Phil Libin has a few choice words about how startups are created and funded.
“The whole venture capital model is stupid,” Libin says, sitting in a standard-issue white cinderblock conference room at Boston University. (He has raised almost $300 million worth of VC as cofounder of Evernote, an organizational app.)
But “the stupidest thing,” he continues, “is the idea of a company. Companies are increasingly archaic, as a unit of organization in the world. What is it about companies that makes the most sense?”
Startup creation and venture capital funding, in Libin’s view, are too focused on “the 50 miles around Stanford University,” in the heart of Silicon Valley.
Libin’s solution is a “startup studio” called All Turtles, which will hatch new products. Yes, it is headquartered in San Francisco (35 miles from Stanford). Yes, it is incorporated as a company. Yes, it is funded by $20 million in venture capital, some of it from the Cambridge firm General Catalyst, where Libin was a managing director until last year.
But hear him out.
Why is it that if you have a good idea for some product that should exist, you have to form a company around it? And then if you take that step, why do you need to go get money from venture capitalists, who want to take a seat on your board and then tell you how to run the aforementioned company?
People who are smart and skilled at creating products, Libin says, shouldn’t have to “raise money, have human resources drama, and run a small little fragile company.” Instead, they should “use their superpower to build a great product,” while having ownership in what it becomes. And as for VCs on startup boards: “No startup board has ever been useful. Don’t you get great advice from a board? A, no, and B, if you want great advice, just go out and get great advice.”
He unveiled All Turtles in 2017 to be an alternative to all that. It will be a “multiproduct startup” that develops new things with artificial intelligence as the foundational technology. One example: Spot, which uses an artificially intelligent persona to gather information about workplace harassment incidents in an interview format. One of its cofounders is Julia Shaw, a psychologist affiliated with University College London.
“The fact that it’s an AI is the whole point,” Libin says. “It has infinite patience. It’s not trying to get you out of its office, and you know it’s completely on your side.” At the end of the interview, you can download a copy of your report, but the system itself doesn’t retain any information. Whether you submit the report is up to you.
Libin says that All Turtles wants to focus on businesses that address a real problem and have “an obviously clear revenue model.” With Spot, businesses pay for a dashboard that helps them manage the reports based on their own policies and follow up on reports that have been submitted while maintaining anonymity; Spot serves as the intermediary.
Other All Turtles ventures include an online speakers bureau called Leaders and a home security system that uses a drone to get an aerial view when there’s unexpected activity on a property.
All Turtles has already set up operations in San Francisco, Tokyo, and Paris. Libin says Mexico City is next, and his goal is to be active in 20 of the top 50 cities worldwide in the firm’s first decade. That is largely a strategy to tap markets where there is technology, design, and product development talent that are less competitive than Boston, New York, or the Bay Area.
“People say that Mexico City is a bad ecosystem for startups,” he says. “Well, yes, it’s a bad ecosystem for making small companies because the lawyers and the accountants there don’t know how to talk to small companies.” But he thinks that All Turtles can create a safe environment for the cultivation of new stuff, along with much of the financial and organizational infrastructure.
All Turtles is one of the latest in a series of attempts to create a Ford-like assembly line for technology concepts that could turn into the next big thing. “There’s obviously no guarantee of success,” he admits. Here in Boston, Paul English launched the “startup foundry” Blade Network in 2014 but eventually decided to focus on just one company. Jeet Singh and Joe Chung created Redstar Ventures in Cambridge with a vision of forming three companies a year.
“That was absolutely too ambitious,” says Singh, who was once Libin’s boss at a Boston startup called Art Technology Group, in the early days of the Internet. “If you look at the last eight years of Redstar, we’ve done five or six companies.” One was acquired in a small (but profitable) transaction, one was shut down, but the others are still growing, he says.
It’s easy to see the temptation of the “diversified portfolio” approach for an entrepreneur like Singh or Libin. Rather than being all in on one idea that could fail in a million different ways, they instead work on several simultaneously, and in theory increase the odds that they’ll discover something that works. But the paradox of diversification may be that they’re not committed enough to any one thing to stick it out.
At All Turtles, Libin says, “We’ll fail things efficiently and double down on the things that are succeeding.” Sounds logical, but often things that look like failures become successes when entrepreneurs refuse to give up — because it’s the only lottery ticket they’ve got.
Libin’s former colleagues at General Catalyst, not surprisingly, are enthusiastic about All Turtles. They’ve put millions of dollars into its bank account, though the biggest investor is Salesforce Ventures, the investment arm of the cloud software firm.
“Phil has a brilliant mind and has been able to attract incredible talent from all over the world,” says Niko Bonatsos, a managing director at General Catalyst. And Libin is “spot-on to notice that not every amazing product thinker loves or cares enough to do the company-building part of the equation.”
Can Libin create a company, take venture money, and rewrite the stupid rulebook of how companies are created and funded? He’s a smart guy, and his progress will be interesting to follow.