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Betaworks to turn its six "Hacker in Residence" products into real companies

By Erin Griffith , written on June 3, 2013

From The News Desk

This year startup studio Betaworks has been churning out various social, mobile and media-related products at a prolific pace. Now, as its first Hacker in Residence program comes to a close, the company will attempt to pull off a slightly more daunting challenge than merely shipping products -- it will turn them into real companies.

At the company's annual Betaday event last month, SVP of product Paul Murphy introduced the six products built in Betaworks' Hacker in Residence program. Murphy joined Betaworks last August as its entrepreneur in residence from Aviary, where he was COO. He quickly recruited five founders who shipped the following products:

  • Dots, the insanely addictive game designed by Patrick Moberg, the illustrator who created Banter. Dots shot to the top of the app store when it debuted and now has more than three million downloads.
  • Telecast, an app which enables and curates TV streaming on mobile.
  • Poncho, which offers human-powered weather information based on big data.
  • Blend.io, a tool that helps musicians collaborate in songwriting and recording.
  • Giphy, a gif search engine. When company figured out that it required a human to sort, tag and categorize gifs, it tried systems like the Mechanical Turk. But that was ineffective either, so Giphy's team designed a clever game that rewards people (mostly teenagers) for helping categorize Gifs. Unpaid labor for the win.
  • And Instapaper, the "read it later" program which Betaworks acquired from Marco Arment.
The six companies from the program today announced they are hiring as they attempt to become real companies. Dots is already earning money through the sales of add-on tools like Shrinkers and Expanders. Instapaper, which costs $2.99 to download on mobile, also earns money. The others have a less clear path to monetization.

Betaworks founder and CEO John Borthwick says the Hacker in Residence program was initially designed to have three or four products, but it ended up with six. Now, he says, the company may slow its output as it digests these products and turns them into businesses. The company is not sentimental about killing off products that don't work as fast as it releases new ones. Last year the company debuted several new products -- Done Not DoneSwirlJust.meMopedBranchTapestry and Svbtle -- and acquired Digg. Borthwick estimates Betaworks has wound down around 20 products since it started in 2007.

Murphy alluded to that flexibility in his blog post announcing this next step for Betaworks Hacker in Residence products. "We’re fully aware that the challenges a company reaches at different inflection points are more interesting to some than others, and we don’t think there’s anything wrong with that," he wrote.

Murphy also noted that Betaworks projects have "funding clarity," meaning they're not busy raising outside funding because the studio supports their growth. Betaworks no longer makes many outside investments, but the company has earned returns on exits such as Tweetdeck, which sold to Twitter, and Tumblr, which minted the company a 100x return on its seed investment when it sold to Yahoo. In January 2012, Betaworks produced a healthy return to its investors; in January 2013 the company estimated its holdings were worth 5.6x.

Not having to worry about raising funds is an advantage for early stage companies, Murphy noted: "Obviously startups are most productive when they’re building, not endlessly pitching partners, so we have created a platform that ensures our startups and teams can focus on building."