20 VC 078 BETAWORKS WEEK Matt Hartman, Director of Seed Investments @ Betaworks

In a comprehensive interview on "20 minutes VC," host Harry Stebbings discusses with Matt Hartman, director of seed investments at Betaworks, the intricacies of early-stage investing and the evolution of social networks. Hartman shares his journey from programmer to VC, highlighting his work at Betaworks with companies like Tumblr and Twitter, and his own startups, ReferBoost and Just Because. The conversation delves into Betaworks' dual function of building companies and investing in them, emphasizing the importance of network structure and community engagement in fostering successful startups. They explore Betaworks' investment in Product Hunt, the potential of podcasting as exemplified by Gimlet Media, and the future of live video streaming with apps like Meerkat and Periscope. Hartman also shares his favorite productivity tools and insights into what excites him about new products, both as a user and an investor.

• Betaworks is a successful startup studio known for investments and internal startups.
• Matt Hartman is the Director of Seed Investments at Betaworks.
• Betaworks has invested in companies like Tumblr, Airbnb, Groupon, and Twitter.
• Internally built startups include Chartbeat, Bitly, and Social Flow.
• Matt Hartman's background includes co-founding ReferBoost and Just Because.
• He began his career at Trammell Crow Company and later joined Hot Potato, which was acquired by Facebook.

"And joining us today from Betaworks is the one and only Matt Hartman. Matt is director of seed investments at Betaworks who have invested in the likes of Tumblr, Air, BNB, Groupon and Twitter, and have internally built startups such as Chartbeat, Bitly and Social Flow."

The quote introduces Matt Hartman and highlights Betaworks' significant investments and internal startups, establishing the company's prominence in the startup ecosystem.

• Matt Hartman started as a computer programmer with an interest in cognitive science.
• He built products from a young age, beginning his career at Trammell Crow, a real estate development company.
• Transitioned to the startup world, joining Hot Potato, which was acquired by Facebook.
• Founded ReferBoost, combining real estate with social networks, and did not raise outside venture funding.
• Moved to New York, connected with Betaworks through previous Hot Potato investment, and started focusing on seed investments.

"I started out totally outside of the startup and investment world at a company called Travel Crow, which is a real estate development company. ... And so I started talking with them and decided that I would try to work on seed investments."

Matt Hartman describes his transition from the real estate industry to the startup and investment world, culminating in his current role at Betaworks focusing on seed investments.

• Betaworks is a studio that builds new consumer internet companies from scratch.
• They have built about 19 companies, with employees working on multiple projects simultaneously.
• Betaworks companies grow and eventually move into their own spaces.
• In addition to the studio, Betaworks makes seed stage investments in consumer companies that align with their themes.

"The way that I describe Betaworks is that we do two things. Our core business is what we call the studio, where we build new companies from scratch on consumer Internet companies."

This quote defines Betaworks as a multifaceted organization with a core focus on creating and nurturing consumer internet companies from the ground up.

• Matt Hartman works on seed investing at Betaworks.
• His preference for seed investing stems from his love for the early stages of product development and company formation.
• Betaworks' seed investing focuses on early company shaping, product development, and community building.

"So I work on our seed investing."

This quote succinctly states Matt Hartman's primary role at Betaworks, which revolves around seed-stage investments in emerging companies.

• Matt Hartman enjoys the early phases of starting a product, which is central to seed investing.
• He distinguishes his interest in seed investing from starting a company or engaging in later-stage investments.
• The early product development phase is where he finds the most enjoyment and opportunity.

"I really enjoy that part of the process. And betaworks on the seed investing side really focuses on that, both on our seed investing side and on our company creation side, on those very early days of the company shaping the product and building the community around it."

The quote explains Matt Hartman's passion for the initial stages of a startup's life, which aligns with Betaworks' focus on early product and company development.

• Harry Stebbings discusses his preference for venture capital work over building products due to the variety it offers.
• He enjoys the ability to work with different companies and help them out on different days.

"The advantage to me, working on the venture capital side versus building at the moment is that I get to work on lots of different things. So I get to work on one company one day and another day and help them out."

Harry Stebbings explains that being on the venture capital side allows him to engage with a diverse range of companies and projects, which he finds enjoyable.

• Matt Hartman believes the term "social network" has become almost meaningless due to its broad use.
• He distinguishes between different social networks by their network structures, such as the bi-directional relationships on Facebook versus the one-way follows on Twitter.
• Hartman uses Facebook and Twitter as classic examples to illustrate how different network structures create different ecosystems, with Twitter being more news-oriented and Facebook being more about connecting with friends.

