E072: with Gabriel Weinberg

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Jason Calacanis hosts This Week in Startups with guest Gabriel Weinberg, Founder of DuckDuckGo.

00:07:10 James Andrew submitted a suggestion for a theme song.

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00:11:00 Ask Jason – Tim Kress – You have mentioned in your news letter that when the market is hot to raise capital at a high valuation but on TWiVC Mark Suster talks about being careful not to go too high and right size. What’s your take on both approaches?

00:12:00 Answer – I’ll answer your question with a question? What is Mark’s job and what is my job? Mark’s a VC and Jason is an entrepreneur and are on opposite sides of the table. VC’s will say make sure you don’t raise too much money at a high valuation because they want to buy low and sell high. Entrepreneurs will say I need to get the best price I can with the least amount of dilution. If someone comes to you and says I’ll give you $2 million for 20% of your company or $2 million for 10% of your company which would you take? Is their a downside when thinking about the exit? Two downsides come to mind. The VCs that are willing to pay the higher valuation the good VCs will say “oh well their paying a higher valuation because they have to they don’t have the track record, we do” A hot VC that brings a lot to the table may say we’ll give you $10 million and the up and comer may say we’ll give you $15 million, 50% more that’s the marketplace. The VCs who are established and bring a lot to the table generally pay less and the new VCs generally pay more. The real issue is if you raise at a high valuation then success is a multiple of that number. The VCs put in a protection in case you don’t reach the multiplier expectation called Preferred Shares, so if they sell for less they get their money first.

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00:19:20 If you are a search engine marketer they are looking for experts

00:21:45 Hacker News has this site and they talk about this new startup a lot, DuckDuckGo

00:23:00 The Interview with Gabriel

00:23:10 How long have you been working on DuckDuckGo? How many people work on it? How much funding have you received? I’ve raise zero capital, it’s mainly just me I’ve been working on it for three years and it’s been live for about two.

00:23:45 How is your site different and why did you create it? I created it to be a better primary search engine. My motivation is I was starting to see SEO spam more and more and the results page was getting harder to read. So I tried to rethink the results page and make it more readable and understandable for the user. We have a ton of features that are in that vain one is called Zero-Click Info where we put answers above the results. Ultimately we try make it more understandable.

00:26:30 So the first box is from the Google API? Nope, no Google API whatsoever, the first result looks a little different with no snippet, its a human powered result when we good results. After that we use BOSS and Bing but don’t use them exactly but we use those APIs.

00:27:20 So you have a list of trusted places such as Wikipedia or IMDB that you use? Correct

00:28:00 Since Yahoo is no longer supporting BOSS how does that affect you? They are actually supporting it but we use a lot of other services. We use them interchangeable to get the deep web graph if you will like SEOmoz has. The way we use it is we rank the results. We actually started our own crawler to weed out spam.

00:29:00 How do you know it’s spam? I built this big training set of domains and rule sets that I train each month and it brings up great results.

00:30:15 You are one guy and you have been able to remove this spam pretty easily, leads one to ask why haven’t Google, Bing etc. taken these sites out? I try to focus on things that can’t copy as easily, not that they can’t technically do it. It’s just that they seem to have a disposition against a heuristic approach if they didn’t they wouldn’t do it because they be called our for censorship.

00:31:30 Google’s position is that it’s all algorithm but that’s not true their is definitely human stuff going on. Because their is no way Wikipedia would rank so high.

00:32:20 How big is the site now? We have 10s of thousands of users a day but we don’t track users, we have over 1.5 million searches this month.

00:33:20 Is the idea to build this without advertising or monetization? My intention is to have highly relevant ads but when I tried it I didn’t like the results so I’ve been working on it and will probably have them again soon but I have no pressure to do so.

00:34:20 Let’s talk about privacy and search, you’ve decided to not track anyone because if you are not trying to monetize you don’t need to. I keep search results but nothing about the user. Google anatomizes them but you can still track peoples sessions and ore than likely connect the dots to a person.

00:36:20 Another piece we do that others don’t, when you go to Google and click on a link that information is sent to the site.

00:37:30 If the government came to you and said we want to review your logs, is that info in your Apache logs? I don’t save the IP address.

00:38:45 If you were to put Google ads on your site how do you deal the need for cookies? You proxy the ads through your server not client side, I don’t use their API so I’m not going to use their ads feed. Do you think Google is nefarious? No, I’m not against them, the people coming to our site are generally leaving Google so we don’t want their ads in front of them.

00:39:40 So what else in this space is notable? I really like the Zero-click Info with no spam, if you go to the About page and click Goodies. Their is all this stuff that I put into the searches, we deep index content from some of these places.

00:43:15 If you type !a term it will take you right to Amazon. It takes you right to the site.

00:45:30 Your last venture was The Names Database, what happened with that? We sold it to Classmates.

00:45:45 You do Angel Investing now what is your thesis on investing? I’ve done 4 deals and advising a few. I’m looking for companies that may not need VC money, with a viral distribution, I also look for a spark that indicates it will work.

00:47:40 What worries you most about the state of the Internet today? I’m bullish and not terribly worried about much. I think privacy is a real issue but it’s not forefront yet in the media spotlight.

00:48:50 What companies impress you? I really like my investments but they are relatively new: Notehall, WakeMate, MyZamana, KadioMobile (sp?), I advise MyDunkTank founder video.

00:52:15 What’s Philly like for entrepreneurs? It’s not the greatest city but it’s improving. We do have a Y Combinator type incubator called DreamIt

00:57:30 Is PerfectBusiness a pay to pitch scam?

