• Strava’s CEO on Community, Competition, and Love-Hate Industry Relationships

    gallery-mark-gainey (1)People love Strava, the 95-person, San Francisco-based company whose training app for cyclists and runners has garnered an almost fanatical following. The company keeps its number of “members” close to the vest, but among the passionate acts of its users was one recent job hopeful who employed the company’s mobile app to spell out “Hire Me” over the course of an 8.1-mile run that ended at Strava’s offices. Another user plotted out a bike ride in the shape of a turkey. In the U.K., where the company’s app has taken off (70 percent of Strava users are outside the U.S.), the press has even asked of its obsessed users: “Is Strava Destroying Your Marriage?”

    Last week, at a StrictlyVC event in San Francisco, Strava’s charismatic cofounder, Mark Gainey, talked at length about his business with Sigma West managing director Greg Gretsch, who wrote Strava one of its first checks. During the conversation, Gainey opened up about what he views as the biggest weak spot of the sporting goods goliath Under Armour, his “love-hate” relationship with the navigation equipment company Garmin, and the one thing that keeps him up at night. Some of that chat follows here, edited for length.

    When Strava started [in 2009], it had 5,000 users. How has it evolved into a global brand?

    It’s been a fascinating ride. [Cofounder] Michael Horvath and I . . .wanted to motivate and entertain the world’s athletes. At first, we were a web company that supported Garmin devices for cyclists. We basically tried to surprise and delight cyclists using the data they’d just uploaded. [Editor’s note: users had access to all of Strava up to five rides; afterward, they were asked to pay $6 a month, or $60 per year for the use of all of its features.]

    In 2011, in trying to figure out a cheaper way for people to participate in Strava, we launched a mobile app that put us on a completely different path. The good news was that wow did that create growth, domestically, internationally – everywhere. The bad news was that we had to completely reconstruct our team and rethink the way we were building ourselves out.

    What types of athletes are using Strava?

    We started with cycling and really focused on them; cyclists are data geeks who are used to [logging their data]. But now, almost half the activity coming in is from the running community, You can upload up to 28 different activities into Strava, though. We see everything from yoga to skiing to kite surfing. We want people to capture their athletic life on Strava.

    What’s the business model and how has it evolved?

    You can use Strava for free as long as you like, or you can upgrade to $6 a month or $60 a year. It’s a very straightforward model that has worked very well for us over the past five years. By going direct to athlete, we’ve been able to maintain that one-to-one relationship and really create long-term customer value.

    A year-and-a-half ago, we also began developing a second direct-to-athlete revenue model, with integrated commerce. We’re not trying to be the Amazon for athletes or create a shop where you can buy stuff but [rather] integrating opportunities into the Strava experience. You can sign up for a monthly “Gran Fondo” — we basically challenge for you to ride roughly 100 miles on a given Saturday — and if you finish, you get an email from us and you “unlock” the ability to buy a limited-edition jersey. We routinely get more than 100,000 people who sign up for these challenges, and it turns out that rewards for athletes is really powerful. We’re simply trying to keep them motivated.

    We also launched something six months ago called Strava Metro, which is an opportunity for us to begin working with urban planners and local governments, taking ride and run data in any given population and giving them an anonymized version of it so they can plan bike paths and pedestrian walkways. That’s something we’ve begun to license out and we think it’s another interesting part of our business going forward.

    What are the metrics that matter most for Strava?

    A long time ago, we placed a bet not to worry so much about the top of the funnel and user acquisition but [focus instead] on engagement. We were sort of fortunate in that athletes tend to network with each other anyway, so we let that kind of be the organic growth, and we focused attention on keeping people engaged.

    Where things have shifted over the last one-and-a-half years is that engagement [now means] something very specific; we call them SUMs, Strava uploading members who [port] their activity into Strava. It’s a powerful metric. We know that once we get them uploading a few times, they’re lifers. If you saw our cohorts, our members, our athletes –they don’t go away. They hibernate when it’s a polar vortex outside, but they’ll come right back.

    Under Amour has been busily acquiring companies. It bought MyFitnessPal and Endomondo last week for $475 million and $85 million, respectively. Over a year ago, it acquired MapMyFitness [for $150 million]. Can you comment on what’s going on, and how you see the market evolving?

    We’re pretty excited about our future. We did a Series D [last fall] led by Sequoia. We didn’t need the capital; we’ve been pretty efficient with our capital. But we were sending a clear signal to the market that we intend to go and grow a global brand. We think there’s a great opportunity to build a sports brand using digital as the platform, so we’ve watched with interest as there has been some consolidation. Under Armour has been especially aggressive over the last year and a half. What we’re finding is that they’re just very different businesses.

    When you listen to Under Armour CEO Kevin Plank, he’s very clear. His business is selling apparel and shoes, and he needs channels to do so. And he has figured out that he can get 100 million email addresses when he pulls together these sites.

    At Strava, though, we have a strict definition of community. Community is about getting our customers to interact with one another. That’s when community happens, [that’s] when you have network effect. I’m not judging. Under Armour has a loyal customer base, Nike has a loyal customer base, Apple has a loyal customer base. I’m not saying that community is the way to go, but in our case, we’re a community-based business. We’re akin to a LinkedIn or a Facebook, and our business is very much predicated on the way the network interacts. And when you look at things like MyFitnessPal and Endomondo, the challenge they’ve had is there’s tremendous churn with them because there isn’t network effect. So it’ll be interesting to watch how it plays out.