"The classic example to me is the difference between Facebook and Twitter is a bi-directional arrow, basically. So the follow versus friend model actually creates these totally different ecosystems."

Matt Hartman emphasizes the fundamental differences in user interaction and content distribution between Facebook and Twitter, which are shaped by their respective follow and friend models.

• Snapchat introduced ephemerality and one-to-many messaging that is sent out one-to-one, which Hartman views as a design pattern rather than just a feature.
• He argues that ephemerality reduces friction to post content, leading to more frequent and casual sharing compared to platforms like Instagram where users aim for perfection.

"I think that reducing friction makes it easier to do something. I don't know that that's always habit forming nerial and I think Ryan Hoover was involved with the book hooked, and they put together sort of a very nice way to think about habit forming activities."

Matt Hartman discusses the concept of reducing friction to facilitate user actions, but he is unsure if this always leads to habit formation. He references Ryan Hoover's work on habit-forming products, which provides a framework for understanding these activities.

• Reducing friction in social networks might lead to higher user retention by making activities more habitual.
• Betaworks is introspective with early-stage companies to determine how the product fits into users' daily workflows and the frequency of user activity.

"A weekly recurring activity versus a twice a year activity impacts whether you can really build an engaged community around that product."

Matt Hartman highlights the importance of the frequency of user activities in building an engaged community around a product, with more frequent activities being more conducive to community engagement.

• Hartman views community as a layer that brings life to the network structure.
• Engagement and network density are key metrics Betaworks looks for in potential investments.
• He recounts an anecdote about Ryan Hoover's engagement across social networks and how data analysis revealed the strength of Product Hunt's growing community.

"It's the thing that gives that network life. And so what we look for is engagement, is on the data side. It's network density."

Matt Hartman defines community as the dynamic element of a network, emphasizing the importance of user engagement and connections within the network, which are measurable through data analysis.

• The early interactions with Ryan Hoover and the positive community conversations on Product Hunt indicated a rapidly growing community.
• Betaworks' intuition about Product Hunt's addictiveness and engagement was supported by network analysis and data.

"And then we really did do this network analysis, and it sort of proved what the intuition was."

Matt Hartman explains that Betaworks' belief in Product Hunt's potential was validated through network analysis, which confirmed the team's intuitive sense of the product's addictiveness and community engagement.

• Hartman is impressed by many companies they've invested in and cites Meerkat as an impressive product they did not invest in.
• He looks for addictiveness and engagement in products as both an investor and a user.

"So, obviously I'm impressed with lots of the companies that we've invested in. I'll give you an example of a company that we didn't invest in that I think was really impressive, which is Meerkat."

Matt Hartman shares his admiration for various companies, including those they have not invested in, such as Meerkat, highlighting the importance of a product's ability to engage and captivate users.

• Meerkat's product launch was tightly integrated with Twitter, more so than Twitter's own acquired service, Periscope.
• The launch was considered masterfully done due to timing and product quality.
• Periscope also had elements of a really good product.

"I think the product itself was well done and so tightly. It was more integrated, tightly integrated. Twitter, it turned out, than even Periscope was, which Twitter had acquired. I thought that product launch was just masterfully done."

The quote emphasizes the effectiveness of Meerkat's product launch, highlighting its seamless integration with Twitter and comparing it favorably to Twitter's integration with Periscope.

• Meerkat and Periscope are still in early stages, similar to when Twitter users were primarily sharing pictures of their food.
• There's potential for new applications to be built on top of Meerkat and Periscope, including podcasts.
• The real-time aspect of these platforms is crucial for engagement and interaction.

"I don't think it's over that I feel like we're still, in the days of the Twitter equivalent, would be tweeting out pictures of your food. People don't really know how to use it."

This quote indicates that the speaker believes Meerkat and Periscope are still in their infancy, with users and developers exploring their potential uses.

• Facebook may consider acquiring Meerkat if strong use cases emerge.
• The company previously invested in a similar company called Up Close, which focused on video broadcasting.
• Real-time feedback is a significant feature differentiating these platforms.

"I think there's a world where that makes sense. If I were Facebook, I don't have a sense of how hard some of these things are."

The quote suggests that Facebook might find value in acquiring Meerkat if it aligns with their vision for social media and real-time video, acknowledging the speaker's lack of insight into the technical difficulties of such an acquisition.

• Design is critical, but not just aesthetic design—also the design of the user experience and features.
• Surprise and delight in discovering features that feel native and intuitive are particularly engaging.
• Real-time feedback, as seen in Periscope's hearts feature, is a good example of thoughtful design.

