E066: with Rahul Sonnad



about this episode

Jason Calacanis hosts This Week in Startups with guest Rahul Sonnad, Founder and CEO of Geodelic

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00:06:00 Ask Jason – Ken Kowal – eRoutingGuide – I am having trouble finding my target community (manufacturers), how do I find them?

Answer: You basically are looking for lead generation, create content around the subject and brand it well and make it memorable, write about services they use. Search Engine Marketing (SEM) is a good approach companies like Trada offer a compelling service. Writing a whitepaper that can be mailed out in a handwritten envelop is an option, it can be pricey but if it leads to a couple customers and your return is high that is an option. Create a really good landing page like 37signals they are good at getting information. Be creative and do something like Grasshopper and the chocolate grasshoppers they sent. The freemium / tiered model like Freshbooks maybe an approach, consider giving away the service for 6 months and ask for reviews. Be creative and they analyze the results.

00:19:30 Behind the Startup – is a new segment where we will follow Jason’s Angel investment in StorkBrokers and look into the initial process of investing, marketing, web design to launch.

StorkBrokers is an online marketplace for parents to sell kids old toys, clothes, books, cribs, bassinets and other stuff.

In this first segment we hear from Sterling Hawkins, StorkBrokers, Founder and Joey Tran of Fortis General Counsel, where they discuss the initial Angel Investment.

Key issues for Jason:

Company Structure – LLC vs C-Corp. – StorkBrokers was originally started as an LLC which isn’t always best when seeking funding in the beginning it works well for tax purposes but they will convert to a Deleware C-Corp. The reason for Delaware is the state is easy to work with and the laws are predictable. Which brings up the issue of existing investors and valuation and how Jason’s investment is integrated.

Intellectual Property – who owns the code? Domain name? Does someone own a small part of the company that may later come back to haunt you? (Anyone ever heard of Facebook?)

Protections – Occurrence of Debt. (basically put an investor wants to be protected so his value isn’t diluted), No one can amend the charter, nor liquidate or increase the number of shares.

Key Issues for Sterling:

What does the investor bring to the table? The value has to be key to the companies growth in order to sell the investor to the other investors.

Different valuation between parties and how much control each investor will have is a balancing act.

The entire process to bring on an Angel Investor to restructure the company and establish the new structure is approx. $10,000

00:41:30 The initial approach will be to bring on a couple more equity partners to bring their expertise instead of paying for their services: PR/SM Firm, Design Firm and Legal

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00:49:00 The Interview with Rahul Sonnad – His first startup was in 1998-99 he was an MP3 fan and wanted to build basically Rhapsody which was an odd concept at the time. He was working at Microsoft and they didn’t want to do it. So he raised some money and paid for so research and immediately got out of the music business and went into hosted video and sold to Comcast in 2006.

00:55:00 2006 was a very good time for an exit but how do you reconcile selling when you decided to sell and do you think about your timing? You think about it a lot but you really don’t know, it’s a personal answer you have to ask yourself if your still interested in the business, have you done due diligence for your investors, are you fully vested in the company.

00:58:00 Once you’ve raised money it’s tough to get more valuation, it’s easier to build another business

01:00:00 So you worked for Comcast how long did you stay? 18 months +1 day, you basically have earn out clauses and you need to transition it into a new company.

01:01:30 How did you come up with the idea for Geodelic? I was fascinated with GPS location services but I was waiting for the right platform. Being best to market isn’t always the right approach but once the iPhone was launch the timing was right.

01:05:00 Will the iPad be the next big thing? The iPad is an element of mobile but HTML5 will be the next big thing that allows you to launch one product it will eventually replace the App. Right now apps are snappier but in time their will be change

01:08:00 What is the premise behind Geodelic? Like back in the day evryone was saying you need a website but in the mobile space you will need an app that is optimized for where you are. So if I walk into a hotel the Geodelic knows where you are and opens up information about that company and it gives them a way to engage people who are at there place of business, the beauty is it’s passive the GPS tells where you are. Our goal is to give companies the toolset to engage people and create their own content.

01:14:00 You have some amazing content right now are you going to create all the data? No we started down the content road but we license the app and enable companies and power users to create the content which is their content that they can take where they choose. We started with content, moved to social networks and game mechanics and will move to financial incentives.

01:18:30 Who owns peoples location data? Apple basically set the standard, you are notified and choose to opt-in or out.

01:19:00 Should this data be anonymous? Yes but from an app maker perspective we are inudated with too much data to really watch anything. However, if someone wanted to create something bad they could as long as the app was running.

01:21:30 How accurate is GPS? Will it get better? 15-30 feet right now but with multiple sources including land based towers it will get better.

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The News with Lon Harris

01:27:30  Flipboard – New “social media magazine” app Flipboard for the iPad was the week’s most talked-about app, both because of the amazing buzz it got upon release and the technical problems that kept everyone from getting a chance to check out its features.

The app basically takes your Twitter and Facebook feeds and converts them into a magazine-style layout for ease of reading. Unfortunately, a server crash soon after the app launched has kept the vast majority of users locked out of the site’s main features. An upgrade was released that allows you to enter your e-mail address so Flipboard can contact you when the infrastructure received an upgrade, but most people continue to not be able to use the app.

