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Big Deal
Comments () | Published December 3, 2010

Hungry Machine got its start in 2007 at the Brickskeller, the beer bar near Dupont Circle, where O’Shaughnessy and several colleagues from Revolution Health—Aaron Batalion, Eddie Frederick, and Val Aleksenko—were wondering what came next. The clique of tech guys had become something of a “tiger team” inside Revolution Health, jumping from problem to problem in the company’s early days.

That conversation resulted in the group’s creating a consulting firm. The partners split their time between large-scale tech consulting projects and on the side building their own Facebook products, such as Visual Bookshelf, which allows Facebook users to share reading lists and book recommendations. Hungry Machine’s consulting practice would have been a very successful lifestyle business—with a million dollars a year in revenue for a four-person firm, the partners were on track for mid-six-figure salaries—but they weren’t satisfied.

“ ‘Entrepreneur’ is more a state of mind than it is an act,” Batalion says. “At the end of the day, it’s all attitude and work ethic.”

They realized that their side business of building Facebook products had the potential to be even more profitable than their main business, consulting for ESPN and JibJab. So they threw away business model number one.

The team’s decision to give up a consulting revenue stream was risky—or as O’Shaughnessy puts it, “whatever the intersection of arrogance and stupidity is.” But the Facebook platform was interesting: It was the sweet spot for a growing business at the intersection of “O2O” (online-to-offline) commerce—that is, using online tools to drive users to make real-life buying decisions.

“We decided, in essence, to cut our wins and try something else,” Batalion says. “It was a hard decision, but consulting doesn’t have a growth curve that’s interesting.”

That idea—never to be satisfied, always to reach for the bigger goal—permeates the company today. To its founders, Hungry Machine is an attitude. “Hungry is hungry. Machine—that goes on forever,” says Batalion, who before throwing his hat in with Hungry Machine had developed something of a bull-in-a-china-shop reputation. When he worked at Accenture, helping Blockbuster move to online video, he earned the nickname Tank for steamrolling over his colleagues. Several of his bosses were removed after he outshone them in tech know-how. At Hungry Machine, he was all for charging ahead. “We’ve never been happy with any success we’ve ever had,” he says.

The Hungry Machine team struggled early on. Visual Bookshelf earned the company some money through Amazon referrals. But progress was slow.

In the spring of 2008, Hungry Machine’s five employees knew they had found an interesting niche in the Facebook app platform but needed room to grow. Steve Case, who had come to know the Hungry Machine guys while they worked for him at Revolution Health, was willing to kick in some seed money, but the founders wanted more.

“We needed a runway,” O’Shaughnessy says. “We needed time to figure out the space and the platform. We knew $600,000 wouldn’t give us 18 months and the flexibility to hire 10 to 12 people.”

That’s when the company had a choice to make: Don, Steve, Ted, Phil, or Mike?

In the consumer-tech field in Washington, there were basically five people who would write checks large enough to get a company off the ground: Don Rainey at Grotech; Phil Bronner at Novak Biddle, a Bethesda-based venture firm; Mike Avon at Virginia senator Mark Warner’s old venture firm, Columbia Capital; and Washington’s own tech titans, Steve Case and Ted Leonsis, longtime AOL executive and owner of the Washington Capitals hockey team. Mike Avon has since left Columbia Capital, so companies now have just four local venture-funding choices. Location matters in venture capital: 80 percent of VC deals happen within 100 miles of a firm’s headquarters.


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Posted at 02:06 PM/ET, 12/03/2010 RSS | Print | Permalink | Comments () | Articles