"What really gets me when products, both on the investment side and just as a user, are experiences that are designed, or apps or whatever they are that are designed, that feel so native and surprise you at how you didn't even realize you wanted that feature."

This quote highlights the speaker's interest in products that offer a seamless and intuitive user experience, with features that users find unexpectedly useful.

• There is currently a podcasting renaissance, with a disparity between the supply of high-quality podcasts and the demand for them.
• Podcasts offer a separate channel for content consumption that doesn't require visual attention.
• Gimlet Media is recognized for its potential in the podcasting space.

"I think at the moment there's not as many great podcasts as there are people looking for great podcasts."

The quote discusses the current state of the podcasting market, indicating that there is a higher demand for quality podcasts than the current supply can meet.

• The speaker believes that Gimlet Media has the potential to be a significant player in the podcasting industry.
• The traditional venture capital requirement for a billion-dollar exit is questioned in the context of podcasting networks.
• There's potential for growth in podcasting due to 'found time' in people's schedules that can be filled with listening.

"Think two things. One is, I think that gimlet has the potential to be enormous."

The quote expresses the speaker's optimism about Gimlet Media's future and its potential to scale significantly in the podcasting market.

• Podcasting has an established ecosystem for audio ads, unlike early social media platforms.
• Monetization can be straightforward with audio ads.
• Podcasts have high conversion rates for interactions, such as donations, due to the intimate nature of audio content.
• A quality podcast network has the potential to be very successful financially.

In the case of podcasting, there's already an established ecosystem of how to do audio ads. And so I think there's actually, in that sense, it's much further along and in many ways can be monetized in a very straightforward way, just in terms of monetization.

The quote explains that podcasting already has a well-defined system for incorporating advertisements, which simplifies the process of monetization compared to newer platforms.

• Betaworks sources new deals through its extensive network of people and portfolio companies.
• Recommendations often come from friends of friends who demo their projects.
• Product Hunt is a tool used to find investment opportunities, leading to actual investments.

A lot of the ways that we get new deals is through our network. People who come in and do it say, my friend's working on something interesting and they come in and demo it and we say, wow, that's awesome.

This quote highlights the importance of personal networks in finding new investment opportunities and how personal recommendations can lead to successful deals.

• Drafts is a favorite productivity app for quick note-taking and task management.
• It allows the creation of macros to send input to various applications via APIs.
• The app improves workflow efficiency by minimizing the steps needed to capture and organize information.

It's basically an input box that then will output to any API that you want.

The quote describes the functionality of Drafts, emphasizing its versatility in connecting with different applications and streamlining the note-taking process.

• Dig Deeper is used to aggregate content shared by Twitter connections.
• Founder's Notebook by David Jackson is a valued resource.
• Lorem Ipsum offers enjoyable lifestyle content.
• The Skimm is frequently read for its content.

I use dig deeper, which basically takes all of my people I follow on Twitter and gives me a digest of the things that they're sharing.

This quote explains the use of Dig Deeper as a tool to curate content from Twitter, highlighting the importance of leveraging social connections for information gathering.

• "Psychology of Persuasion" by Robert Cialdini is a favorite book for its practical insights.
• It is part of a lineage of works that includes Kahneman and Tversky's research and "Predictably Irrational."

I really like the Psychology of persuasion by Robert Gildini.

The quote reveals a personal preference for a book that bridges academic research and practical application, indicating its impact on the speaker's understanding of psychology and persuasion.

• Disruptive Multimedia, founded by Ryan Leslie, is the most recent public investment.
• The company offers a personal CRM for fan engagement via text messaging, emphasizing direct communication.
• The investment reflects an interest in platforms that foster one-to-one connections at scale.

He's a rapper, actually, and he had built a product that if you go to his Twitter accounts, he posts his phone number publicly. And so he built almost like a personal mobile CRM for his fans where he can communicate with them.

This quote explains the rationale behind the investment in Disruptive Multimedia, highlighting the unique approach to fan engagement and personalized communication.

• Vidar Law specializes in delivering legal results for businesses.
• The firm is likened to the god Vidar, known for justice and achieving difficult tasks.

Vidar was the God who associated himself and was acknowledged as the chief of justice and vengeance, and he was known for doing the jobs that no one else could do and for getting results in them.

The quote draws a parallel between the mythological figure Vidar and the law firm's ability to handle challenging legal matters, emphasizing their effectiveness and results-oriented approach.