[jacquesm]

> Without ever having officially launched, co-founder and CEO Or Arbel managed to secure $1.2 million in funding from a list of unnamed investors, except for co-founder, angel, and Mobli CEO Moshe Hogeg, who participated in the round.

Stuff like that really gets me. I see tons of start-ups that would have a fighting chance given that sort of investment and then lame stuff like this gets funding. Of course they're entirely free to spend their money any way they want, but was there really no place to spend that better?

Congratulations to the Yo team for furthering the research to the origins of the term 'dumb money'.

I guess if you timed it right you could use Yo to communicate in Morse, but that seems to be a waste of bits considering that each packet will activate a very large number of bits being sent where one would suffice.

[ChuckMcM]

Perhaps, and this would not surprise me in the least, it is vanity investing. Something which has some traction, clearly is scratching some itch, and is under valued relative to that traction. Here we are in June, a couple of months from April and it has 50,000 active users. With a bit of virality that gets to maybe 250K or 300K. Conceptually simple (probably not patented or otherwise circumscribed) the team is probably 2 maybe 3 people. So with the two founders and maybe an employee, its an easy Acqui-hire at $3M. So you put in your 1.2M, get prodded, sell for $3M and double your money in what, 6 months? A year? And I agree with your 1+M$ is nothing to sneeze at, a lot of good can be done with that. Welcome to the gangsta school of high tech investing :-) If you have the capital to play with you can lay down bets like this, and it is exactly like laying down a million bucks on the 'pass' line at the casino. If they get an acquihire you get your money + 100% back, if they manage to keep the shine and traction going maybe you get back 2x or 3x your money, or maybe they fizzle and fade and people move on and you are out a million bucks. I was familiar with a guy who was a 'player' and he mortgaged his house for nearly a million dollars and put it all into a 'winner' startup/concept which, in his case, did not win. It was an "interest only" note with a big payment at the 5 year point, at which time he turned the house over to the bank. Very sad.

I will take exception though to the 'dumb money' comment. It is dumb to gamble, but even smart people do it, it is a risk/reward trade-off. Smart people can look at the fundamentals here and see there is a possible 'flip' opportunity, high risk, high reward, short time to closure. The trick will be to see in 3 years if it hasn't flipped or exited by then. But that only tells you the payoff. I bought a $66M lottery ticket the other day, 'dumb' ? Sure it was $2 put at risk. I chose not to buy a $2 soda. Probably not a smart allocation of capital, but the soda would have been turned into piss in short order, the lottery ticket has potential right up until the drawing :-).

[ejain]

I'm guessing that with $1.2M in funding, the valuation is more likely to be something like $12M? So a $3M "aquihire" might not be such a good deal...

[ChuckMcM]

As long as we are guessing ...

Well there is a seedier way think about it, and I don't like it but I recognize that it is not uncommon.

I would not be surprised if some investor gave the company a 'high' valuation (ie lead the round), invested in their preferred shares, and demanded a 2x or 3x liquidation preference. Let's say you are right and that I am right and there are 3 employees, and lets guess that they are sharing in say 80% of the "equity" but there shares are "common" not "preferred." The employees and founders feel awesome! "Look its worth $12M and we are millionaires!" and they go about their business trying to make it more awesome and cool. Except they can't make it more awesome enough and they need more money. The original investor says "Oh sure, I'm in but I don't want to lead this round." and the founders go out stumping for money, but they can't find anyone who agrees with their original valuation much less an even higher one. What to do? what to do! And the money is running out, and there are people to feed and spouses or significant others who are getting worried. And the "Blam!" the investor mentions they could use an exit to his pal a BigCorp who offers to buy them out in an acqui-hire "terms of the deal not disclosed" and the founders are hired and given 'earn out' packages that force them to work at BigCorp of 3 maybe 4 years, meanwhile our investor clears their liquidation preference, doubles (or maybe triples the cash) in their pocket and if they are participating preferred takes another bite at what ever is left over for the common stock.

Ok so all this evilness speculation speaks poorly for the folks who just invested $1.2M in Yo. Neither I nor probably anyone else really knows what they saw in the company to make them feel that they could get their money back, but it is critical to remember that investors are in it to make money, if the founders get some too that is a "nice to have" but isn't essential. This lack of alignment gets sometimes missed when people like Jacques are wondering "What the heck is going on here?" An investor doesn't care if its a 'down round' if they are getting 2x their money back in under 5 years. Using the rule of 72[1], getting double your money in 4.8 years is a 15% rate of return. A "win" in anyone's book.

