E1014: Open Office Hours LIVE! Jason helps founders with their biggest challenges: targeting a specific segment of customers, overcoming past failures in a market, developing new nuclear energy, competing against a major incumbent & more!

Episode Summary

Executive Summary: In this episode of This Week in Startups, host Jason Calacanis conducts open office hours with three founders: Sebastian of Tailpath (blockchain-based goods tracking), Sana of Rivet (local commerce rewards app), and John of Circles (positive-only social recommendations). Across these sessions, Calacanis emphasizes the importance of proving market traction with concrete data, adapting to investor perceptions of market trends, and the necessity for founders to defend their ideas under pressure. He provides actionable advice on business strategy, fundraising, and product-market fit.

Main Topics: Tailpath's blockchain goods tracking (Priority: 5/5): Sebastian pitches Tailpath, which uses blockchain to track goods like diamonds, honey, and wine. Calacanis challenges the approach, noting the difficulty of creating consumer demand for provenance tracking and the crowded blockchain space. He advises Sebastian to focus on paid pilots and custom projects to survive until the market matures. Rivet's local commerce rewards app (Priority: 5/5): Sana presents Rivet, a rewards app for independent shops. Calacanis initially expresses skepticism about the mom-and-pop market, but is won over by Rivet's traction (170 stores, 51 daily transactions, subscription revenue). He advises Sana to lead with performance metrics rather than industry trends to counter negative investor bias. Circles' positive social recommendations (Priority: 4/5): John pitches Circles, an app that allows users to share only positive recommendations, aiming to compete with Yelp and Facebook. Calacanis probes the value proposition but acknowledges market frustration with Yelp after a show-of-hands reveals many have deleted the app. He suggests leveraging email/SMS offers for businesses to engage users. Market vs. data storytelling (Priority: 4/5): Calacanis consistently advises founders to use their own traction data (e.g., customer retention, revenue growth) rather than citing external industry reports or trends, as personal performance metrics are more persuasive to investors. Overcoming investor bias (Priority: 4/5): Calacanis explains that investors often have negative biases based on historical startup failures (e.g., Groupon for local deals, ICOs for blockchain). Founders must address these biases directly with proof points and a clear differentiation strategy. Advice to Deep Isolation: balancing strategic partners (Priority: 3/5): Although Elizabeth's segment is brief, Calacanis advises her on managing relationships with strategic investors (e.g., drilling companies) by limiting their information rights and ensuring commercial flexibility, while focusing on pure venture capital investors for control.

Key Arguments: Founders should lead with their own performance data, not industry trends, when pitching to investors. Blockchain startups should focus on paid pilots and custom projects to survive until the market matures, rather than seeking large-scale funding. Local commerce startups face investor skepticism due to past failures (e.g., Groupon), but can win by showing tangible traction and customer love. Positive-only recommendation apps can differentiate by offering businesses tools to directly engage their most loyal customers. Strategic investors should be given limited board access and commercial contracts with flexibility to avoid conflicts of interest.

Data Points: Tailpath revenue growth: $1,000/month pilot → $10,000 in add-ons - Demonstrates increasing customer investment in Tailpath's custom software approach. Rivet daily transactions: 51 transactions per day - Across 170 stores shows initial adoption, but low per-store activity. Rivet fee per transaction: 10% of sale (7.5% after payment processing) - Stores give up meaningful margin for potential incremental sales. Yelp user sentiment: 10 out of 40 audience members have deleted Yelp out of frustration - Indicates significant consumer dissatisfaction with Yelp's model, creating opportunity for alternatives. Circles fundraising: $500,000 from 30 angel investors in 2 weeks - Demonstrates strong local support, but need for larger VC investment.

Pivotal Quotes: "We call it internally when somebody is selling, when somebody is going against the market like this, the market trend, we call it, you know, like selling ice cream on the Titanic. Like, yeah, maybe you'll sell some ice cream on the Titanic, but it's going down." — Jason Calacanis: Explaining to Sana why investors are skeptical of the mom-and-pop retail market. "So, if you can prove me wrong that mom and pop stores are not going away or that you can make a business selling into them, that's great. It seems like it's a hard business and you need a lot of scale, but because you're taking 7.5%, maybe less scale than Square does, which takes just 2.9." — Jason Calacanis: Demonstrating that investors are open to being convinced by strong data. "So, you want to take on Yelp? Absolutely. Yelp, and I'm going to get into a bigger, yeah. So, your concept is people going to Yelp who are looking for a restaurant are being done a disservice by being given negative reviews in addition to positive ones?" — Jason Calacanis and John (Circles): Setting up the challenge for Circles to differentiate from a dominant incumbent.

Implications: Founders must lead with their own traction, not industry trends. For blockchain and local commerce, persistence and custom work may be necessary until markets mature. Positive-only recommendation apps face an uphill battle but could disrupt Yelp if they gain critical mass and offer unique business tools.