The cases of Seamless, InVision, and Pond5
Cliff Sirlin, Managing Director at LaunchCapital, is the embodiment of entrepreneurship. At the age of 25, straight out of law school, Cliff co-founded the first of his four businesses. Since then, he has experienced a long career both as an operator and investor.
I sat down with Cliff to better understand what he looked for when he made early stage investments. While each of these cases are quite different, all included business model innovations and incredibly impressive founding teams.
Cliff explained the varying innovations in these three cases and how he thought about it at the time.
1) Seamless – Tapping into the power of excess capacity
“Seamless, now merged with Grubhub, was one of the most successful companies I invested in back in 2000. But very few people know the genesis of Seamless. Most look at it now as a super convenient way to order food on their smartphone but long before the smartphone existed, Seamless was in the business of marrying consumer demand with excess capacity.
It started out at a very early stage as an idea of a few law school grads who wanted to increase the back end efficiency of the law firm meal ordering process. At the time, tracking reimbursable meals while working at a law firm was a nightmare. Bringing efficiencies to this process was a major step forward. Next, most NYC based restaurants were looking to expand their revenue base. If you think about restaurants, they are very busy from 12:00 PM to 2:00 PM and from 7:00 PM to 9:00 PM. At those hours, there’s a capacity constraint of how many people the restaurants can seat. Yet, these restaurants have large commercial kitchens that can prepare meals far beyond their seating capacity.”
Seamless approached the restaurants and basically cut a simple deal: We will create an additional sales channels for you to go beyond your seating capacity in exchange for a percentage of the sales. The restaurants loved it as they could make more money and the law firms got an efficient meal delivery system for their employees. The employees loved the convenience. The infrastructure already existed; what was needed was just another business model to profitably unlock the unused capacity.”
Thus a perfect marriage – consumer demand, backend efficiency and excess capacity.
2) InVision – An industry expert sees an emerging problem
“Around 2010, everything was converting online. We had pioneers like Steve Jobs pushing for high-quality graphic design in every business. Stellar UI/UX was no longer a luxury but more a necessity—and with it, everything around graphic design was exploding.”
Enter Clark Valberg, The Founder of InVision, who was a graphic design expert. He realized other graphic designers in his field did not have the necessary tools to collaborate with their colleagues. Graphic design for the web and mobile apps require a dynamic experience that provides near-constant feedback.
“Designers and customers needed the ability to interact and understand the functionality of the front-end of a website before they actually spent the time and money to construct the back-end infrastructure. Clark identified this need after experiencing the frustration of working with clients and fellow graphic designers without a collaborative tool, so he set out to build it himself. Now millions of people benefit from his vision and associated tools.”
This is a case of an industry expert who saw what was coming, identified a large gap in existing resources, and delivered a product that became a success.
3) Pond5 – Observing parallels: building a business in an adjacent vertical using a proven blueprint
“Back in 2009, Youtube and video media were becoming more and more prevalent. Videos, sound effects and photos were the essential elements to media marketing campaigns – but they were very expensive to produce. Businesses were in dire need of low cost options. Tom Bennett, co-founder of Pond5, saw an opportunity to replicate a business model that had been perfected in an adjacent vertical. His pitch was simple: look, there is a company called Getty Images. Everyone knows about Getty Images—it’s a marketplace for photography. But what doesn’t exist is a marketplace for video. Tom set out to create this new marketplace. Since he had worked in this sector before, he clearly understood the needs of those involved in the creative IP world.
Pond5 had perfect timing. They also benefited from a few important trends – video creation is expensive but a business necessity; there was tremendous growth in the ranks of independent photographers and videographers; each one of whom was trying to figure out how to monetize their creative endeavors. Finally, there was a blueprint to follow in an adjacent vertical thanks to Getty Images.”
These ingredients were combined to create a highly successful marketplace.