[1] https://www.directinvesting.com/drip_learning_center/rule_of...

[ry0ohki]

I'm suspicious of the "unnamed investors". Has anyone done any fact finding, I'm betting these guys are just looking for PR, and saying they got 1.2m for a "Yo" app is a pretty good way to do it.

[the_watcher]

>>"unnamed investors" It's totally possible that these are legitimate, respectable investors, investing on information we aren't aware of. It's also possible (and more likely, in my opinion) that the unnamed investors are a relative of a founder, who invested in this to give them runway to do something else, or to potentially spur interest from other investors or acquirers.

[logicallee]

very interesting. I wouldn't have considered this - I mean it's blindingly obvious whether a company you're working at (or supplying services to, etc) is two kids with an app hiring you, or two kids with an app and 1.2m in cash hiring you. So if they're doing this, it's likely they won't be hiring anyone, meeting with any real investors, or spending money on anything. That severely limits the upside of any PR - and that's bold.

On the other hand if they got some money, just not as much as that, then perhaps they could fluff as you suggest. Is this common in your experience? I've heard some reports of other fluffed numbers on HN, ("turned out not to have raised as much as they claimed") but no first-hand experience of anyone doing this.

[majani]

it's their former boss

[dustingetz]

Have you considered that perhaps the investors have more information than you, or the founders have an insight that you don't have, or that this is not their final product?

[jacquesm]

This may all be true. At least they have the M in MVP covered.

[mathattack]

I suspect it's the last. They have either great insight into virality, or a second step that looks easier to monetize.

[7Figures2Commas]

> I see tons of start-ups that would have a fighting chance given that sort of investment and then lame stuff like this gets funding.

What makes you think this is an either-or proposition? There's a glut of capital chasing startup opportunities today. No entrepreneur is entitled to money, but every entrepreneur can compete for it. Sure, some entrepreneurs are better connected than others, which often makes fundraising easier. But at the end of the day, why should investors be implicitly blamed for a failed startup led by an entrepreneur who was unable to convince said investors to provide his or her company with funding?

Sales is an integral part of building a successful business, and if you need capital, you had better be prepared to sell your company to the people you're asking to provide it.

> Congratulations to the Yo team for furthering the research to the origins of the term 'dumb money'.

Even if you subscribe to the notion that there really is "smart money" and "dumb money" when it comes to angels and venture firms, let's not pretend that there isn't such a thing as "dumb entrepreneurship." Entrepreneurs who start businesses without lining up the capital they need to execute are taking a risk. In many cases, especially among young entrepreneurs, that risk is not at all calculated.

On this note, it's sad that so many startup entrepreneurs bet the farm on day one by putting themselves in a position where they believe they need to sell equity to raise capital. There are a variety of ways to fund a business and early on, selling equity is often one of the least attractive despite the sex appeal that Silicon Valley has given it.

[kanzure]

> but was there really no place to spend that better?

Maybe. Consider all of the competing opportunities that might be discovered in a short window, like say a week. Out of all of those options, which ones are still early stage, which ones are demonstrating any amount of traction, and which ones have fancypants metrics like "over 5,000 messages sent per day"? (I'm just making that number up. But I'm sure that sort of number was mentioned at least once. Even if they had to squint to ignore the power law distribution.)

edit: and which ones are riding on the news or rumors of a >$1 billion exit (while still demonstrating traction)? (Snapchat/Whatsapp rumors were probably floating around for a bit before they happened.)

How much is traction worth? what about fad traction?

[jacquesm]

It shouldn't be this hard to tell a fad from a start-up.

[beachstartup]

i don't know, there's genocide and starvation and plenty of other profoundly disturbing things in the world. whether specific apps are stupid or not, or get funding or not, doesn't even register on my care-o-meter.

a huge portion of the 'technology' industry is just rich/privileged people doing nonsensical things that may make them a bunch of money. whatever.

trying to find or impose some kind of rationality on it is in my opinion pointless, and holding it accountable to some kind of moral benchmark is as sure as anything i've ever seen, to disappoint.

