20 VC 028 CoFounding TechCrunch and The Benefits of Not Raising Venture Funding with Keith Teare

In episode 28 of the 20 Minutes VC, host Harry Stebbings interviews tech luminary Keith Tear, co-founder of TechCrunch and founder of Archimedes Labs. Tear recounts his journey from a political activist and sociology student to a tech entrepreneur, highlighting his early coding days and the founding of Europe's first consumer ISP, Easynet. He discusses the challenges of venture funding in the UK and the more receptive risk culture of Silicon Valley. Tear also touches on the structural discrimination faced by women in the tech industry and the need for societal changes like free childcare to empower women. He shares insights into the evolution of venture capital, the lean startup movement, and the current funding landscape. Finally, Tear highlights several promising startups from Archimedes Labs, including Downtown, Windy, and Context Plane, emphasizing the importance of innovation without venture capital reliance.

• Keith Tear is the cofounder of TechCrunch and has a history of successful ventures.
• Raised significant funds for Real Names Corporation and prepared it for an IPO with a high valuation.
• Currently leads the Palo Alto incubator Archimedes Labs, which has incubated notable startups.
• Also holds CEO positions at Just me and Context Plane Inc.

"Now today is an extremely special day as we welcome a legend onto the show. He is the cofounder of TechCrunch alongside Michael Arrington. He founded Real Names Corporation, raising more than 130,000,000 for the company before filing for an IPO with an implied valuation of 1.5 billion. And nowadays he is the founder at Palo Alto incubator Archimedes Labs, whose incubated startups include the likes of MDoT TechCrunch and Travis Kalanick's Red Swoosh."

This quote introduces Keith Tear, highlighting his significant contributions to the tech industry and his current role as a leader in startup incubation.

• Keith Tear started as a political activist in response to political turmoil during the 1970s.
• His activism focused on supporting immigrants, Irish Catholics, and other victims of government policies.
• He authored a book about his activism and learned to code to support his causes, which led to his technical proficiency.

"So my generation was very political. We were angry against the government on behalf of people who we felt were victims of the government. And immigrants, Irish, Catholics, Vietnamese, anyone who lived in a british colony were the people we identified with. And so I became a political activist for a long time."

Keith Tear explains his motivation for becoming a political activist, which was rooted in a sense of injustice and empathy for marginalized groups.

• Keith Tear's activism necessitated learning to code for practical purposes like managing mailing lists and book distribution.
• He and a colleague innovated by connecting a Commodore 64 to a typesetting machine, streamlining the publishing process.
• His technical skills were honed through self-teaching and practical application, eventually leading to a successful business.

"In order to pursue all of that as a sociology and political science graduate, I learned to code. And I learned to code for things like creating mailing lists for fundraising, or when we wrote books and distributed in the bookstores."

This quote highlights the practical reasons behind Keith Tear's initial foray into coding, which was to support his political activism and sociological work.

• Keith Tear's introduction to coding began in high school with Fortran four.
• He was drawn to the logical structure of programming, which resonated with his interest in systems and logic from a sociopolitical perspective.

"Even when I was in high school, we learned Fortran four, and we had a link to the North Yorkshire mainframe from our school. So we learned the basics of if then else loops and things like that."

Keith Tear describes his early exposure to programming in high school, which laid the foundation for his later technical endeavors.

• Keith Tear's technical skills led to the establishment of a thriving company, Clarkswell, which is still operational.
• His company provided technical services to major clients, allowing him to finance his political activities.

"And before you knew it, I had a pretty thriving company, which today is called Clarkswell. It still exists in London. My brother actually is a senior engineer there still."

This quote marks the transition from Keith Tear's political activism to becoming a tech entrepreneur, with the founding of a company that continues to exist.

• Keith Tear played a pivotal role in the creation of the first consumer ISP in Europe, Easynet.
• His boredom with databases and networks led him to discover and contribute to the emerging Internet space.

"In 1994, I was a little bit bored with databases and networks. Now I discovered the Internet."

This quote captures the moment Keith Tear shifted his focus to the Internet, setting the stage for his future contributions to making the Internet more accessible to consumers.

• Harry Stebbings learned networking and backend technologies.
• David was the CEO of the venture.
• The cyber cafe was located in a building with a shop window facing the street, near Gooch Street station on Whitfield Street.

I learned networking and all the backend stuff. And David was the CEO. And we did it in a building in Goude street, just off of Goud street, behind Gooch street station, Whitfield street. And that building had a front facing shop window. And we put a cyber cafe in there.

