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How Tilt Went From Hot $375 Million Startup To Fire Sale (fastcompany.com) 167

Posted by BeauHD from the all-good-things-must-come-to-an-end dept.
tedlistens writes: Not long ago, social payments company Tilt seemed to have it all -- a hot idea; cool, young founders with Y Combinator pedigrees; and $67 million in funding -- not to mention a $375 million valuation. But Tilt was more successful at cultivating its user growth and fun, frat-tastic office culture than at nailing down a viable business model. When Tilt finally ran out of cash, the party ended with the company's sale at fire-sale prices to fellow Y Combinator alums Airbnb in an aqui-hire deal. Where did it all go wrong? Here's an excerpt from the report: "Tilt was based on the premise that 'something like PayPal and Facebook would collide,' Tilt founder and CEO James Beshara says. The company aspired to be a social network for money -- instead of sharing photos and videos, users exchanged digital cash for birthday ragers and beer runs. During Tilt's early years, the pitch was simple, and carefully calibrated for Silicon Valley boardrooms: 'Let's prove that we can dominate the globe.' [...] By early 2013, millions in venture dollars were pouring into Tilt's coffers. Investors were lured by the same strong social metrics (viral coefficient, for example, a measure of user growth) that had marked Facebook as a winner. But the hopes embedded in Tilt's $375 million valuation came crashing down to earth last year. Beshara hadn't built a business; instead, he had manufactured a classic Silicon Valley mirage. While investors were throwing millions of dollars at the promise of a glittering business involving 'social' and 'money,' their Mark Zuckerberg-in-the-making was basking in the sunny glow of Bay Area praise and enjoying the ride with his bros. Revenue was not a top priority -- a remarkable oversight for any company, and a particularly galling one for a payments company. Eventually, with cash running low, Tilt went looking for a buyer..."
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How Tilt Went From Hot $375 Million Startup To Fire Sale More

How Tilt Went From Hot $375 Million Startup To Fire Sale

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  • This just proves (Score:5, Insightful)

    by Anonymous Coward on Tuesday April 18, 2017 @09:41PM (#54260865)

    that there is a shortage of skilled intelligent STEM workers!

    1) Expand universities to recruit even more naive wide-eyed dreamers into STEM. Generate debt to transfer public money into private coffers via tuition.

    2) Lobby for more H1B visas.

    3) Make fun of over 40 engineers and claim that they're too old to understand what you're doing.

    4) Don't forget to shove a broom up your ass so you can wipe the floor on the way out when the bailiffs come to execute the eviction notice on your startup...

  • My experience? (Score:2, Informative)

    by glitch! ( 57276 )

    Venture capitalists are greedy parasites. They are arrogant, yet stupid as a bag of rocks. However they got their money, I am pleased to hear whenever they lose their "investment" in a craptastic venture. Yes, I have had an encounter with one of those morons.

    • Re: (Score:3)

      by murdocj ( 543661 )

      If you are so smart, fund your next startup without those "greedy" venture capitalists who actually want some return on their $$$

    • Re:My experience? (Score:5, Insightful)

      by msauve ( 701917 ) on Tuesday April 18, 2017 @11:00PM (#54261099)
      Greedy parasites? Who are they sucking who doesn't agree with it and like it? Go ahead, create a startup without any financial backers (or venture capitalists, as you call them). At least they're putting their own assets at risk. Do you expect to get support from a shy socialist?

      "Y Combinator" "frat-tastic office culture" "aqui-hire" "Where did it all go wrong?"

      From the very start. The medium is much more than the message. Really, all that bubble-talk business-speak is meaningless bullshit intended to suck in the naive. Even though Steve Jobs is dead, the San Jose valley continues to live in a reality distortion field. For every Microsoft/Apple/Google/Facebook, there's a zillion dead pets.com sock puppets. Is 17 years really so long that people have forgotten what a tech bubble looks like? Hint: this is it.

      Who really thinks Snapchat, who has never made a dime, whose business it making pictures puke rainbows and is readily replicated, is worth $24,000,000,000 in market cap? Or that Tesla is currently worth more than GM or Ford?

      That show "Silicon Valley" sometimes seems more documentary than comedic farce.

      • Re: My experience? (Score:2, Interesting)

        by Anonymous Coward

        Agree on Snapchat, Tesla is a different story in my opinion. Sustainable transport is the future according to wall street, ea Tesla, GM is done, the new Nokia. Besides Tesla is delivering products, its model 3 is coming out and its preorders are off the chart. And most important, you mainly invest in the founder and with Musk running 3(!) dollar companies, compared to Spiegel, HA. Naa Snapchat will be the next Twitter, I'm more positive on Tesla. My 2 cts

        • I'm not a Tesla fan,[1] but it's true that they do at least make something, and they sell it, and they have assets. That's more than you can say for most Valley startups.

