Where do mission-driven startups find seed funding?

Where do mission-driven startups find seed funding?

Tumml has wrapped up its Tumml's Summer 2015 Cohort – but our entrepreneurs are still rolling! Check out Tumml's latest impact stats, highlighting that our 33 startups have raised $35M in funding, created 280+ jobs, and touched the lives of 2.2M people. And, while much of the tech industry suffers from a lack of diversity, 76% of Tumml startups have a woman or person of color on the founding team.

It's been a big few weeks for our portfolio companies. Our alum Neighborly announced a $5.5M funding round and Scrumpt was a TechCrunch Disrupt SF 2015 Battlefield Finalist!

Want to learn more about how Tumml thinks about urban impact? Read our take on bridging the capital gap for mission-driven entrepreneurs in the Stanford Social Innovation Review. And check out Julie's TEDx talk on how public and private collaborations drive urban innovation. Please help us spread the word on Twitter!

You can read more updates from Tumml here, as well as news stories we're following. TechCrunch has an interesting story about how startup Zumper argues that one-third of San Francisco's rent is attributable to VC funding.

Startups can't afford to ignore government

Startups can't afford to ignore government

We first published this article in TechCrunch on July 22, 2015.

Last Week, California threatened Uber with license suspension for failing to comply with state laws. Last month, Santa Monica banned Airbnb vacation rentals. But in spite of regulatory challenges faced by companies like Airbnb and Uber, entrepreneurs still act like government isn’t an issue. After all, startups are disruptors, and government is just a monolithic barrier to innovation, right?

Government as enemy?

 The prevailing view in Silicon Valley is that entrepreneurs are changing the world, while government is just standing in the way. And it’s exactly this mentality and media narrative of the ‘disruptors’ versus the ‘regulators’ that’s holding back our startups.

A new era in startup innovation

The truth is that government is now more critical to the success or failure of startups than ever before. Many of today’s largest and most successful private startups are playing in a public space that is highly politicized, highly regulated, or traditionally run by government.  Let’s take a look at the data.

For half of the most highly valued, venture-back private companies, interaction with government is core to their success. The top five list is even more telling – between Uber, Airbnb, and Palantir, you have the GDP of a sizeable country.  And this trend continues as you go down the “unicorn” list of billion dollar startup valuations – from employee benefits platform Zenefits, and fintech startups like Stripe and Credit Karma, to energy company Bloom Energy.

Just a few years ago, the move of startups towards highly regulated industries was unthinkable. But, with governments now cash-strapped and unable to provide all the quality-of-life services for residents, entrepreneurs are uniquely positioned to step in.

And clearly, if startups can master the tight-rope act of engaging with government, they can be big winners.

Moving beyond the philosophical and into the practical

It’s time for startups to stop treating government with disdain or, even worse, ignorance. There is a clear business case for working with government. But you have to be savvy. Let’s take some lessons from entrepreneurs in the trenches.

1) Not everyone will like you just because you’re innovating

 In fact, people may hate you more because you’re disrupting highly entrenched industries. And they will actively try to run you out of town.

Take the example of Zenefits – a startup that helps small businesses manage employee benefits. The startup is disrupting the health insurance market by cutting out the middlemen, known as health care brokers. Earlier in 2015, the Zenefits business model was declared illegal by the state of Utah, on the basis that its model violated a law against rebates. While consumers love Zenefits, the insurance brokers cried foul.

Zenefits proactively engaged government and regulators to change the situation. Fortunately for Zenefits, Utah’s governor and legislature stepped in, clarifying that the Zenefits business model is legal earlier this spring. Just a few weeks later, Zenefits announced a funding round of $500 million at a $4.5 billion valuation. Clearly, it pays to engage with government.

2) Your approach matters

 You need to be tactical about when and how to engage with regulators.

Let’s take the example of Night School, a shuttle service that would use school buses to transport individuals between San Francisco and Oakland, in the evenings, when public transit was slow or nonexistent. But the startup was shut down before they could fully launch. Unfortunately for Night School, they engaged with regulators in the wrong way. They asked for permission before they had broad-based community support or validation of their service. And without a war chest of funding, they couldn’t afford to fight.