This quote describes the early career experiences of Harry Stebbings, detailing his learning of networking and backend systems, and the establishment of a cyber cafe under the leadership of a CEO named David.

• The cyber cafe was not intended to be a women-only space.
• It became popular with women due to the presence of female managers, Ava and Jenne.
• Notable male figures like Maurice Sarchi and Mick Jagger were investors.
• Sinead O'Connor was a frequent visitor, indicating a strong female presence despite male-dominated internet culture.

No, it was never intended to be a woman only space. That derived from the fact that Ava and Jenne ran it and became very, very famous. And it was extremely active with women, but it was never women only.

Keith Tear clarifies that the cyber cafe was not exclusively for women, but gained a reputation for being women-friendly due to its female management and active female patronage.

• The internet reflects the male-dominated nature of the world.
• Women face structural discrimination, especially when it comes to childbearing and societal expectations.
• Keith Tear suggests that providing preschool crash facilities as a legal requirement for employers could alleviate some of this discrimination.

Well, it's a male dominated world, and the Internet reflects the world, probably in an exaggerated way, due to the computer science basis of it.

Keith Tear comments on the broader societal issue of male dominance, which is mirrored and possibly amplified in the internet space due to its technical foundations.

• Keith Tear advocates for free childcare to improve women's ability to work and gain financial independence.
• Subsidized childcare is seen as a civilized step and more important than women's suffrage in terms of empowering women.

Free child. Yeah, free childcare. I mean, it seems to me that would be civilized. And we all aspire. Ever since ancient Greece, our goal has been to improve civilization.

Keith Tear emphasizes the importance of free childcare as a means to advance civilization and empower women, drawing a historical parallel to the aspirations of ancient Greek society.

• Keith Tear joined the women's liberation movement in the 70s.
• He observes that while there has been rhetorical progress in women's rights, structural change is minimal.
• High-profile exceptions do not reflect the overall structural position of women or other minority groups.

Only at the level of rhetoric. Structurally, I joined the women's liberation movement back in the 70s when I was in college, as most guys did in those days.

Keith Tear reflects on the lack of substantial progress in gender equality since his college days, noting that while the conversation has evolved, deep-seated structural issues remain.

• Keith Tear met Michael Arrington in 1997.
• Michael was initially a lawyer working with Keith on corporate development.
• Keith recognized Michael's talent in business development and invited him to join his company, Real Names.
• Together, they raised significant funding and planned for an IPO.
• Later, they co-founded an incubator called Archimedes Labs, which led to the creation of TechCrunch.

Michael was the lawyer assigned to me at Wilson Sansini to work with me on the formation of real names and on all the corporate development stuff. And it was very clear very quickly that he was a much better business development professional than he was a lawyer.

Keith Tear recounts how he recognized Michael Arrington's business acumen during their early professional relationship, which eventually led to their collaboration on various projects including TechCrunch.

• TechCrunch was a successful venture that never raised venture capital funds.
• Mike Arrington, the founder of TechCrunch, retained a significant majority share.
• Hard work and dedication from 2005 to 2010 were key to TechCrunch's success.
• Building a great product or service can be more impactful than obtaining venture capital.

"TechCrunch never raised a penny, ever. And so Mike was vastly the majority shareholder in TechCrunch."

This quote highlights the fact that TechCrunch was able to succeed and grow without external funding, which is often considered a necessity for startup success.

"He worked every hour of the day for years. From 2005 to 2010, he was working end to end every day."

This quote emphasizes the commitment and hard work put in by Mike Arrington, which was instrumental in the success of TechCrunch.

• TechCrunch was initially part of Archimedes and was later spun out.
• The spin-out allowed for an equitable adjustment of equity.
• The relationship between the mentor and mentee (Mike Arrington and Keith Tear) remained strong due to mature handling of the business relationship.

"We span it out after about a year when it was obvious that it was going to be successful, and that was because the economics didn't make any sense."

The spin-out was a strategic move to better reflect the contributions of each party and ensure the economic viability of TechCrunch separate from Archimedes.

"I characterize myself as his teacher more than his business partner. And that worked out really well."

Keith Tear views his relationship with Mike Arrington as that of a mentor, which contributed to a positive dynamic and successful partnership.

• Keith Tear had difficulties securing venture funding in the UK due to perceived social and educational biases.
• Easynet and Siberia, two of Keith's ventures, were grown through revenue rather than venture capital.
• These experiences led Keith to move to the United States for better opportunities.

