If there are a lot of companies out there chasing down the Holy Grail of location services, Urban Compass, a startup still in stealth mode, believes it could be one of the lucky ones that might just find it.
Urban Compass is co-founded by Ori Allon, a superstar engineer who’s been thinking about search and discovery for years already — having already sold businesses to Google and Twitter — and Robert Reffkin, a superstar ex-Goldman Sachs banker.
Before they’ve even launched a product, though, their company has already managed to catch the eyes (and faith) of several top-shelf investors. Founders Fund, Goldman Sachs, Thrive Capital, the CEO of American Express Kenneth Chenault, and ZocDoc’s CEO Cyrus Massoumi, among others, have come together to give Urban Compass $8 million in seed money, one of the highest publicly-disclosed seed rounds of 2012, which is now being used to track down the best talent to build its product.
Location, location, location
There have been some notable advances in the world of hyperlocal services from the likes of Google (mapping data matched up against local services), Yelp (user-generated reviews), Foursquare (turning hyperlocal into a social network) and more. But to date, no single company has owned the space in the same way that Google has come to dominate search, or Facebook social networking. Part of the reason for that might be because no single company has been successful enough in personalising recommendations in the way that you would expect something “hyperlocal” to do.
Or, in the words of Ken Howery, a partner at Founders Fund, “The mobile/hyperlocal guys out there (e.g Google, FourSquare) know where you have been, but don’t really know who you are as a person and don’t do a great job at making quality recommendations to you for important, complex decisions.”
The approaches to hyperlocal services can vary but the goal is the same: it’s about giving people the most informative and accurate information about where they are, where they want to go, and where they should be — and then converting that into a business that makes money without upsetting too many privacy advocates in the process. Urban Compass promises an approach different from everything that has been tried so far.
Not a whole lot is known yet about Urban Compass, and an interview with the two co-founders, Ori Allon and Robert Reffkin, yielded little in the way of details. Here is what I was able to put together:
There will be software, but eventually also hardware, involved. “We’re not coming out with our own devices not at this point,” says Allon.
It will start its data drive first in New York, being an archtypical city and also Urban Compass’s base. Future target cities will include London and San Francisco.
Its market strategy is to go direct-to-consumer, and it is coming from the direction of companies like Uber and Airbnb, in that its mission is to “improve and fix a real world problem in areas that currently do not have much technology,” says Allon. “We are trying to bring more technology to the real world.”
Howery specifically notes that “they are trying to disrupt a large industry.” It’s just a guess, but one real-world area that Urban Compass could focus on is real estate (property being a family business of Thrive Capital’s Josh Kushner, and real estate being a principal investment area for Goldman Sachs); another could be the medical industry, which might have been what caught the eye of ZocDoc’s CEO.
There will be something social about it, too. “If a person asks me something right now, I’m sure there are people two blocks away who can answer,” Allon notes.
But don’t mistake this for crowdsourcing: Urban Compass will have a “human network”, people employed by the company to go to urban areas to collect data. That data will be fed into a platform. Those data collectors, he says, “will be followed by machines that will be powered by our software.”
But if Urban Compass is going to help us find all sorts of useful local information one day, further questions now about how consumers will use this, or any more details, go nowhere fast.
The perfect storm
There’s been a lot written about the Series A (and B, C, and D) funding crunches. But when a startup comes along that appears to be a perfect storm of big idea and proven founders, money still materializes:
“Our investing is driven by backing great founders, and the team at Urban Compass is no exception,” notes Howery at Founders Fund. “Robert is one of the hardest working people I have ever met” — in addition to his banking background, Reffkin has trained for and run marathons in each of the 50 states for charity; and he runs a mentorship nonprofit in New York, which is how he met Allon. “Ori is an accomplished entrepreneur and engineer, who left a management position at Twitter [Allon was director of engineering based in New York] because he believed in this company so much. We also think they are helping solve a major pain point for a lot of people.”
It’s worth wondering whether, if there is less money going to later rounds of financing these days, we will see more large seed rounds like Urban Compass’s coming up. That’s not something Howery wants to discuss here, though. For him, the main point of a large seed round is not to offset possible fundraising difficulties down the line, but because there will be a need for early investment to follow through against larger competitors, including the need to hire top talent (there are currently 15 people working there).
Still, Allon and Reffkin know all too well that early rounds of money are not always a measure of success — recall Color — so they’re careful to explain why it is that they have raised as much as they have this early on.
Allon says that in his experience, it’s important to raise money early to “hire the right people to really run with your idea.” It’s a pattern for him — he also pulled off a sizeable round for Julpan, the company he eventually sold to Twitter — with backers for that startup including Microsoft.
But equally important as the actual value of the money is the group of people behind it. This, in fact, is the first time that Goldman Sachs and Founders Fund have invested together in a seed round, notes Reffkin, and it was done this way because of what each investor brings to the table. “We actually took funding from people who can be helpful to us.” Founders Fund brings entrepreneurial and scaling expertise; Goldman helps with operational expertise; and other backers “get us to the people we need to implement the product.” Plus, he notes, “I don’t want to raise more money in the near term.”
And while Allon has already had two successful exits under his belt, both made at relatively early stages for companies that were each no more than a year old (in fact Google bought Allon’s PhD thesis, in which he created a new search algorithm called Orion, before it was actually developed into a full-fledged company; that work eventually got incorporated into Google’s wider search algorithm), he is committed to Urban Compass for the long haul.
In Reffkin, who is not only a friend but has his own ties to nonprofit work that have counterbalanced his banker’s life, Allon may have found the perfect partner. ”Since I finished by PhD (in 2006) I’ve been focused on improving search engines and real time search,” Allon says, “but making it embeddable in daily life, to actually improve our lives, is important for me.”