3) It takes a village

Productive engagement with government requires investment of time and human resources.

Let’s look at Airbnb. Airbnb has experienced a backlash in some cities around taxation and fears that it reduces the affordable housing supply. But the startup has taken an incredibly proactive approach to working with government. First, they speak the language of government – collecting and sharing data on housing impacts, spending, and tourism.

Second, Airbnb has a collaborative approach to lobbying – with an expansive government relations and civic partnerships team, public relations, lobbyists, and key lawyers to help navigate the complexity. It truly takes a village to work with government, and Airbnb’s village is designed to productively engage policymakers.

Uber is an exception

 Perhaps no company’s battles with regulators have been as public as Uber. The ridesharing service has grown to 300 cities across the globe, developing notoriously antagonistic relationships with many regulators along the way.

And frankly, Uber is going to be successful in spite of itself because it has the money to fight these battles. Its combative strategies have alienated a lot of regulators – and this is going make it more difficult for the new startups that come after them.  Which is why it’s important for startups to work even harder to engage with government. Because, unlike Uber, you probably don’t have the multi-billions in cash to fight.

Wake up and smell the regulation

We’ve entered a new era of startup innovation – one where government will mean life or death. It’s time for startups to get over their indifference to government. In this era, the most successful startups will see government as a partner, not a problem.

Startups need to fix their government problem

Startups need to fix their government problem

We often get asked how startups can successfully work with government – it's been a challenge where many startups have failed. Chariot, a Tumml alum, provides a great case study on productive partnerships. Read our take on how startups need to fix their government problem in the San Francisco Chronicle.

In other news, Tumml alum HandUp launched a donation gift card programHandup is a crowd funding platform for the homeless. Check out more press on the gift card launch below. And a bunch of Tumml companies are hiring – help us spread the word on Twitter!

You can read more updates from Tumml here, as well as news stories we're following. TechCrunch has an interesting story about how startup Lugg has raised $3.8 million in seed funding to provide a ride-sharing platform for on-demand, short-distance moves. 

Jobs @ Tumml companies

Jobs @ Tumml companies

A bunch of Tumml companies are hiring and we want to help them spread the word! Check these jobs posts out and tell your friends:

Happy Wednesday to all your jobs seekers out there!

3 way startups can prove traction

3 way startups can prove traction

Tumml RAs May Samali and Jeff Carlson suggest ways for early-stage startups to show traction in the market
First appeared in Medium on July 15, 2015

Before handing checks to startups, investors want proof of business concept. 

As we mentioned in an earlier post on preparing for investor pitches, showing market traction should be a key part of the message communicated to investors. In simple terms, entrepreneurs must demonstrate actual market interest in their product. 

For most businesses, producing sales and revenue is the best way to show traction. But in our experience, many entrepreneurs struggle to demonstrate meaningful traction, particularly at the pre-revenue stage.  To assist early-stage startups, we’ve compiled a list of three ways to prove market traction:     

  1. Collect pre-orders for your product: Before building your product, connect with potential customers to gauge interest. If early conversations go well, invite them to pre-order your product. The more people willing to put money and weight behind a proposed product, the stronger the evidence of product-market fit. One way of collecting pre-product sales is via crowd-funding platforms such as KickStarter or Indiegogo. These platforms provide quick access to a large pool of potential customers and can be a powerful way to demonstrate that your idea has merit. Pre-orders can also give your business a cash infusion to finish product development. If customers are initially reluctant to pay, suggest they try a pilot.    
  2. Show that you have a large user base: For many early-stage technology platforms, growing a user base should be a priority. This is because rampant user growth is a powerful early signal to investors that your product resonates with the market. For example, from May 2011 to Jan 2012, Pinterest’s number of unique users skyrocketed 30-fold. But how can an early-stage company demonstrate user growth? Use off-the-shelf tools like LaunchRock to lower the barriers to signing up. Allow your users to register through Facebook. Encourage users to recommend that their friends join them on your platform. You can focus on monetizing your product once you’ve established a strong following.    
  3. Demonstrate that your users are engaged: Even if your user growth hasn’t yet exploded, you can still show traction. Focus on the users you do have, and prove that they love your product. Demonstrate that users come back to your product (number of repeat use), or that they are hesitant to leave (low churn). Send customers a quick Net Promoter Score (NPS) survey to quantify their loyalty. Goodreads is a great example — it took nearly five years for the company to reach 5 million users, but with a base of passionate users it was able to court investment. 

