Betaworks might be one of the most difficult-to-categorize companies in New York. It started out in 2007 as a Twitter-focused incubator of sorts, having both invested in Twitter and sold one of its inventions, Tweetdeck, to the company. It was also known as an investor, making early bets in winners like OMGPop, GroupMe, Venmo and Tumblr (the sale of which produced a nice “single digit millions” return on a $50,000 seed investment).
But it has since evolved into a studio hybrid that acquires, builds, invests in and kills more apps than most people even dream of using. From the outside, the company is a machine, churning out an endless stream of loosely related products. But what does it all add up to?
Believe it or not, there is a master plan. Betaworks is building a version of the Web that CEO John Borthwick and his team of builders want to live in — spartan-designed media on top of apps on top of utilities that all disjointedly make the social Web a better place, leveraging one another to do it.
If Borthwick can pull this off, he may do more than change the way we use the Web. He could live the dream, having built a way to make a living as “the idea guy.”
In the early days, Betaworks’ products were all about utility. Tweetdeck, the Twitter dashboard, was a utility. Betaworks sold it to Twitter. Bitly, Socialflow and Chartbeat were all utilities. They spun out to become independent companies.
Then in early 2011, Betaworks essentially pivoted, returning all of its money to investors and announcing it would slow outside investments to focus on building consumer web products internally.
Since that turning point, Betaworks has released social, mobile and media-related products at a blistering clip. Tapestry. Swirl. Donenotdone. Blend.io. Poncho. Dots. Telecast. Findings. The company even launched a partnership with development agency Fictive Kin to fuel its idea machine. Betaworks is happy to kill off projects too — the company has abandoned around 20 of them, Borthwick estimates.
But Betaworks hadn’t quite captured the fascination of the mainstream media until last summer, when it acquired down-and-out Web 2.0 community Digg. The story had an irresistible narrative: Digg, a high-flying startup had become so beholden to its community that it lost touch with the mainstream. Digg’s fresh-faced wunderkind founder Kevin Rose also lost interest, and with his departure, the brand all but died. The price tag was even more shocking: Betaworks paid just $500,000 for the company, once valued at $150 million. With that deal Betaworks embarked on the rarest of all Internet ambitions, the consumer Web turnaround.
Then Betaworks announced it would build a Google Reader replacement; then it acquired “read it later” app Instapaper. Earlier this month, under the leadership of entrepreneur-in-residence Paul Murphy, the company built six new products and unveiled them all at once. A few weeks later, the company announced it would be turning those new products into real businesses. Betaworks’ pace is accelerating.
It has the tech world buzzing. Lately I can’t sit in a Flatiron coffee shop for more than an hour before I overhear someone talking about Betaworks. And every time I ask a New York techie which startup they’d love to work for? Betaworks.
But to an outsider, the company’s bold moves look opportunistic, even a little erratic.
The individual updates — Swirl launches, Tapestry rebrands! They bought Digg! They bought Instapaper! They’re making a news reader! They invested in Moped! They launched a music app! And a weather app! And hey, look at this addictive hit game! — seem incredibly disjointed. Furthermore, why build four overlapping products related to content consumption — Digg, Bloglovin, the Google Reader replacement and Instapaper — rather than just focus all efforts on one? The connection between something like a search engine for gifs (Giphy) and a mindless game (Dots) is tenuous. The products all operate separately, so what are the benefits of housing them all under one roof?
John Borthwick does, however, have a master plan.
His underlying thesis for Betaworks has evolved since the company’s start, but ultimately the startup studio, or factory, or incubator, or however you want to categorize it, wants creative experimentation around a few core anchors. Betaworks, with its data and financial resources, serves as their common tech backbone.
Borthwick has compared the company’s loose grouping of products to a blueprint, which exists in the form of a 40-item “to build” list. “There is an outline and we are continuously editing,” he says. “When we build one piece that really fits well, it is a dark circle and we begin drawing around it.”