          Whether they'll survive remains to be seen, of course. However sluggish and burdened their competitors are, they are also powerful and they have deep pockets.

          [1] EVs don't meet my automotive needs, and I hate all the gadgets. And as a dedicated curmudgeon I hate anything popular, of course.

      • Or that Tesla is currently worth more than GM or Ford?

        Do you not remember about ten years ago when the market crashed? All the execs flew, not drove, to congress to ask for a bailout. They had no plans for what to do with the money when congress asked. Elon Musk was having what he called his worst year ever at the same time, but he was also launching shit into space. He was not asking for billions of taxpayer money with no idea what to do with it.

        Years after Tesla started selling the model S, Ford and GM started selling their own comparable electric cars w

        • Re:My experience? (Score:4, Insightful)

          by Dog-Cow ( 21281 ) on Wednesday April 19, 2017 @02:18AM (#54261509)

          Ford did not ask for, nor did it receive, a government bailout. Ford realized it was in trouble long before the market crash and recruited the CEO of Boeing, who had turned Boeing around in a manner similar to what Ford needed. Ford is doing well, if not as great as it might have once been.

        • Making $10 billion / year!? Oh no! (Score:5, Insightful)

          by raymorris ( 2726007 ) on Wednesday April 19, 2017 @03:10AM (#54261593) Journal

          > Why the heck would anyone value Ford or GM more than Tesla. Ford and GM's unrealistically optimistic dream would be "be in the exact same place we are now 20 years from now."

          Ford and GM are making $10 billion profit each year, and have been for a long, long time. They've been making money for over a hundred years. The question for Ford and GM is whether they'll make $9.5 billion next year or $10.5 billion. So yeah it would be just terrible for them to "be in the exact same place we are now 20 years from now." I sure hate to be making $10 billion every year.

          Tesla, on the other hand, has lost money every year. Tesla MIGHT start making money at some point. Eighty years from now, Tesla might be making $10 billion / year. Also Tesla might go the way of Myspace. We'll find out in a few decades.

          • Ford and GM are making $10 billion profit each year, and have been for a long, long time. They've been making money for over a hundred years.

            Without bailout money, Ford would still be here, and GM would not. Don't conflate the two.

          • You missed the part about "unrealistic." Producing the same gas guzzling SUVs for the next 20 years is not going to work. They have no realistic plan for the future even if they're fine now.

            • You missed the part about "unrealistic." Producing the same gas guzzling SUVs for the next 20 years is not going to work. They have no realistic plan for the future even if they're fine now.

              Every major automaker but FCA has realistic plans for the future. Chevy already has PHEVs and EVs and will soon have HEVs due to a partnership with Toyota. Toyota has all three, as does Honda. All automakers are lightweighting their vehicles, with Aluminum is beginning to creep into SUVs [foxbusiness.com], now that it's fairly well-entrenched in cars, albeit higher-end ones.

              So given that every automaker but FCA (which is barely hanging on, based solely on the strength of the Jeep brand and their Hellcat models) is moving for

      • Do you expect to get support from a shy socialist?

        In Europe, probably. Their governmetn's seem to subsidize startups.

      • Re:My experience? (Score:5, Insightful)

        by serviscope_minor ( 664417 ) on Wednesday April 19, 2017 @04:03AM (#54261695) Journal

        Go ahead, create a startup without any financial backers (or venture capitalists, as you call them)

        Er...? I'm pretty sure "venture capitalist" is a pretty common, non derogatory term for them.

        Anyway you have a point. The VCs are not super smart. A lot of them qualify as "rich but dim", and consider due diligence to be "does the company have a good pitch" and/or "Have my cronies invested I don't want to lose out".

        There are a huge number of obviously, and phenomenally stupid investments made. Even in foresight, not hindsight. And they seem keener on people who can pitch a dream rather than create something and follow through. It's their money to waste as they wish, but given they're trying not to waste it, it seems an odd choice to me.

        But whatever. The reason SV succeeds and "silicon toilet" or whatever the latest place to be optimistically given the "silicon" prefix (e,g, the laughably names silicon roundabout" in London is that despite everything that silly VC money is one of the key ingredients. By haphazard chance eventually some of the money goes to sane companies which are a success. So at least you stand a chance there.

        The VC model by contrast elsewhere is insanely risk averse (it's VC FFS, that's pretty much the *definition* of risky). The sort of propositions you get are "well, develop your product, get certification and manufacturing sorted out and customers and sales and then we'll consider investing an amount that would end up as a less than minimum wage net payment for your time for a controlling interest after the point where you don't need the money".

