Boulder Bits: ‘Startups for grownups’

If your input about a suggestion focuses on why it’s a bad idea, friends might label you negative.  Meeting “let’s go swimming”  with “my swimsuit doesn’t fit anymore, the pool is too crowded,” or “it’s too cold,” can turn you into the person no one invites anywhere.

If you’re a core employee of Boulder Bits, however, the focus would be right in line.

As a startup studio, Boulder Bits comes up with and develops product ideas internally, raises capital to fund the ideas and then creates companies to bring them to market.  The method they use to make sure that only the best new product ideas make it to the next stage involves finding all the things wrong with it. 

Ideas with the least number of wrongs make it to round two.

Unlike accelerators and incubators, Boulder Bits gives legs to ideas that it develops and has already put to the marketability test rather than hunting for entrepreneurs with the next best idea for a product or service.

“Accelerator models have people applying to get in with their ideas for support and capital but the studio model means that we come up with our own ideas and then find teams,” said Marco Vienna, Boulder Bits vice president of strategic development.

Traditional startup assistance models include accelerators and incubators.  Accelerators invest a specific amount of capital for a determined amount of time in exchange for equity. Incubators help new and startup companies develop through offered services like mentorship, management advice and office space with less of a strict time deadline.  They often don’t provide capital or take a cut and sometimes help startups build a foundation that will appeal to future venture capital investors.

As a team of five, Boulder Bits starts its process by generating ideas that could turn into solutions.  “We then use a process we call popping balloons,” said Jesse Lawrence, CEO and founder.  The idea is to metaphorically throw darts at ideas based on reasons why the ideas won’t make it in the marketplace.

“Good solutions pop with effort, bad solutions pop easily, and the best solutions are hard to pop,” he added.  “The goal is to think of as many different ways as possible to pop the balloons.”

If a product or service has easy access to customers or if it has a distribution mechanism, then the team is less likely to find ways to pop the balloons.

The process helps Boulder Bits kill 99 percent of its ideas for startups and invest in the top 1 percent.  The company aims to build and scale businesses that will beat the tendency for nine out of 10 startups to fail. 

In response to the question, “Why do startups fail?” Lawrence references the ideas of Bill Gross, CEO of Idealab, the technology incubator that has created more than 150 companies.  Gross analyzes the success factors that keep both his own company as well as his investment companies moving forward.

Idealab’s goal is to find technology solutions and when one shows promise, recruit a great team, spin it off into a company, and then help it grow a successful business.

“Teams are an important factor, making sure they’re aligned and scalable around a solution for customers,” Lawrence said, echoing his matching belief.

Boulder Bits finds teams to take over companies once they’ve been established and have started to get traction.  “We provide investors’ perspective and get solutions on track in the beginning before bringing anyone else in,” he added.

The first person that’s added to the company once it’s what Lawrence calls a ‘validated solution’ is a founder.  This person starts out as an employee with Boulder Bits and soon takes the company over.  Boulder Bits then steps into the role of investment company that gets equity.

A premise that fuels Boulder Bits is that running a business can derail traditional founders.  When entrepreneurs start companies with their own ideas, they can lose perspective and be challenged when the market indicates a need for flexibility and a change in course, according to Lawrence.

“Most founders think of their company as their baby and can’t pivot when it’s necessary,” he  said.  “For example, a founder can think the company is supposed to be consumer based but consumers may not want to pay for it and enterprises do.

“Going from B2C to B2B could cause a founder to lose passion, which in turn would hurt success.”

To avoid the disruption, Boulder Bits not only vets out a portfolio company’s strategies but makes sure both funding and support are in place.

“We’ve streamlined HR, accounting and seed funding so founders can focus on their competencies,” said Sarah Phillips, Boulder Bits COO.  “We then focus on bringing in the best startup founders.”

Ned Stankus came onboard with one of Boulder Bits’ portfolio startups – Tactac – in February. 

Tactac, which launched in July, is an app that lets shoppers invite friends to share opinions and recommendations for products of interest.  For example, someone can use the app to pick a few baby products in preparation for a new family member and invite people she trusts to chime in with input.

Why not just follow the number of stars online reviewers used to grade the products?

“Amazon did a study and found that about 70 percent of the reviews on their site were fake or incentivized,” Stankus said.  Plus, people who know you have a better understanding of your personal preferences.

Tactac has partnered with Amazon to handle payment and fulfillment. 

Stankus refers to the Boulder Bits model as ‘startups for grownups’.  “It’s not like college kids staying up all night developing ideas,” he said.  “Boulder Bits provides a cushy way to do this – I don’t have to mortgage my house, I receive a living wage, and I’m involved in products I have a passion for.”

The name Tactac even takes into account that changes in the company as it develops are possible.  “It’s purposely generic,” Stankus said.  “If we change the business model, we don’t have to change the name.”

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