This is the fifth in a five-part series called “No VC,” which highlights startups that have succeeded without venture capital, the lifeblood of Silicon Valley.
Gabe Rivera often hears from Silicon Valley’s elite, who are eager to invest in his startup Techmeme, the favorite news website of technology industry insiders. But many of them, such as SoftTech VC’s Jeff Clavier, don’t get very far.
“The first time I asked Gabe if he would be interested in an angel investment,” said Clavier, “he replied something like: ‘I don’t want to deal with the obligations attached to raising money, and I still want to be able to take a nap after lunch.’”
Rivera created the site in 2005, when blogs and news outlets tracking the daily gyrations of technology giants began pouring a greater amount of content onto the Web. Techmeme collected the day’s most important headlines in one place, grouping together similar posts from different sites and constantly scanning for fresh news. Rivera had left his programming job at Intel and supported the new website and himself with $55,000 in personal savings. In 2006, he began selling ads and began growing his team.
Techmeme, which Rivera calls a “scrappy” operation, now has a staff of 12 who mostly work from his San Francisco apartment or their own homes. While the algorithm for sifting news has improved and Rivera has hired human editors to find stories the machines miss, the site looks almost identical to the way it did six years ago.
Reluctant to make revenue a priority over user experience, Rivera has resisted selling large-format graphical ads in favor of smaller promotions targeted at the industry Techmeme covers, including sponsored blog posts, help-wanted ads and announcements about upcoming events. Rivera declined to say how much the site makes, but said it covers the cost of labor, servers and everything else, “with a little left over.” Sales are at least $1 million, based on ad rates posted on the site.
However much money Techmeme makes now, it’s no secret that the potential is much greater. Rivera has turned down acquisition offers from major Internet players because he would “hate to see Techmeme wither or die inside a bigger company, and I’d hate to see our team get bogged down building another company’s doomed product,” he said. Investors approach Rivera about once a month. He tells them he doesn’t need the money and that they wouldn’t be patient enough to support the company he hopes to build.
“We’re still exploring what the product and revenue model is at a very fundamental level, and raising money too early in this process wouldn’t make sense,” said Rivera, 39. “It’s true that in many ways, more money would make many things easier, including hiring more good people. But I’m also concerned about what it might make not possible: patience in letting a product mature, or forgoing costly distractions like board meetings and fundraising.”
Clavier and other investors who have befriended Rivera over the years have stopped pestering him because they acknowledge his approach wouldn’t work for venture capital.
“The genuine question when you raise funding is how it allows one to grow faster, larger and more valuable,” Clavier said. “It seemed to me that Gabe was not clear that funding would get him there anyway.”
Mark Suster, an investor at GRP Partners in Los Angeles, reads Techmeme every morning and has also discussed funding with Rivera. While Suster admires the entrepreneur for his independent approach, he said that’s also what would make Techmeme a poor investment.
“Gabe is not the guy a VC would invest in,” Suster said. “I’m trying to find the guy who can say, ‘I want to change the world and have the biggest company possible.’ That’s who I need to finance. History would not suggest that he’s that guy.”
Still, Rivera continues growing the business at his own pace. He has built and staffed a separate site that aggregates media news, Mediagazer, and expects to do the same for other news-driven topics.
“I don’t believe anyone aiming to build the ‘biggest company possible’ could have made something like Techmeme,” said Rivera. “Any such person working on something remotely similar to Techmeme would instead focus on how to reach tens of millions of users as quickly as possible, and as a result, the relevance of the product for a community as focused as Techmeme’s would suffer.”
Plus, growing too quickly might get in the way of the naps Rivera takes after lunch almost every day.
“My naps are important,” he says. “We should all nap more.”