"In the UK, I never got venture funding."

This quote reflects the challenges faced by Keith in obtaining venture capital in the UK, which he attributes to his background and lack of connections to elite institutions.

"We grew the business from revenue from day one, and we never raised venture capital before."

Despite the lack of venture capital, Keith's businesses were able to grow through their own generated revenue, showcasing an alternative path to business growth.

• Keith felt like an outsider in the UK due to his background.
• In Silicon Valley, being a foreigner was advantageous as it allowed for judgment based on merit.
• The risk culture in America was more favorable for entrepreneurs with big ideas.

"I felt like an outsider in England, due to know North Yorkshire working class origins, going to Canterbury, not Cambridge, you were not made to feel welcome."

This quote illustrates the cultural barriers Keith experienced in the UK, which he felt hindered his entrepreneurial opportunities.

"As a foreigner, you get judged on your merits, actually easier than Americans."

Keith found that in Silicon Valley, his foreign status allowed him to be evaluated on his abilities rather than his educational background or social class.

• The venture capital ecosystem in Silicon Valley has evolved into a 'barbell' structure.
• There is ample seed funding and growth-stage funding but a lack of funding for mid-stage development.
• Changes in venture capital practices have not necessarily served the best interests of innovation or entrepreneurs.

"The most recent developments in venture capital in the valley are characterized in America as the barbell ecosystem."

The 'barbell' metaphor describes the current state of venture capital funding, with heavy concentrations at the seed and growth stages but a thin middle where companies struggle to find funding.

"About 98% of those companies die. And they die because there is no money to fund the next step."

This quote highlights the high failure rate of startups that cannot secure funding after the initial seed stage, indicating a critical gap in the funding ecosystem for developing companies.

• The early stage investment environment experienced a shift with investors moving towards later-stage investments once more proof of concept was established.
• This created an opportunity for organizations like Y Combinator and 500 Startups to grow in the mid-2000s.

to the desire to invest later when more was proven. So the early stage was kind of abandoned and that made a space available that y combinator and 500 startups and others grew into in 20 04 20 05 20 06

The quote explains the shift in investor focus to later-stage investments, which left a gap in the market for early-stage incubators and accelerators like Y Combinator and 500 Startups to fill.

• The lean startup movement gained traction in the mid-2000s, promoting the idea of cost-effective startup development.
• Initially, it was cheaper to build startups during the web 2.0 era, but costs have risen with the need to develop across multiple platforms in the mobile era.

The lean startup movement grew in 2004 2005. That led to the belief that it's now very, very cheap to build something.

The quote highlights the initial perception that the lean startup methodology made starting a business very affordable, a belief that was especially prevalent during the web 2.0 era.

It's really no longer true in the mobile era where you have to build an Android app, an iPhone app, a cloud service and probably a web service as well.

This quote points out the increased complexity and cost of building a startup in the mobile era, where multiple platforms need to be developed and maintained.

• Despite the increased costs in the mobile era, the funding environment has been slow to adjust and still operates under the assumption that startups can achieve a lot with limited capital.

the funding environment has kind of got a delayed reaction. It still acts as if it is cheap and it thinks you can do a lot with $100,000, which you can't.

The quote indicates a disconnect between the current costs of building a startup and the funding environment's expectations, suggesting that the amount of capital usually provided is insufficient.

• The speaker values the present and future achievements over past accomplishments, reflecting a forward-looking mindset in their career.

And the future is always the highlight. Of your career, never the past.

This quote emphasizes the importance of focusing on current and future projects as the most exciting and significant parts of one's career.

• The best piece of advice received by the speaker was to marry a specific person, which positively impacted their personal life.

Marry Jenny McPherson.

The quote is a personal anecdote, reflecting the profound influence that a significant life choice, such as marriage, can have on an individual's happiness and stability.

• Downtown: A German startup using iBeacons to facilitate automated ordering and payment in restaurants.
• Windy: A Greek startup creating a weather app that utilizes smartphone barometers for microclimate predictions.
• Context Plane: A stealth startup developing a system to make real-world beacons as accessible as web domains, enhancing user interaction with physical spaces.

Downtown app in the App Store... Windy, which is building an app called Sunshine... Context Plane is building context registry and context directory to allow the real world to be browsable, just like the web is.

Each quote describes a different startup incubated by Archimedes, detailing their innovative approaches to using technology to solve real-world problems, from simplifying dining experiences to providing accurate weather predictions and enhancing physical-digital interactions.