Vessel. ‘We are following the trend of the market,’ Raemdonck said. ‘Our customers love the notion of food and drinks as part of the experience.’

DAMAGE CONTROL

Wells Fargo CEO Tim Sloan received a thrashing from a bipartisan committee when he testified before Congress yesterday. “Sloan tried to convince Congress that Wells Fargo has abandoned the aggressive sales tactics that led to the creation of millions of fake accounts and other issues, such as charging thousands of customers for auto insurance they didn’t need and imposing unwarranted mortgage fees on homeowners. … His assurances seem unlikely to ease political pressure on the bank. Many of the representatives who questioned Sloan said they have constituents who were harmed by Wells Fargo’s scandals.”

ZACK ELLER’S DEALS OF THE DAY

American Express has acquired LoungeBuddy, a booking and rating app for airport lounges: “Chris Cracchiolo, a senior executive at American Express, said the acquisition shows the company’s commitment to enhancing travel benefits for its premium card members.”

Osprey Capital LLC has purchased Kaleidoscope Floral, a Naples design and event planning business. “The planned purchase follows a handful of others involved in the local hospitality sector including WeddingLux Event Planning and Design, EventLux Social Celebration Planning and Design, GlobalWorks Events and Destination Management, Naples Transportation & Tours and Naples Princess Cruises.”

BREXIT

Across the pond, Brexit’s a mess but one pro-remain brewery from Suffolk in the UK is getting creative in making its feelings known on the matter. Served at a Paris pub The Cricketer, “the beer’s hoppy notes give it a deliberate bitterness, said Lomig Fronty, a French barman at The Cricketer pub. The brewery ‘wanted to put across its feelings towards Brexit, hence the bitterness of the beer,’ Fronty said in between pulling pints. ‘So that’s what I tell people who don’t want to take it for this reason, it’s actually an anti-Brexit move to buy this beer.’”

And that’s what’s ahead.

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