One last tip: Let metrics be your driver! Tracking metrics over time gives you and your potential investors insight into how well your product is performing. But you need to be intentional about measuring your progress. First, identify what you need to measure. Every product and market is unique, so decide thoughtfully. And avoid generic or vanity metrics. Then build tracking tools into your product and report your findings. After all, as AngelList co-Founder Naval Ravikant says, traction is “quantitative evidence of market demand.”

8 legal mistakes startups must avoid

8 legal mistakes startups must avoid

Tumml RAs May Samali and Jeff Carlson flag common legal errors made by entrepreneurs
First appeared in Medium on July 15, 2015

In our experience, many early-stage entrepreneurs launch their startups without consulting a lawyer. Lawyers are expensive, after all. Ironically, it almost always costs more money and takes more time to fix legal mistakes down the road. 

Complying with the law is particularly important for early-stage startups courting investors. But all too often entrepreneurs scare off potential investors with messy legal documentation or impending liabilities and lawsuits.  One of the worst reasons for startup failure is making avoidable mistakes. To prevent startups from falling into legal pitfalls, we’ve compiled a list of eight common legal errors made by early-stage entrepreneurs:     

  1. Neglecting your documentation. Record every important interaction involving your company, and keep your documents in order. Legal due diligence can make or break an investment deal.    
  2. Lacking a founders’ agreement. Think of your founders’ shareholder agreement as a “pre-nuptial agreement” for your founding team. Because nine out of 10 startups fail, it is worth thinking about how you and your co-founders might deal with failure. Your founder’s agreement should address issues of ownership, vesting rights, the roles and responsibilities of each founder, including salaries and terms of employment.    
  3. Choosing the wrong corporate structure. In the US, there are a variety of corporate structures to choose from. You might structure your company as a sole proprietorship, general proprietorship, C corp, S corp, LLC, LLLC, Public Benefit Corporation or limited partnership, for example. Your company structure has important implications for your future fundraising, so get a legal opinion and select thoughtfully. Mistakes in forming a company are hard to undo.    
  4. Bypassing industry regulations. Regulations exist to ensure products and services on the market are safe, fair, and accessible. For example, a commuter bus startup needs a transport permit. And a neighborhood food popup must pass health and safety standards. Ensure your startup obtains the necessary permissions and obeys industry rules. Otherwise, you might face shutdown.    
  5. Circumventing employment law. People who work in a startup are entitled to the same employment entitlements and legal protections as those in more traditional workplaces. Do not overlook your responsibilities as an employer. And make sure you understand the difference between an intern, a casual employee, a part-time or a full-time staff member, and a contractor. Misclassifying your staff can lead to big problems.    
  6. Ignoring intellectual property protection. Arguably, the most valuable asset of a startup is its intellectual property. For startups in the US, the three essential legal pieces of IP are trademarks, patents and copyrights. Protect your IP and brand from the get-go. Make sure you don’t inadvertently steal others’ IP. Likewise, don’t let competitors, contractors or unhappy employees steal your valuable IP. Consider getting some non-disclosure agreements drafted. Many entrepreneurs neglect identifying and protecting critical IP assets, and too many don’t figure this out until the damage has been done.    
  7. Overlooking tax obligations. Many startups ignore important taxation issues. Consider the tax consequence of your actions — in particular, the implications of issuing stocks or options. A common blunder for startups in the US is failing to make an 83(b) election when founders’ shares are subject to vesting. If you fail to make this election, you will be taxed at ordinary income rates instead of capital gains. This is a problem because you may have substantial income tax liability when your stock vests if it increases in value, even if you do not sell it.    
  8. Disregarding securities laws when issuing stocks. It is common for startup founders to issue stocks to angel investors, family and friends. But if you issue stocks without complying with specific disclosure and filing requirements under state and federal securities law, you risk running into serious legal issues — and your shares might not be valid. 

