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Lifestyle Startups Gain Attention at SXSW, But Can They Survive?

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KUT News
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Companies connect with users and venture capitalists at SXSW Interactive to promote their ideas.

Earlier this year, a sometimes-fierce debate broke out between students at Austin High School and the head of an Austin company called #BeSomebody. The company makes money by encouraging people to follow their passions. But when the company’s founder came to speak at the school, the students criticized his message as privileged and disconnected from reality.

Controversy aside, it got us thinking about these lifestyle tech startups — ones based on ideas or messages rather than products and services.

Can they survive? 

Many people at this year's SXSW Interactive trade floor say they support the idea of lifestyle companies, if the message is positive. But they are riskier investments, and right now, entrepreneurs say investors aren't always making smart decisions about where to invest their money. 

One lifestyle company is Xocial (pronounced "social").

"Well, it started with us a couple of years ago," says Colin Duetta, the CEO of Xocial, which is based near Toronto. "We were brainstorming about the social balance that we have with one another, the unspoken kind of chi. You know? Points?" 

Duetta says he and his partners wanted to recognize the good around them with the app, which allows people to send thank-yous to other people.

“But more than that, you become part of the social community, and that’s opportunity to connect with people you’re not digitally connected with typically: the volunteer soccer coach, teacher, crossing guard, the charity worker," Duetta says.

The more good you do for people, the more points you get — essentially making a game of the act of being nice.

“By gamifying it a little bit we’re hoping to build a little bit of friendly competition around recognizing good and maybe doing a little better ourselves," Duetta says.

It’s a trend of among startups: Thinking their ideas are going to change the world.

It's encapsulated in https://youtu.be/J-GVd_HLlps" target="_blank">this scene from the HBO show Silicon Valley in which startups are pitching their ideas at a conference.

But instead of promoting a software or a product or a service, these companies are promoting a lifestyle. In Xocial’s case, users get points for being a better person. #BeSomebody wants you to unabashedly pursue your passion and try to make it your career. Another Austin-based company that’s been a successful lifestyle brand is the Chive. They promote the “bro” lifestyle by telling their followers to "Keep Calm and Chive On."

“I’ve been an entrepreneur for 10 years," says Matt McCoy."I personally wouldn’t do it. Just because it’s just traction that you get.”

McCoy was promoting his company, Scanalytics, at South by Southwest. The company makes floor pads that businesses can use to track foot traffic in their stores or at special events. So he’s selling a product to businesses. 

“If I was ever inspired that way I would look into pursuing it, but like I said, I think it's a little bit riskier of a venture," McCoy says.

Plus, it’s about finding a target demographic. As a 26-year-old, McCoy says he can buy into lifestyle brands like the Chive.

“Five years from now, I’ll be in my thirties," McCoy says. "Maybe I’m not into that kind of lifestyle anymore. So, it’s hard to say. It’s catching fire and then picking up new people."

Others agree that lifestyle companies need a strong message that resonates with a lot of people.

"Not just your immediate customers," says Richard Hollis, another CEO promoting his new business at SXSW. "But into the future. I think that message gets lost."

Hollis says the tech revolution is here. "What I think is not here is discernment — can you discern a good investment from a bad investment?" 

Others question the lack of discernment, too. When the Austin High School students criticized the #BeSomebody message, senior McCoy Johnston says he was surprised more people weren’t critical of the message.

“If a high school class can understand just how faulty this message is and how poorly it’s constructed, I want to know, ‘Why was Austin High the first people to talk about this?’” Johnston says.

#BeSomebody founder Kash Shaikh says his company is a community of people trying to help and inspire others, and it's a message some people, like the students at Austin High, just don’t understand.

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“I feel there’s a lot of kids, people out there that have been beaten into submission into not believing they can follow their passion, that they can make whatever they want to make happen, happen," Shaikh says. "They’ve had too many people tell them 'be more realistic, more reasonable.' And to be honest, those are two words I never use, and it’s not part of the #BeSomebody message at all.”

#BeSomebody received a $1 million seed investment last year to launch its app. Initial investments in startups like #BeSomebody, known as seed deals, have seen a four-fold increase over the past four years.

But some tech experts say discernment comes when those companies go back for the next round of funding. In those rounds, known as Series A and Series B investments, there will be less money to go around.

It will take longer for these companies to raise the money they need, and many of them won’t make it.

Jason Korman runs the company Gaping Void, which works with businesses to solve internal problems. He says the chances of getting noticed at SXSW and surviving after the festival are slim.

“It’s become like a lottery," Korman says. "So, can you do it and win? Yeah, you can. Are the chances high? No. But there are always going to be people who want to take that shot.”

That's one reason SXSW is so popular, so people get that face time with potential customers – and the investors who will help them keep the lights on.

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