    Will we see Strava make any acquisitions?

    Part of the reason to do the raise [last fall] and put ourselves in a position of strength [for that possibility]. It sure feels like it’s a market that’s ripe for consolidation, and we’d rather be on the aggressor’s side.

    What would you be acquiring for?

    We’re always looking at other services that would benefit our athletic community. Areas around nutrition are interesting, around training. The event marketplace is fascinating for Strava. The challenge is the noise of opportunity. There are so many things we could do for our athletes and frankly we’re a team of about 95 people, so we’re trying to be careful about what we do and don’t do.

    Which companies are always on your radar?

    Under Armour has always been on my radar [particularly after they acquired MapMyFitness last year]. Nike is always on my radar; we talk to them all the time and think there are opportunities for interesting partnerships, but they have Nike Plus, so I monitor that one closely. Another would be Garmin, [a company] that everyone thinks that we’re in bed with and that we’ve had this close relationship with since day one because we sell all their devices and support all their users. But the truth is it has been a love-hate relationship for the better part of five years. We think there are amazing things to do together, so we’re hoping it’s more the cooperation part but . . .

    What I actually lose sleep over is the startup I haven’t seen yet. I understand those big businesses and what they’re trying to do. I worry that there’s someone else who has figured out how to something really cool with mobile and apps and that we don’t have time to do. The guys who make me nervous are the companies that [venture capitalists] are probably funding right now.

  • Ariel Poler: I Don’t Want to Become a Professional Investor

    arielpolerheadshotFor 15 years, Ariel Poler did the entrepreneur slog, founding I/PRO, an early web analytics company; Topica, an email community; and the mobile marketing startup TextMarks. Then, in 2010, Poler decided to turn his attention entirely to angel investing, a pastime in which he’d long dabbled and that has also proved lucrative for him thanks to numerous hits, including AdMob (acquired by Google) and StumbleUpon (acquired by eBay and taken private again).

    Poler’s investing career took shape in the late ’90s when he began helping out the boards of several startups, including Kana Software and LinkExchange, in exchange for equity. He still doesn’t think of himself as an “investor,” though, or plan to raise a fund. “It’s just not what I want to do for a living.” He explained during a recent chat.

    How many startups do you invest in per year and what size checks do you write?

    I don’t have a target but it’s worked out to be between three and five per year. In terms of the size of check, the average is probably $50,000.

    You’re involved with a lot of “hot” companies, including the cycling and running app company Strava. Why not raise a fund like everyone else in your position?

    I don’t think of myself as an investor. I won’t invest in an entrepreneur who I won’t have over for dinner. I don’t want to have to optimize for financial return. To become a professional investor, it’s just not what I want to do for a living. It’s not why I do it.

    You want to like the people you’re backing. How do you decide if it’s a good fit?

    It’s becoming harder. Because the speed at which startups get built and funded has accelerated significantly in recent years, there’s generally less time for people to understand if there’s a good fit. On rare occasions, I think [something] will be a good fit, then discover it isn’t. But that’s another benefit of [not being obligated to outside investors]. When that happens, I hold on to my shares, but I won’t proactively spend my time with the startup.

    What I try to do is interact a little bit in a way that’s proactive for entrepreneurs [like via] working meetings. I recently met with some founders who needed to pick a vertical for their product and needed help prioritizing, and I said, “Let’s pretend I’m a member of the team,” and we spent an hour and a half [on the issue], and I enjoyed it and they enjoyed it. That’s how it starts. Because everything is moving so quickly right now, you might not have the luxury of [spending a few weeks or more with a team], but I still try.

    You were on the board of Odeo, a platform for podcasters out of which Twitter was eventually spun, and you let founder Evan Williams buy back your shares. Was there a lesson in that experience?

    Everybody got their money back. It wasn’t an option. It wasn’t like some said, “Give me my money,” and others didn’t. Evan wanted to own 100 percent of Odeo and he bought everyone out. Then months later, he did a financing for Twitter and a small group of those who’d been investors in Odeo participated in the Twitter round. For me, when I was deciding, I thought Twitter had potential; I did feel pretty good about it. But there were other reasons I decided not to invest and they’re reasons that were pretty valid and go with my investment philosophy.

    That was the worst professional decision of my career, no question about that. [Laughs.] But if you look at most of the very successful companies, it’s very hard to predict [their rise]. When Evan came to the board and said, “I don’t want to do this anymore,” Twitter was already part of Odeo. We [the board] said, “The founder doesn’t want to do it. We don’t have any traction. We should try to sell it.” It was my job as a board member to find an investment bank, and I did. I was thinking Twitter could help MySpace compete against Facebook. But no one would take it for free — not for a dollar. That’s when Evan said, “I’ll do an incubator [and restart].”

    Many investors seem to think it makes sense to just back an entrepreneur like Williams an infinite number of times.

    That’s a common takeaway. But sometimes they try again and it works, and sometimes they try and it doesn’t. We all thought Twitter could be great but it wasn’t a slam dunk.

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