Don’t ask Rich Barton to invest in your enterprise software company. The Zillow co-founder and former Expedia CEO just doesn’t want to hear about it.
He’s not being a jerk. Barton — an angel investor who has bankrolled companies such as Glassdoor, RealSelf and Avvo — simply doesn’t have an “inherent interest” in B2B, nor does he have have any desire to call the CTOs of Fortune 500 companies.
“I love building consumer brands,” said Barton, speaking Wednesday night at the University of Washington as part of Seattle Startup Week. “Building brands does excite me. I (love) creating words. We made up Zillow. We made up that word, and now a lot of people know that word, and that is kind of cool.”
One other thing that excites Barton about consumer Internet businesses — especially those that rely on reviews or user-generated content — is how quickly they can take off. He’s certainly experienced that “flywheel” during his career, whether it was watching hotel reviews pour in to TripAdvisor or salary data flow at Glassdoor.com (where Barton serves as chairman).
“User-generated content models are magic,” said Barton. “And they are magic because the more reviews you have of hotels, for instance, the more it attracts users to the site. And the more users you have, of course, the more reviews you get. This is a very simple, elegant example of a positive feedback system. This flywheel spins faster and faster, and what happens is the competitive moat — the defense, the competitive differentiator or the moat around the castle — gets wider and deeper every day with every review that is done. So, it is really hard for someone to come in and try to compete with TripAdvisor.”
That’s also the case at Glassdoor where Barton says the flywheel “spins and spins” with more reviews leading to more visitors. That creates a situation where businesses can expand globally relatively quickly.
“User-generated content models like Yelp and Facebook and Glassdoor and TripAdvisor — they go global really easily because people from China and people from India and people from Africa — anywhere in the world — can start filling out reviews and get this flywheel spinning,” he said.
Later in the talk, Barton responded to an audience member’s question about how to get the momentum churning at consumer Internet businesses. The Seattle entrepreneur — who described the challenge as the “cold start problem” — noted that it can be really hard to lift these types of businesses off the ground initially.
To get around those issues, Barton said that they paid for the first 10,000 reviews at Glassdoor. They also conducted telephone surveys of employees in order to collect salary data, and bought Facebook ads in order to target IBM, Microsoft and other employees at large companies.
“We spent money to start the flywheel,” said Barton. “And, if you really do have a flywheel, it is OK to spend money to get it spinning. It is OK to do un-economic things to hand-crank stuff, so long as once it is spinning you can take your hand away.”
Spending that money initially to get things moving is why venture capital was invented, Barton added with a laugh.
Editor’s note: GeekWire’s John Cook will interview RealNetworks founder Rob Glaser Thursday night at 7 p.m. at the University of Washington’s Condon Hall as part of Seattle Startup Week.