        Yeahhh, no. VCs in SV might be stupid, but they aren't (interestingly) quite that stupid. And that's why SV has so many success stories. Sure there are many failures, but many successes and insanely many failures is a much better way to success than none of either.

      • That show "Silicon Valley" sometimes seems more documentary than comedic farce.

        Mike judge is a seer. Idiocracy anyone?

      • Greedy parasites? Who are they sucking who doesn't agree with it and like it? Go ahead, create a startup without any financial backers (or venture capitalists, as you call them).

        Not all financial backers are venture capitalists. VCs tend to be corrosive, in my experience -- and my experience includes a couple of successful startups. Despite your insinuation, it is very, very possible to have a successful startup without taking a dime of VC money.

      • They can be greedy parasites and still be people you need to deal with. It's the best position for a greedy parasite to be in.

    • > "Tilt was based on the premise that 'something like PayPal and Facebook would collide,'

      And this has happened years ago. It is called Weixin, and the west has completely missed it

      >Ycombinator

      Don't invest in Ycombinator startups. Ycombinator is a pyramid scheme - saying this with all seriousness.

      They claim gynormous valuations for unsubstantial businesses due to big initial financing rounds.

      All funds that push Ycombinator early rounds use hot money from sale of shares of earlier Ycombinator companies

  • Huh? (Score:5, Insightful)

    by JustAnotherOldGuy ( 4145623 ) on Tuesday April 18, 2017 @09:54PM (#54260913) Journal

    Tilt? Never heard of it, literally.

    Oh, I'm sure it was huge, but it made less of an impact than a BB hitting a battleship. I'm not exactly a stranger to the internet, but I never heard of it before this obituary.

    • Indeed. I'm 28 years old, supposedly in the "Milennial" generation and never have I heard about this.

      There are a dozen other ways to send money, some of them free. Many times even easier to just use cash.

    • Re: (Score:2)

      by mwvdlee ( 775178 )

      Same here.

      Maybe they should have spent some of that $67 million on marketing.

  • "Revenue was not a top priority" (Score:5, Insightful)

    by JustAnotherOldGuy ( 4145623 ) on Tuesday April 18, 2017 @09:55PM (#54260917) Journal

    "Revenue was not a top priority"

    Well there's your problem.

    • "Revenue was not a top priority"

      Well there's your problem.

      It was never a problem for Twitter.

    • Re:"Revenue was not a top priority" (Score:4, Interesting)

      by RuffMasterD ( 3398975 ) on Wednesday April 19, 2017 @09:26AM (#54262569)
      That's venture capital for you though. Their modus operandi seems to be 'invest in many startups -> grow customer base as fast as possible -> sell for higher price to next investor'. VCs are trying to profit from capital gains made during the growth phase of a company. Therefore growth is the top priority. Most investments will be a write-off, some break even, and one or two may be the next Google or Tesla and make up for all the other losses. Another type of investor will take over once a company reaches break-even.

    • Re: (Score:2)

      by mjwx ( 966435 )

      "Revenue was not a top priority"

      Well there's your problem.

      Half way there, there's an old saying I heard from a successful boss of mine years ago.

      "Revenue is vanity, profit is sanity".

      You don't need to just make money, anyone can get money through the door. You need to make more money than you're spending.

      • That's something that can wait a long time. The place I work for believes in reinvestment to expand capabilities, not profit per se. Amazon spent a long time eschewing profit in order to grow.

        Of course, if I don't see future profit potential, I'm not investing.

    • There's something to be said for making customers a top priority, on the principle that you can usually find some way to get money when you have customers. Expanding the customer base might be worth taking hits to revenue. Not that you can keep this up indefinitely.

      • There's something to be said for making customers a top priority,

        If you have seed money to burn, sure. But otherwise the business of business is to make enough money to stay in business.

        • Sure. If you don't have a path to increased revenue and profit, only the stupid investors will invest. There are situations (like Amazon's when they started out) where just having a lot of customers is the right thing to do. The difference between Amazon and Uber was that everyone could see how Amazon was supposed to profit when it went into that phase, and I don't see how Uber's supposed to become profitable with its current business model.

  • Social payments sounds a lot like WeChat Wallet / Alipay. Except those also combine the useful features of Apple Pay. Actually, Alipay makes Apple Pay look old.

    • Re: (Score:1)

      by neoRUR ( 674398 )

      Yes sounds like WeChat stuff, But the giving of money is more socially accepted there, then in America. Also WeChat does some stuff that might be considered gaming here. I guess these guys didn't quite understand their business, I think it could work, but you have to be innovative not, just talkative.