The anchors to that blueprint are media, storytelling and data. Media includes the curation, discovery and consumption of content, ie., Digg, Digg Reader, Instapaper, Bloglovin. The storytelling bucket includes Tapestry, an app that aims to be a sort of Instagram filter for stories. The data and “contextual computing” bucket includes anything from Poncho to SocialFlow and Donenotdone.
The one thing they all have in common, aside from fitting loosely into the categories of consumer Internet and digital media, is a shared design aesthetic. Most of Betaworks’ apps are clean, stripped-down products that highlight content above all else. “The actual tools are all really thin,” Borthwick says. “The chrome is very minimal.” He compared the common aesthetic to Pixar. Each Pixar movie features different characters and settings, but you can always tell it’s Pixar by the look of it.
And there are little synergies. Betawork’s family of products slyly work together to make each app slightly better. When Tweetdeck wanted to incorporate a link-shortener, it used Bitly. When Tapestry users want to read the app’s uniquely formatted content later, they’ll be able to send Tapestries to Instapaper. And so on.
Beyond that, each siloed product contributes something to the company’s collective knowledge, be it data, design lessons, or specific builds. Even Dots feeds the shared knowledge beast — Betaworks studies user engagement on the highly addictive app (a million downloads in the first week) for making user interface decisions in other apps.
Dots also contributes financially through sales of in-app purchases. Likewise, Digg is running native ads, and Instapaper makes around $1 million a year on app sales.
That won’t necessarily keep the lights on forever. Betaworks has for the most part sustained itself on the spoils of its smart early stage investments. The company’s current investment portfolio, most recently valued at 5.6x, is packed with established consumer web properties like Pinterest, Twitter, Kickstarter, Airbnb and BuzzFeed, as well as hot up-and-comers like RapGenius, Grand St., Branch and IFTTT.
Borthwick chose not to turn Betaworks into a traditional VC fund because he wanted the freedom to experiment and collaborate in-house. “Venture capital forces companies to keep raising more money and that only works well for certain kinds of companies,” Borthwick says. “That is not what Betaworks is building.”
He can explain every reason Betaworks is different from VC funds, as well as incubators, accelerators, collectives, and even late-90s startup studios. His new model is popular enough to spawn a few copycats, including Science, Inc. in Los Angeles and HVF, Max Levchin’s big data-focused “not an incubator or co-working space” project.
Even though the model is new, Borthwick is ultimately trying to do something that’s been done before: a lifetime of being the idea guy. Many successful founders that sell their companies don’t want to retire on an island. But they are also too close to the gut-wrenching agony of building a company to do it all over again. They want to leverage their smarts across multiple projects, while taking a more hands-on role than a mere venture capitalist.
It is a seductive proposition, particularly when the cost of building an app and iterating on it is so cheap. But in practice it’s trickier than it sounds. The consumer web in particular is binary — things are either hits or they’re misses. When a startup studio has a big hit, everyone gets sucked into the hit (see: Obvious Corp. and Twitter). The opposite is also true. When a startup studio doesn’t produce a hit its founders lose interest and it falls apart (see Kevin Rose’s Milk labs).
With Betaworks’ breakneck pace of building, buying and iterating on products, it has taken the startup lab concept to the extreme. Betaworks may not be the first group to experiment its way into a big hit. But if the company succeeds in building something worth more than the sum of its many, fast-moving parts, it’ll be the first to do it sustainably. Which is, Borthwick would have us believe, all part the master plan.
[Illustration by Hallie Bateman]
- BetaworksBetaworks is a company of builders. Investments: @Digg @Kickstarter @Tumblr @Twitter
"Betaworks is building a version of the Web that CEO John Borthwick and his team of builders want to live in — spartan-designed media on top of apps on top of utilities that all disjointedly make the social Web a better place, leveraging one another to do it." - Erin Griffith, Pando Daily
- portfolio includes Tumblr, Twitter, Kickstarter, as well as up-and-comers like RapGenius, Grand St., Branch and IFTTT - bought Digg for $500k, rebuilt from scratch - bought Instapaper, the original “read later” product from former Tumblr CTO Marco Arment - built Dots, the insanely addictive game - built Giphy, a gif search engine - built Bit.ly, the first link shortener