Vator Box

Javelin Venture Partners looks at HipChat

Would Jed Katz be interested in investing in this cool instant messaging startup?

Innovation series by Bambi Francisco Roizen
November 8, 2010 | Comments (4)
Short URL: http://vator.tv/n/135f

5

We wrote about HipChat back in August, when the startup took in $100,000 from Sandy Jen and Elaine Wherry, both co-founders of instant messaging company, Meebo, and TechFellow Awards recipients, as well as the Founders Fund.

Pete Curley, co-founder of HipChat, has a great video pitch on his company profile on Vator, so we put him into a Vator Box episode (which we haven't aired in a while). For those not so familiar, Vator Box is a show where we bring in an investor, typically a well-known venture capitalist, or a seasoned entrepreneur and we take a look at startup pitches and evaluate them.

In this episode, Jed Katz, a venture capitalist at Javelin Venture Partners, was our guest host. He joined me and my co-host, Ezra Roizen, digital media investment banker.

We look at HipChat, a young startup providing instant messaging and group chat for small companies, typically with fewer than 50 employees.

Here's our takeaways from watching Pete's pitch.

- Jed gave the product a thumbs up. In his words, "It's a cool product."

- We highly encouraged HipChat to give the product away for free because its target market of SMBs (small- to medium-sized businesses) of fewer than 50 people is a relatively frugal customer base. HipChat is doing just that with a 30-day trial. But at the time we filmed this, HipChat's business model was to charge $1 per user, per month. It was unclear whether there was any free version at the time. After 30 days, HipChat's subscription service kicks in.

- If HipChat is looking for an exit down the road, they may best be served trying to build up a significant user base as oppose to building up revenue.

- By having a significant number of users (over some revenue), the company may have more defensibility. A larger company may choose to acquire them rather than copy them if they have a big enough user base.

- Javeline Venture Partners is an early-stage VC firm based in San Francisco. Would Jed want to meet with Pete? You'll have to watch to find out!

 

Related companies, investors and entrepreneurs

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HipChat
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Description: HipChat is a private instant messaging and group chat service for companies that saves you from the distractions of today&rsquo...
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Pete Curley
Co-founder,
HipChat
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Jed Katz
Managing Director,
Javelin Venture Part...
Bio: Jed Katz is the Managing Director of Javelin Venture Partners, an early-stage venture capital firm in San Francisco.  One of the pio...

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Comments

Pete Curley
Pete Curley, on November 8, 2010

Thanks guys! I wanted to let people know that HipChat is free for teams with under 4 people, and there is a 30-day free trial so your company can kick the tires. Please let me know if you have any questions at pete@hipchat.com.

PS. This kind of looked like an ad for diet coke.


Bambi Francisco Roizen
Bambi Francisco Roizen, on November 8, 2010

LOL. Yes, that's our new sponsor :-) -- and, yes we figured there was a new "free" model in there. And, that's great that you have it free for teams under four people and the 30-day trial as well. Glad you enjoyed the show!


Steve Franco
Steve Franco, on November 10, 2010

Bambi et. al - I enjoyed this Vator Box episode because you focused on several important concerns faced by many startups. The issue of whether to acquire non-paying customers rapidly versus gradually acquiring paying customers is a difficult fork in the road. I think your panel is correct that Skype would not be where it is today had it initially charged customers. If HipChat tries to obtain millions of users along the same path, HipChat's business model would have to focus purely on customer acquisition, and providing an awesome free service -- that's the essence of a preemium model (i.e. dropbox, skype). I imagine that this would also entail more funding.

Another issue that I found interesting is how will HipChat acquire customers? Will it build ontop of Skype, Salesforce, current AIM-clients, or maintain its stand-alone website? In terms of a niche, it seems that it's targeting mid-size businesses -- a more important question for me is WHICH type of businesses are they going after? Architecture firms? National non-profits? Another issue that I'd like to know is what it's doing to go after those niches? Companies like Facebook have shown that going after an initial niche/small market can really ignite the tipping point.

This interview in particular hit home for our startup, FriendCameo. Unlike HipChat, we already have the user traction (350,000 users) which we built ontop of a platform (Facebook). Our next concern is how -- in the words of Jed Katz -- will we get to "millions of users" while still providing a freemium model.

Again, great job and best of luck to you Pete.


Steve Franco
Steve Franco, on November 10, 2010

Bambi et. al - I enjoyed this Vator Box episode because you focused on several important concerns faced by many startups. The issue of whether to acquire non-paying customers rapidly versus gradually acquiring paying customers is a difficult fork in the road. I think your panel is correct that Skype would not be where it is today had it initially charged customers. If HipChat tries to obtain millions of users along the same path, HipChat's business model would have to focus purely on customer acquisition, and providing an awesome free service -- that's the essence of a preemium model (i.e. dropbox, skype). I imagine that this would also entail more funding.

Another issue that I found interesting is how will HipChat acquire customers? Will it build ontop of Skype, Salesforce, current AIM-clients, or maintain its stand-alone website? In terms of a niche, it seems that it's targeting mid-size businesses -- a more important question for me is WHICH type of businesses are they going after? Architecture firms? National non-profits? Another issue that I'd like to know is what it's doing to go after those niches? Companies like Facebook have shown that going after an initial niche/small market can really ignite the tipping point.

This interview in particular hit home for our startup, FriendCameo. Unlike HipChat, we already have the user traction (350,000 users) which we built ontop of a platform (Facebook). Our next concern is how -- in the words of Jed Katz -- will we get to "millions of users" while still providing a freemium model.

Again, great job and best of luck to you Pete.


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