  • Uber is next (Score:4, Interesting)

    by Anonymous Coward on Tuesday April 18, 2017 @10:39PM (#54261065)
    Can Uber and Lyft be far behind? They're cab dispatchers without the cabs. That's it. It is impossible to be worth $28 billion just by shaking down cabbies for a couple of years.

    • Re: Uber is next (Score:4, Insightful)

      by Anonymous Coward on Tuesday April 18, 2017 @11:10PM (#54261117)

      Yes they will be next.

      Uber has never made a profit. It is run simply by people throwing money at it because "it's going to be big".

      All they have to do is run an app and handle payments. And yet they do that at a massive loss. Maybe when the investor income dries up they can sack just about everyone who isn't directly involved in basic platform maintenance and payment system and turn a profit. But if they do, it will be tiny and they won't have the "market valuation" they have now.

      Twitter is another one. Twitter is clearly saturated. Yet isn't making a profit.

      Facebook at least made nice profits all through its growth and some actual real ways to make money,, and is now doing quite nicely.

      • Re: Uber is next (Score:1)

        by Anonymous Coward

        What Uber does that gives them value is mine data. In the grand scheme the data about travel patterns that Uber is gathering will make it a valuable entity over time.

    • Big difference. Uber and Lyft actually have a large base of PAYING customers in industry where - in the long term - there are legitimate profits to be made.

      Also, I personally find Uber rides to be significantly better than cabs. Certainly a viable service.

  • Read more about Y Combinator (Score:3)

    by __aaclcg7560 ( 824291 ) on Wednesday April 19, 2017 @12:25AM (#54261313)

    I'm reading "Chaos Monkeys: Obscene Fortune and Random Failure in Silicon Valley" [amzn.to] by Antonio Garcia Martinez. The author and his two engineers leave the startup they worked at to create a startup at Y Combinator to create a better version of the Digg toolbar (remember toolbars?) for Google advertisers in 2010. I'm at the part where the author sends his engineers to Twitter while he goes to Facebook in a three-way deal. Fun times.

    I doubt this book will replace Startup: A Silicon Valley Adventure [amzn.to] by Jerry Kaplan as my favorite Silicon Valley startup book.

  • That brogrammer vision thing (Score:3)

    by maggotbrain_777 ( 450700 ) on Wednesday April 19, 2017 @12:28AM (#54261327) Homepage Journal
    And after reading more than half the article, I still had no idea what the company actually did. Guess that I am not one of those thinkfluencers who could see their vision. *shrug*

  • failure written all over it (Score:4, Insightful)

    by ooloorie ( 4394035 ) on Wednesday April 19, 2017 @01:15AM (#54261405)

    cool, young founders with Y Combinator pedigrees

    That's pretty much all you need to know; it has failure written all over it.

  • Sigh. (Score:2)

    by ledow ( 319597 )

    "Revenue was not a top priority -- a remarkable oversight for any company, and a particularly galling one for a payments company. Eventually, with cash running low, Tilt went looking for a buyer..."

    Well - this is what happens when you just throw $65m at someone but don't provide them with a set of targets, metrics, viability tests, check-ups, performance reviews, performance-linked investment etc.

    Of course revenue's not a priority if some idiot finances you to the tune of decades of operating income without

  • So they went Full Tilt? (Score:3)

    by Qbertino ( 265505 ) <moiraNO@SPAMmodparlor.com> on Wednesday April 19, 2017 @08:21AM (#54262241)

    *TADUM* *CRASH* *THUD*

    Thank you, thank you, I'm here all week.
    Tip your waiter and try the fish.

  • "social payments"? "Tilt"? (Score:1)

    by Anonymous Coward

    Never heard of either of these.

  • Startups worry about revenue? (Score:3)

    by LynnwoodRooster ( 966895 ) on Wednesday April 19, 2017 @10:47AM (#54263001) Journal
    You have to be joking! Next thing you're going to expect is they worry about profitability!

  • oblig. Kids in the Hall (Score:1)

    by Anonymous Coward

    Office, Submarine [youtube.com]

  • Who's that?

  • It's fun and easy to mock these cases in hindsight. What a bubble! Fake company! No revenue! Etc. And, I'm with you in the mocking. But what gets lost is that before the crash, really smart people bet on this company. I'm not talking about investors. A friend left his home city and great director-level job to take a higher level position in a new city at this company. He is a smart guy. He was excited. He truly believed he was making the clearly right decision.

    My point is that if all we do is laugh, we don'

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