00:58:20 The News with Lon Harris

00:58:45 Yelp Deals

Yelp has been quietly experimenting with a Groupon/Living Social/Daily D-style functionality, called Yelp Deals, offering time-sensitive daily deals offering steep discounts at local businesses. They’ve now made the new product somewhat more official, announcing plans to offer local deals in San Diego, San Francisco, New York and a few other cities in the near future. (For example, offering 5 Yoga classes for $30 that would normally cost $65 at Dan Diego’s The Little Yoga Studio.

This, of course, comes shortly after Yelp introduced Foursquare-inspired “check-in” functionality, allowing individuals to become “Yelp Royalty” by checking in repeatedly at local businesses. Think this presents a genuine threat to sites like Groupon, considering that Yelp already has 36 million users a month? Are Yelp spreading themselves too think trying to do everything in the local space? Why has Yelp’s check-in service not become more significant a player yet?

0059:30 Feedback – Websites are typically known for one thing, occasionally two but rarely three. However, the Internet is changing and the big businesses can because they have scale. Very viable competitor to Groupon but the space is big enough for both.

01:03:50 Buxfer Joins the Deadpool?

Social payments service Buxfer launched in 2007 out of the Y Combinator incubator. The site allows you to monitor all your bank and credit card accounts in one place.

Though the site itself is still live, it’s now a bit of a ghost town…No new tweets since October, no more blog posts and over on Get Satisfaction, users are wondering if anyone is even still in the building. Plus, the site’s two founders are now working at Facebook.

Buxfer raised $300,000 in angel funding back in ’07, and according to TechCrunch, there have been no official announcements from the entrepreneurs or investors as to the project’s current status.

As an investor, are you concerned about companies like Facebook offering lucrative deals to entrepreneurs to basically give up on their own companies? How would you feel as a Buxfer investor?

01:04:50 Feedback – As an investor you can take over the asset and sell it but we don’t know the story of this one. As an investor you do expect some projects to fail.

01:07:45 Netflix on the iPhone

I feel like we do Netflix stories every week, but they just keep making news!

The popular Netflix iPad app is now available for the iPhone and the iPod Touch. All Netflix members can download and stream movies to the app for free. It works on both 3G and WiFi connections as well, much like the recent Hulu Plus app (though consumers should of course bear in mind that AT&T no longer offers unlimited data plans to most users.)

Much like the old school XBox version of Netflix, the iPhone version doesn’t let you add to or manipulate your streaming queue, but will allow you to access it. It also does not offer functionality for your DVD/Blu-Ray queue.

How big a gamechanger is this for Netflix? Will you start watching movies and TV shows on your iPhone?

01:08:40 Feedback – Yes, people will watch movies on their phone. Why would Apple not buy Netflix, it’s a no brainer.

01:11:00 Hulu Plus: Huge Rip-Off?

And speaking of Hulu Plus…is it a huge rip-off?

A new analysis of all the Hulu Plus available content reveals that 88% of it is already available for free on Hulu.com. This includes 98% of the clips that you can see on Hulu Plus! Out of 28,000 TV episodes, only around 3300 of them are exclusive to Hulu Plus. These include episodes of “The X-Files,” “Law and Order SVU,” “SNL” and “Family Guy.” HOWEVER, it’s worth noting that many of these shows are available on Netflix Streaming as well WITHOUT ADS, so if you had that one, you REALLY don’t need to go for the Hulu option.

Even worse, there’s more competition on the way for Hulu. Apple may be announcing 99 cent TV rentals on its September 1st event in a few days…

Am I being too hard on Hulu? It’s only a bit over a month old…Will more content be coming along soon? What would you do if you were running Hulu to make it more competitive?

01:12:00 Feedback – People who own the rights are purposely making this confusing so they can maximize profits. The ads are so repetitive

01:14:45 Facebook and Y Combinator

Facebook has announced that it will start working with Y Combinator companies to “create transformative social experiences,” and this will apparently involve giving them preferential treatment and access to company resources. To quote Facebook’s post:

“We’ll provide product, technical and design resources to support new Y Combinator companies interested in working with us to build deeply social products…These companies will have priority access to our technologies and programs such as Facebook Credits, Instant Personalization and upcoming beta features.”

Last year, Y Combinator partnered with Twitter in a similar fashion, with its companies getting priority access to the stream.

How big an advantage will this be for YC companies?

01:15:30 Feedback – Any startup that participates in this is stupid, they will steal your idea and get you to sell to them at a low price. Don’t do it, it’s a trap, it’s a trap. Techcrunch has become a favor bank at this point. They treat Mark Zuckerberg with kid gloves.

01:21:00 Kooaba Lands $3 Million in Funding

Swiss startup Kooaba offers mobile visual search and augmented reality technology via mobile phone apps. Basically, you can take a snapshot of print ads, DVDs, book covers, movie posters and so forth and get all kinds of information like specs, price comparisons, coupons and so forth.

Kooaba received $3 million in Swiss franks (about $3 million) this week in venture funding from undisclosed Swiss investors. They plan to use it to enter new marks, hire more developers and pursue partnerships with other visual search and augmented reality companies.

Seems like there are a lot of companies in this space, or something similar. Thoughts on this? Would you invest in one of these AR companies?

01:22:00 Feedback – No, I wouldn’t invest. The application of this doesn’t work well, the numbering system works.

01:23:10 .co winner is @ZChaitman wins $100 for Socialcampus.co

01:25:45 Thank you to @Tricaster

01:26:30 To all the Jayters that want to be on contact: Lon [at] thisweekin.com

01:27:59 End

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