Headline: WSJ LINK “At 17, App Builder Rockets To Riches From Yahoo Deal”
Nick D’Aloisio sold Yahoo his technology and company Summly for “undisclosed millions” as reported by the Wall Street Journal on March 25, 2013. Some say $30 million.
It is a special story of a kid with an idea that turns into riches. In it are classical “How To” lessons for you and your start-up ambitions. Here we go:
- Serial entrepreneur. Nick “previously created several apps, including Facemood, . . . and a service that helps people discover new music.” Start-up experience is valuable, for founding a successful start-up it is priceless.
- No pedigree. Nick was not born into greatness. No famous or super-rich parents. No entrepreneurial family-trail. No fabulous university degree. No Silicon Valley location. Just an idea and determination to make it succeed.
- Talented founder. Clearly Nick is the center of attention, for good reasons, primarily for his invention and also his entrepreneurial savvy. The founding CEO of a start-up is what investors focus on. Venture investing is a people business.
- Tiny burn rate. Nick lives at home, works at home. It does not take huge financing to do a great start-up.
- Bold seed funding. SRI International, the revered Silicon Valley R&D firm got involved with Nick’s technology (related to artificial intelligence) and has some ownership. More high profile investors got involved. Zynga’s CEO Mark Pincus, Horizon Ventures (the investment firm owned by Li Ka-shing of Hong Kong). Then came actor Ashton Kutcher, Stephen Fry, and Wendi Murdoch “who collectively gave him a total of $1.5 million in funding.” Start with high quality investors to lead you to more of the same.
- Clear use of funds. The $1.5 million came after he his initial app began getting attention. The fresh funds were for getting code written and patents applied for. Very simple, very clear, very focused. Not overly ambitious plans.
- Focus. Nick put his further education on hold, without abandoning plans for a future university education (perhaps he could buy one as his next move?). Serial entrepreneurs realize doing a start-up is best without significant distractions.
- Fresh category. The new market Nick focused on is “news-reading technology.” That is a new name for a new space, a new market. It is a unique name. People are following it as it develops meaning and commercial endeavors. Selecting (or inventing) new category increases chances of big success.
- No Gorilla. The new market is not yet dominated by a strong market leader. It has no Gorilla yet. Summly had a clear playing field ahead of it. Serial entrepreneurs know it is not wise to attack a market leader. Instead it's best to flank into uncontested territory where there is a good chance to become the Gorilla of the new market category.
- User savvy. Nick’s app attracted users, quickly. Knowing what triggers positive responses from your Ideal End User is critical to success. That is one reason youth often “gets it right” with youthful technorati (like kids hooked on mobile phones). Nick clearly got it right.
- Strategic partners. In addition to SRI, Nick connected with News Corp. “which signed a deal . . . so that its content could easily be integrated with the [Summly] app.” Wendi Murdoch, an investor, is wife of Rupert Murdoch, the CEO and Chairman of News Corp.. One move leverages another, adding power to the market positioning as leader of the new category.
- First-to-get-it-right. Not "first market mover." First is death for start-ups. Pioneers get arrows in their backs. Nick had many predecessors trying to get news reading summary products. All were trying to figure out how to attract large numbers of end users. Nick followed them and became "First-to-get-it-right.” Serial entrepreneurs know first is to be avoided, and that first to figure out what sensationalizes end users becomes the big winner.
- Morphed and renamed. First name was Trimit, launched in 2011 as a service for summarizing news. In late 2012 it was re-launched as Summly, reflecting the morphed focus of the refined app. Start, modify, change, shift, alter, focus, launch. So don’t sweat the first name of your start-up, you will change it.
- Clever name. Choice of the new name for the app reflected elements of brand marketing with names, a move that boosts competitive power: (1) alliteration (sum-lee, as in goo-gill, face-book) and, (2) suggestive, bringing meaning and value to users of the product. Clever names add significant value to a new enterprise, especially its branding potential.
- Buzz boomed. Nick “became a minor tech celebrity, and his efforts garnered numerous print-media articles and TV appearances.” Nothing beats a start-up worth writing about, blogging about, Tweeting about. In fact, Nick says Horizon Ventures “contacted me out of the blue” after Trimit began to receive accolades. PR tsunamis are the dream of marketing-minded entrepreneurs, exactly what they spend creative juices to make happen.
- Buyer enthused. Yahoo sees a clear fit for the technology. They see a broader application to more of what the company offers to its end users. The focus is on applying news-reading technology. In fact, the Summly service will be shut down. A large vision for the acquisition made it go down easier, quicker and with a higher price tag for the selling start-up.
- Wise sale. Nick said “a number of companies approached us” about a possible acquisition. Big corporations have staffs looking for start-ups that might be suitable for purchase. Buyer Yahoo has made six since its latest CEO has come aboard. Nick chose with criteria important to the future success of the technology he had created. And he sold, rather than strive to build a large company from this idea. Serial entrepreneurs know when it is a great time to cash in their chips.
- Quick success. From 2011 to March 25, 2013 is very fast for any start-up to succeed. It is rare. Even more rare is the large financial value for such a new enterprise. The chances of repeating this time-to-wealth are historically very slim.
BOTTOM LINE: Dissecting a successful start-up like Nick's Summly reveals a lot of the right things going on. When you can see them in new enterprises (or see them missing), you'll be well on your way to building your unfair advantage.
I wish you The Best on your Adventure!