June 26th, 2013 Startup Grind NYC: Jared Hecht and Steve Martocci
On Wednesday, June 26, 2013, OLC attended Startup Grind NYC’s event at Alley NYC featuring Jared Hecht and Steve Martocci of GroupMe and Skype. GroupMe is a mobile group messaging app that was launched in May 2010. By 2011, it was recorded that GroupMe sent over 100 million messages per month and by 2012, it had reached 550 million. The app was conceived and developed at TechCrunch Disrupt in 2010, going on to raise over $10 million in capital and was eventually acquired by Skype for $80 million.
Brian Park: So tell us a little about yourselves and of course, how did you guys first meet?
Jared Hecht: Well first, I was born in San Francisco, then I moved to New Jersey and eventually to New York City. I went to school in NY. Steve and I met through music. We liked two bands: Disco Biscuits and Phish. We met at those shows.
Steve Martocci: I grew up in Long Island, went to Carnegie Mellon. I tell people not to get As in college. Focus on your entrepreneurial venture. College isn’t worth getting As for.
BP: What about you, Jared, what do you think?
JH: I didn’t want to get into politics or anything. I wanted to go into music. Generally, I agree with Steve. If you want to get into banking or consulting, get As. Otherwise, with entrepreneurial tendencies, your time is better suited to be spent building your business.
BP: I heard you guys were involved in a couple of bands?
JH: A couple—they weren’t that great though.
BP: It was interesting at the TechCrunch Hackathon—
SM: Yeah, Jared and I got to be great friends and he was debating whether or not to go for Teach for America or be the eighth employee at Tumblr. We knew that we wanted to work with each other. Jared had the idea of a group messaging concept. We needed to find a way to timebid our idea and the hackathon was a great idea. We were like, “Let’s do this,” and that was that.
BP: You think this was the breakout event?
SM: We just wanted to go to festivals It was because we wanted to build it.
JH: As we built our idea, three hours in, we decided to quit our jobs and build this company full time.
SM: As soon as we had a product that worked from end-to-end, we knew we had to pursue it. Once you felt the product in your hands, you knew you wanted to do this.
BP: You had the idea in hand and the hackathon was the platform.
SM: It was getting to that MVP—we were able to utilize different tools as an engineer and a hackathon is a great way to work uninterrupted.
BP: So what exactly is GroupMe?
JH: It’s a mobile group messaging system that lets you stay in touch with people that you care about.
SM: The very first thing we talked about in GroupMe was the SMS messaging. Then came pictures, in-app messaging, it pushed fairly rapidly.
BP: GroupMe launched at the TechCrunch Hackathon—you won it and then went to South by Southwest?
JH: We came out with a working prototype and we felt that we had a product that we believed and had passion in enough to leave our jobs. We raised funding and went to TechCrunch Disrupt in San Francisco. There, we had the chance to talk about our product and actually launched publically. In December, we had a lot of traction and we hit a sweet spot in the market. It was more than group messaging. People were bored with conventional social networks and GroupMe allowed them to be themselves in small groups. We were able to articulate that and SxSW came along and we really hit it off.
SM: We had some momentum going on prior to South by Southwest. It was the perfect grounds to get people with common interests together. For us, it was the perfect storm. It was magical. It was a really great experience. SxSW is a great place when apps make it shine.
BP: When you got your first seed funding, this was before SxSW. How did you get to dealflow? How did the process even happen?
SM: Before the hackathon started, I tapped this guy I knew was an investor and I told him that I was going solve the group communications problem. That guy was Charlie O’Donnell. The night of the Hackathon, Ron Conway was walking through the halls—I was just giving demos left and right. From there, we met up with Charlie and he introduced us to a couple of investors and I think having the product was the magical key.
BP: Ron Conway was basically your conduit to the West Coast.
JH: Ron is the don. He’s an incredible investor. He and a group of investors invest in inflection points, which is where companies are pinged and they figure out if they need to get more capital, sell their company or hire critical people. Ron is a philanthropist at heart. All I’ve seen him do is help people. He also introduced us to Skype.
SM: As you get serious about raising capital, you need to be conscious about the West Coast. Having an ally out there is a great thing. GroupMe wouldn’t have happened without Ron.
BP: Let’s talk about your Skype acquisition. GroupMe was your baby. What was the conversation like?
SM: We had no intention of selling our company! The best thing about quality investors is that they’re not in it for the cash. They’re in it for the long haul and they want to see it be a big company. It was already a very natural process. We were talking to Skype as a commercial partner, but the talks went so well that it ended up becoming an acquisition.
BP: Okay, so here’s a different question. How do you find a good technical co-founder?
SM: You need to be able to inspire people. You need to want to work together. Inspiring people is important. There used to be a great divide between engineers, business development and media guys, but hackathons are a great way to bridge that gap.
JH: I feel like I am extraordinarily lucky. Steve’s tips are really cool. The other thing you should do is speak code. Just the basics. The most important thing aside from complementary skill sets is having a strong comfortability in questioning each other’s actions. Constant challenge, always questioning why it’s exciting about what it is you guys are going to do leads to better decisions and ultimately a better team.
BP: You were part of a startup before starting GroupMe. Did that help you run the company?
JH: They gave me direction and an idea of how they should be run.
SM: I joined Gilt when they were experiencing massive growth. You needed to use massive scaling techniques and I am very much of a believer that you always need to be learning.
BP: Are you guys Microsoft-owned or Skype-owned?
JH: We’re owned by both Microsfot and Skype, quite literally.
BP: Well, they’re both different cultures, how did you reconcile that?
SM: They saw how fast we work and they like that. They let us grow and retain our culture and product.
BP: What do you guys think of Yahoo’s acquisition of Tumblr?
JH: I think it’s a great thing for NYC, Tumblr and Yahoo. I think Tumblr is one of the pillars of the internet and it will go on to be a pillar of the internet.
BP: So what’s next for the future of GroupMe?
SM: We recently launched the group bill splitting feature. We really differentiate ourselves from messaging apps. The more we understand how our groups are used, the better we can solve problems that they face.