Is CityGuru really a “Startup”–or an excuse for empty promises to investors? That may depend upon whether or not CityGuru, Inc is really a startup as claimed by founder, Drew Morrison.
Why should a Drew Morrison-CityGuru investor or prospective investor know if CityGuru, Inc. is truly a “Startup” enterprise? For purposes of conducting your Due Diligence, the status of startup will determine the level of risk and the odds of receiving any return on that investment.
The term “Startup” is bandied around with increasing frequency to describe young companies, usually technology-based, who are free of conventional business practices yet dependent upon constant flow of capital from angel investor or venture-capitalists. Many founders protest that a startup culture cannot be delineated by metrics, revenue, age or size. To them, a “Startup” is a “State of Mind”. To an investor this is an un-nerving way to relinquish all control—and transparency—over your funds.
Unlike the founder’s “state of mind” mindset, savvy investors need parameters by which they can measure and understand what is happening to their investment funds. Like it or not, this requires some sort of metric.
In the many definitions you may hear for “Startup” the metric of Time is likely to surface first. The American Heritage Dictionary defines “startup” as “a business or undertaking that has recently begun operation.” Therein lies the rub—to be a startup, the AHD suggests you must have set up shop recently.
Y Combnator accelerator head Paul Graham says, “A company five years old can still be a startup. Ten years old would start to be a stretch.” Natalie Robehmed of FORBES says, “I’ll go out on a limb and say categorically that after about three years in business, most startups cease being startups.” Oddly enough, CityGuru founder, Drew Morrison emphatically stated “One year” defines a startup “because few companies survive after the first year of operation”, suggesting with pride that CityGuru, Inc. is a surviving startup. The status of “startup” also provides Morrison with a convenient reason why the enterprise has produced no return for investors or any measurable growth in five years when pressed by impatient investors. For one, Drew Morrison prefers a much broader definition of “startup”.
A more popular definition of “startup” is being adopted from Steve Blank of Quora:
“A startup is a temporary organization used to search for a repeatable and scalable business model”.
Particular attention is drawn to Blank’s emphasis on the words “temporary” and “search”.
Blank emphasizes “temporary” because “a startup’s goal is to cease being a startup”…supporting the general agreement that the key attribute of a startup is its ability to grow and to scale very quickly, rapidly moving from its status of “startup” in 3-5 years. Paul Graham says it is this focus on growth unconstrained by geography which differentiates starutps from small businesses. A new restaurant in one location is not a startup, nor is a new franchise a startup. Natalie Robehmed echoes this sentiment when she says: “An early stage venture that isn’t capable of this type of rapid scale-up is a small business, not a startup”
Blank’s emphasis upon “search” is his key distinction from small and large businesses that operate in mature markets and a startup who has the ability to search and find “an unknown business model—in order to disrupt existing markets or even create new ones.”
So, Is Drew Morrison-CityGuru A Startup?
Founder Drew Morrison clearly has the “state of mind” required for CityGuru, Inc. to claim status as a startup, but growing discontent among investors suggest this is more of an excuse to use the newness to the market as an excuse for why dividends or returns are nowhere in sight for investors any time soon.
CityGuru, formerly known as On The Go Technologies, was founded in 2010, and changed its name and incorporated in March, 2011. The tree rings suggest the enterprise is pushing five years old—and on the outer age limits of a “startup” status. There are no measurable indications that CityGuru has the capability to exponentially scale up any more than it did in 2010, and therefore does not meet Blank’s determining factor of “Temporary”, and goal of ceasing to be a startup. While Morrison is quick to claim there has been rapid advancement of the company there are no metrics—even financials–to substantiate his claims.
Prospective and current investors alike must take a hard look at what CityGuru, Inc. has been doing during its 5-year tenure as a “startup” much the same way one might ask what Johnny, aged 21, has been doing all this time that he remains a freshman in high school.
Morrison bandies that CityGuru—as a startup—seeks to “disrupt” existing markets—the second key distinction of Blank’s “search” definition of a startup. But, again, Morrison’s claims don’t stand up against inspection.
At best CityGuru services are vague described only as “VIP Access to the City (Seattle)”. There are no records of revenue but Morrison claims revenue comes from a subscription based business model. In a later post we will examine what CityGuru produces in more detail but for now we must ask what existing market is CityGuru disrupting? Exactly? On the surface, it seems Drew Morrison-CityGuru are providing little more than just another social venue for enjoying the finer things Seattle has to offer. In fact, any “disruption” of existing markets seems to be more “competition” within the existing markets. For example: in 2014, CityGuru hosted a “Girls Night Out” social event. In 2015, Seattle Met is duplicating the same event but on a larger scale.
While it seems, from an Investor’s prespective, that CityGuru is more a Small Business rather than a Startup, we will concede to Morrison’s claim of “Startup” if we apply Dave McClure’s definition which is:
“A ‘startup’ is a company that is confused about—
- What its product is.
- Who its customer is.
- How to make money.
As soon as it figure out all 3 things, it ceases to being a startup and becomes a real business….except most times, that doesn’t happen.”