Divining the potential of a start-up is a technology reporter’s constant task. We spend a lot of our time trying to figure out which companies, both large and small, are newsworthy and why.
It’s not an exact science. It is more a balance between intuition and reporting. For clues, we look in part to venture capitalists who finance these companies because, after all, they want to bet on winners. These investors say they write checks for entrepreneurs who seem confident, capable and driven by an inner hunger that will carry them to success. They say they often prize these qualities more than the particular idea or company involved.
We also talk to entrepreneurs, who often say a winning idea is one that invents a new way to do something — like exchanging messages with your friends or finding the best restaurant. And we look at data, seeing which companies are gaining users quickly or attracting people who are particularly interesting to advertisers for one reason or another — teenagers or women, for example.
Still, none of these factors are necessarily enough to warrant coverage. An all-star roster of investors is not a surefire measure of success. Investors can bet on losers, too. Good entrepreneurs, almost by definition, are passionate about their pursuits, so that doesn’t cut it, either. Gaining users is important, but what if the company isn’t making money from its customers yet?
The tipping point — the moment at a which a start-up moves from being an interesting company on the periphery of your radar to a notable one that is prime for covering is hard to pinpoint. In some ways, it’s just a feeling based on experience. The app, game, service or idea that you have had your eye on starts to pop up all over — in casual conversations at parties or in a conversation overheard on the subway. In some ways, gut instinct is the only way to distinguish between companies that perform identical function — Vine versus Viddy, Instagram versus PicPlz, GroupMe versus FastSociety, WhatsApp versus Kik.
Sometimes we get it right, but we can also miss the mark.
Last year, after Facebook announced plans to buy Instagram for a mind-boggling $1 billion, a colleague and I tried to figure out which companies might be next. We waded through the list of companies we had noticed and picked the ones that seemed most promising for the year.
One company that we originally put on the list was Tumblr, the popular microblogging service. But then we took it off. The company, founded in 2007, felt a bit older than the rest to be considered a start-up and while we knew plenty of people who used it obsessively, it seemed as if most of them worked in media in major coastal cities. We knew the company was self-reporting eye-popping page view numbers, more than other popular social media sites — as far as we could determine. But Tumblr didn’t seem to have a clear strategy for generating revenue or a plan for forward momentum.
We went back and forth over whether it belonged, and then decided to take it off and keep it on a mental list of “companies to watch.” Either Quora or Findery, formerly Pinwheel, took its place in the roundup.
A few months later, Yahoo bought the company for $1.1 billion, showing that it doesn’t always take revenue or a clearly defined road map to attract big money.
As for our other picks last year, demand for Uber seems only to be increasing, reflecting rumors of a round of financing that would push the company’s valuation into the multibillions. Similarly, Dropbox seems to be sustaining its momentum, with more than twice as many visitors using the mobile application in the last year, according to comScore, a Web analytics firm. Path also appears to be drawing large numbers of users through mobile. And Pinterest is still widely considered to be a social media heavyweight and is now valued at $2.5 billion, thanks to a recent $200 million investment in it.
Quora, on the other hand, has lost traffic to its home page in the last year, with a dip to 1.5 million visitors from 1.8 millions, according to comScore. Airtime and Findery weren’t generating enough traffic at all to register on comScore’s tools. And although the payments start-up Square has persuaded venture capitalists to funnel several hundred millions to its coffers, it seems to be struggling to gain that faith from consumers.
This year, we have tried our luck again at picking a fresh crop of companies that seem poised to take off, both among consumers and among larger companies that might buy them for their talent and technology. As always, dozens were considered, but not all made the list, including VHX, a video-delivery service, Tinder, a popular dating app; Feedly, a news reading application; Leap Motion, a device that lets you control your computer with hand motions; or Dots, an addictive iPhone game.
We’ll have to wait another year to see how we did.
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