[ISL]

1-bit communication can get a lot done.

Not sure? (don't do this) Try calling your local emergency service (911 in the US) and hanging up.

[jacquesm]

No, really don't do this, you could get someone killed like that (priority traffic causes tons of traffic accidents annually, if they follow up on a 9/11 when there is nothing wrong you are in very hot water, and rightly so).

There are a lot of situations where one bit communications can make big changes. Sending a voltage down the wire to the 'launch' relay on some missile will do a lot worse. In the end, any actuator anywhere is going to respond to just a single bit changing state. So we're in violent agreement about that.

But to reduce the available bandwidth to nothing when lots is available has me puzzled. Twitter found that reducing the number of characters (by necessity, rather than by choice) launched a new medium. I can see how taking that to its logical conclusion (from 840 bits to 1 bit) may create an entirely new mode of expression.

At the same time I fear it will not leave them with a value that is is 1/840th of twitter, that '1' is perilously close to a '0'. In that sense it is like 'pair', which tries (tried?) to be a social network for 2.

Maybe someone should come up with a 0 bit medium?

[ryandvm]

Can't wait for the Facebook clone. They should call it "Poke". Oh wait.

[iLoch]

"Like" would probably be pretty appropriate...

[DonHopkins]

Reminds me of Reverend Harry Powell, an itinerant technology evangelist, con artist, and serial entrepreneur with the words "LIKE" tattooed on the knuckles of one hand and "POKE" tattooed on the other, who would explain this fact to his victims by using his hands in a sermon about the eternal struggle between doing no good and doing no evil.

[WildUtah]

A technical note: Twitter carries unicode messages; the limit is not 140 octets but 140 code points [0]. This is especially useful when tweeting in Japanese.

I believe there are more than 65536 code points assigned so a tweet should be able to carry over 2240 bits of information -- 2240+ Yos.

---

Incidentally, in Japanese and BEV (probably adopted from jp), the word "yo" has an entirely different meaning.

[0] http://www.joelonsoftware.com/articles/Unicode.html

Edit: added endnote

[jacquesm]

A good one, thanks. Yes, that makes good sense. I guess that in some languages twitter really does carry a lot more information than it does in Latin alphabet languages.

If your language would only allow for 140 bytes you'd be really out of luck if your language routinely requires multi-byte sequences in UTF-8.

Hm. You could do a 'tweet compression' trick where you use a fixed number of bit from a subset of UTF-8 that you know is multi-byte (selected for the extra long sequences) in order to put longer messages on twitter, and then use a decompressor to turn it back into ascii.

[madeofpalk]

Already exists! http://pages.physics.cornell.edu/~aalemi/twitter/

[DonHopkins]

"YoTor" could push innocuous "Yo" messages out over disposable one-time use IPv6 addresses, and all of the side-band message data could be transmitted in the IPv6 address. "The source address is the message."

[markburns]

What is the number 840?

[jacquesm]

6*140. But as your sibling comment points out twitter is not based on octets but on code points so there is actually a lot more information in there. I made the assumption that the limit was the 140 byte limit from GSM messages with a 'payload' of roughly 6 bits per character position but as was pointed out it is in fact now 140 UTF-8 code-points.

https://dev.twitter.com/docs/counting-characters

[markburns]

Yeah, I'm familiar with tweeting in Japanese, and how much more information you can get across in a tweet, which made me question the number. However, I'm still not sure why (in an imaginary world where twitter doesn't encode in UTF-8), it might be 6-bits. 7 or 8 I can understand. I'm just curious of what your thinking was, not trying to do any one-upmanship.

[jacquesm]

Well, 'ascii' is ' ' to 'del', above that I can't even type on this keyboard with any reliability so that gives an upper boundary for me of 96 characters. Of those the actual information is carried mostly by the letters, A-Z, twice if you want to count uppercase and lower case for 52 letters, 10 digits, a space. So that's 63 letters. Round up to 64 (maybe add the @ character or the # if you want, those are pretty prevalent in tweets as well). That's approximately 2^6. If you drop the lowercase/uppercase distinction then you can fit all the other ASCII glyphs and punctuation marks in the second half of your imaginary 6 bit code. You can't enter anything below <32 in a tweet, other than a linefeed.

[jkestner]

Metadata/context is data.