Ultimately, we recommend getting a legal opinion on important business questions. Many law firms work with early-stage companies through fee-alignment plans or deferred payment plans. Consider these options. And make sure your chosen lawyers are well-versed in the area of law you need help with. 

Disclaimer: This blog post does not constitute legal advice. If you find yourself in any of the situations listed above, you should defer to professional legal advice.

 

5 tips to perfect your pitch

5 tips to perfect your pitch

Tumml RAs May Samali and Jeff Carlson share tips for a successful early-stage startup pitch
First appeared in Medium on July 6, 2015

Investment dollars can be critical for the survival of early-stage startups. And creating the perfect pitch is imperative to securing these investment dollars. But this is not an easy task, especially for first-time entrepreneurs. 

Here at Tumml, we work closely with early-stage entrepreneurs who are tackling urban problems. Based on our experience, we’ve compiled a list of our top five tips to assist early-stage startups as they prepare their pitch decks:     

  1. Show why you care. Most ventures are born out of founders’ personal experiences. The desire to solve a problem you have encountered first-hand is a strong motivation for entrepreneurship. Did your battle with depression move you to build a mental health platform? Did the lack of public transport options in your neighborhood push you to found a carpooling service? These stories are part of your personal narrative. Include them and your passion will shine through in your pitch. Investors want to hear why you care about the problem you are trying you solve. How did you come to discover the problem you are building a solution to?    
  2. Tell a story. The internet is littered with templates and frameworks for pitch decks. Although these are great starting points, your pitch should be more than filling in a predetermined set of slides. Focus on telling a comprehensive story about your desire to solve a problem and the impact you will have. The key to telling a great story is combining thoughtfully-chosen anecdotes and statistics with a simple, clean presentation.    
  3. Build trust in your team. When introducing your team, don’t just present a slide with the photos and titles of your co-founders. Tell us how your co-founders met, how you all fit together, and why you will work well as a team. Investors look for startups whose team members have complimentary skill sets, but similar mindsets. Many startups fail because of conflicts between co-founders, poor team dynamics, or a lack of shared vision. Investing in early-stage startups is as much about investing in the team as it is about investing in an idea. Give investors a reason to believe in you and your people.    
  4. Demonstrate proof of concept. An idea is just an idea unless you can prove to investors there is a market for your product or service. Don’t assume there is a market. Instead, show that there is product-market fit. Run a pilot. Build an MVP. Get out there and do some user testing. Include quantified results in your pitch to prove you have traction.    
  5. Practice, practice, practice. How you present yourself is just as important as the content you share. Spend some time refining your message so you can convey your mission and vision in one sentence. Ask friends, family, and colleagues to serve as a practice audience. Create a list of anticipated questions from investors and prepare concise answers. Practice really does make perfect.

Meet the new Tumml cohort!

1 Comment

Meet the new Tumml cohort!

We are thrilled to welcome the Summer 2015 Cohort to the Tumml family!  We were overwhelmed by all the incredible submissions that we received from startups around the world. We have narrowed down our selection to nine standout companies that we feel represent Tumml's mission of empowering entrepreneurs to solve urban problems. Each team brings a unique vision to Tumml and we look forward to seeing them grow with us:

   An online platform that empowers homeless and disabled individuals through the celebration and sale of their artwork.

 

An online platform that empowers homeless and disabled individuals through the celebration and sale of their artwork.

   A web, mobile, and hardware product that helps companies and governments build better and safer cities.

 

A web, mobile, and hardware product that helps companies and governments build better and safer cities.

   The fastest way to mobilize thousands of local people for campaigns, events, and projects you care about.

 

The fastest way to mobilize thousands of local people for campaigns, events, and projects you care about.

   An online platform where users can learn about, promote, and support ballot measures.

 

An online platform where users can learn about, promote, and support ballot measures.

