How one "Series A crunched" startup traded user acquisition for dollar acquisition

By Erin Griffith , written on December 21, 2012

From The News Desk

Wendr's story has a beginning that's familiar to many a startup. Sam Zises saw a hole in the market for social networking apps. They were great for sharing one's current activity. But they were awful for making plans for the future. So he built an app that helps friends share their plans with each other. Wendr was a "Foursquare for the future" and it gained modest steam, accumulating users in the tens of thousands.

Unfortunately 10,000 users does not a successful social media app make. Especially when ten million users is the new one million users and a Series A crunch is on. Founder Sam Zises saw the writing on the wall and did what he, as a former brand and business development manager at ad agencies OgilvyEntertainment and Big Fuel, knew best. He went after the big brands.

It worked.

Wendr is now a product of Zises' agency, [L]earned Media, and he's white-labeling the app for brands, starting with a BlackBerry campaign in 30 South American, Latin American and Caribbean countries. The app is part of RIM's BlackBerry Insider program. Blackberry Insider is the a community that includes both exclusive and user generated content for the underground scene in music and nightlife in Latin America. In each of the 30 countries involved, Wendr pulls in events from a user's phone calendar as well as Facebook events to share a newsfeed of friends' plans both in the app and in BlackBerry Messenger.

Turning an app into an agency is not a venture capitalist's dream. But it's also not a lame soft landing. Zises' agency is building cool technology that will be used by more people, and he's getting paid for it. "There's just so many opportunities for brands to connect with startups," he says. "The next venture capital is going to be brands."

It's a much different chorus than one I've heard repeatedly from startups focused on user acquisition. The whole "we're not your creative agency" thing. Talk to me in a few months when your pre-money company runs out of venture capital -- maybe that creative agency gig looks a bit more attractive.

Brand-savvy entrepreneurs who understand advertising from day one will have an easier time monetizing. The marketing world is trickier to navigate than most startups think. Facebook, Twitter, and Instagram have struggled to keep their users happy while courting advertisers. You could argue, that, in light of Facebook's constant privacy outrages from users and whiny complaints from advertisers, the company has utterly failed on both fronts. Same for Instagram, with Terms of Service-gate this week, and Twitter, with its hostility toward its developer community as it aims to please advertisers.

Now, the next Facebook, Twitter or Instagram might not even make it to a Series A round of funding. We're in a new paradigm of investing where VCs are hostile to social media startups that are focused on user acquisition and gaga over enterprise software. Investors have been pointing many a young company in Zises' direction, and he's advised early stage startups like Makeably, GiftHit and SocialPace on how to be brand-friendly from an early stage. With [L]earned Media's Blackberry deal (and a deal with Budweiser as the result of winning a pitch contest), Wendr is proof that a young startup with hardly any traction can make money, even if it means white-labeling the product or shifting focus ever-so-slightly. As app overload sets in and a seed-stage shakeout begins, that is a better option than failure.

"For every Instagram or Snapchat out there, how many Wendrs are out there that are making cool products but don't have that magic fairy dust to get them to a billion picture shares?" Zises asked.

[Image credit: thethreesisters on Flickr]