Is this a minor detail no one will remember in a month or two? Or does this kind of crash immediately following launch, and at the height of buzz surrounding the app, hurt its chances of finding a big audience? As Robert Scoble asked: “Is it fair to judge a startup badly based on 24 hours of extraordinary growth?”

It sets itself apart from aggregators and news apps like Pulse in that it doesn’t rely on RSS feeds but instead grabs URL’s directly from social media sites and networks.

However, according to a blog post in Gizmodo, Flipboard may be violating copyright law by scraping content from sites to which it doesn’t own the rights. Flipboard co-founder Evan Doll told the site:

“Flipboard shows short content previews. We do not offer a “full article” view in Flipboard for articles of arbitrary length. If the user wants to read the full article, they tap ‘Read on Web’ and are taken to the full site in an embedded browser.”

Gizmodo notes, however, that plenty of copywritten content, such as Boston.com’s “Big Picture” feature – a slideshow of photos taken from wire services – are fully viewable within Flipboard.

So what do you think? Is Flipboard “fair use”? Do products like Flipboard and Instapaper (which allows you to take content from websites and download it to read later…without ads) violate the rights of content creators to host and sell ads against their own content? Are they opening themselves up to a potential lawsuit?

It’s different fair use is often misunderstood, the question that needs to be asked is did I infringe on their ability to do business?  In this case it’s unfair, if they were using thumbnail images it would be ok, they need to only show a short excerpt and then link to the full story on the original site.

01:33:30  Disney Acquiring Playdom? – Last month, we discussed Disney’s investment of $33 million in Playdom via its venture capital arm, Steamboat Ventures. This brought the total investment in Playdom to $76 million, and set a valuation of about $345 million. Now it appears that Disney may be prepared to acquire Playdom outright. According to TechCrunch, the deal is all but made and is being referred to internally as “Project Platinum.”

Disney recently acquired iPhone game publisher Tapulous, makers of Tap Tap Revolution.

No word yet on what price Disney is prepared to pay for Playdom, though we should note that Zynga, Playdom’s main (but much bigger) competitor, has been valued at around $2 billion.

Does this deal make sense for Disney? Do you expect it to go through?

Disney needs to be in the gaming space, they command a lot of different brand just think of all the opportunities, it was probably leaked because someone has an agenda

01:45:00  Facebook Contract Lawsuit – So, by now, everyone has heard about the lawsuit filed by NY based lawyer Paul Argentieri, alleging that he paid Mark Zuckerberg back in 2003 to create two sites, one of which was called “The Face Book.”

Argentieri has delivered one document to the court which appears to be signed by “Mark Zuckerberg,” and which promises to split 50-50 ownership in Facebook with Argentieri’s client Paul Ceglia in exchange for a fee of $1000. Additionally, the contract promises Ceglia an addition 1% stake in Facebook for every day teh site was late. Thus, Ceglia is suing for 84% of the company, plus damages.

Though admitting that Zuckerberg once worked for Ceglia, Facebook has replied that it “strongly suspects” forgery is involved and called the lawsuit “absurd.”  Zuckerberg told ABC World News: “We were quite sure that we did not sign a contract that says that they have any right to ownership over Facebook.”

Argentieri says he has documents to back up his claim of being a majority stockholder, and called the claims of forgery “reckless and absurd.”

You can see the contract here…http://www.wired.com/epicenter/2010/07/facebook-suspects-forgery/

Any reason to believe this is a valid case? Even when you consider Ceglia was indicted in NY in 2009 on charges of defrauding people who pre-paid him for heating supplies he never delivered?

They (Facebook) has settled many lawsuits aready, Jason’s trying not to be the “anti-Facebook guy” but the evidence seems to be mounting.  The question is why did they take so long to bring the lawsuit?  Jason thinks the suit will be settled.

01:54:00  Betable – Betable.com is a new site where users can create their own bets and then share them with friends. The company is describing themselves as “Twitter for Betting,” and is hoping to be a place where regular people who would like to place bets with friends can go online to organize these sorts of ventures easily. (Zynga for Betting might be more accurate).

Here’s how it works. Betable takes 10% of the profits on all bets. Users get 30% of the proceeds from a big they’ve created. Anyone who places a bet has their money taken up front to guarantee that winners get paid. Bets can be shared on Facebook or Twitter automatically, so your friends needn’t already be on Betable for you to invite them to place a bet. And because it’s social, Betable hopes that means that people don’t scam one another by placing fake bets or claiming false victories.

The company has launched in the UK, where gambling laws are a bit looser than in the US, but the entire team, including CEO and founder Christopher Griffin,is here in the states.

The company has secured a $3 million in funding from Atomico, a venture fund created by Sykpe founders Niklas Zennstrom and Janus Friis.

Are you surprised to hear a VC firm taking a stake in what is technically a gambling site? Or is this “social” enough to get around the concerns over online gaming?

As long as it’s only available in the UK this is a great idea it wouldn’t be legal here.

02:01:30  End

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