   A mobile app that empowers consumers to make smarter and more responsible purchasing decisions.

 

A mobile app that empowers consumers to make smarter and more responsible purchasing decisions.

   Software to help incarcerated citizens transition back into society by connecting all corrections stakeholders.

 

Software to help incarcerated citizens transition back into society by connecting all corrections stakeholders.

   A personal journaling platform and therapy marketplace to improve the world’s mental health.

 

A personal journaling platform and therapy marketplace to improve the world’s mental health.

   An app that allows you to give $1 a day to a nonprofit of your choice for free.

 

An app that allows you to give $1 a day to a nonprofit of your choice for free.

   An app that allows users to check their Food Assistance account balances and calculate the cost of goods and coupons as they shop.

 

An app that allows users to check their Food Assistance account balances and calculate the cost of goods and coupons as they shop.

1 Comment

The next generation of urban innovators

The next generation of urban innovators

We are so happy to have hosted Tumml's Winter 2015 Cohort Exhibition Day on Monday, April 6th.  We had over 150 community members -- civic and government organizations, entrepreneurs, funders, and corporations -- attend to learn about these five awesome urban innovators. It was particularly exciting to have San Francisco Supervisor Jane Kim join us! The founders of ScrumptThe Town KitchenParkoCommutr, and Simpolfy presented the urban challenges they are tackling and their innovative solutions for our cities. A big thank you to all of the sponsors.  Check out some event pictures below!

Jobs @ Tumml companies

Jobs @ Tumml companies

A bunch of Tumml companies are hiring and we want to help them spread the word! Check these jobs posts out and tell your friends:

Happy Monday to all your jobs seekers out there!

Tumml is now accepting summer applications!

Tumml is now accepting summer applications!

Tumml's Winter cohort is gearing up for Exhibition Day – mark your calendars for Monday, April 6th! Get your tickets now and learn more about the our cohort's solutions for everything from workforce development to early childhood nutrition. 

It has been a busy month, filled with events, guest speakers and continued progress. Tumml was all over the place at the LAUNCH Festival: Clara spoke on stage with Jason Calacanis; Rose Broome of Tumml alum HandUp did an on-stage check-in; and Tumml alum Popupsters coordinated the food vendors for the event's 12K attendees! 

Do you have an innovative solution to a city problem? We're now accepting applications to join the Tumml program this Summer! Applications will be accepted on a rolling basis, so apply early (the sooner the better). And help us recruit some awesome entrepreneurs via Twitter.  If you have any referrals, send them our way (info@tumml.org).

You can read more updates from Tumml here, as well as news stories we're following. Bloomberg Business has an interesting story evaluating whether cash-burning startups growing city-by-city will meet the same sad end as Webvan...

Which company will become the world's largest publicly traded B Corp?

Which company will become the world's largest publicly traded B Corp?

Tumml is about halfway through the Winter 2015 cohort! Our companies have been busy meeting with awesome mentors like Molly Turner @ Airbnb, Laurel Arvanitidis @ the City of San Francisco, Chris Lambert @ Lyft, Ange Kingyens @ Version One Ventures, Kim-Mai Cutler @ TechCrunch, and the list goes on – many thanks for all the inspirational advice.  We’re excited to announce that

Tumml company The Town Kitchen has launched its corporate lunch service in the Bay Area. We hope you’ll consider trying out their service for your next team meeting, corporate lunch, or conference. Use the code TUMML to get $20 off of your first order (ten order minimum applies). Coupon expires 3/19! Email hello@thetownkitchen.com to learn more about their business teaching culinary skills to at-risk urban youth while preparing delicious, local food. 

And what have Julie & Clara been up to? They've been traversing the country to talk about Tumml, urban innovation, civic tech, women in management, and countless other topics! In the mood for a 30-minute learning sesh? Julie talks with Startups 4 Good here!  

**Final note: We're pulling together information on insurance options for urban impact startups. If you have any experience with the topic, broker recommendations, etc, please send them to info@tumml.org. We appreciate your help :-)

You can read more updates from Tumml here, as well as news stories we're following. Apparently Unilever is considering B Corp status...