It’s a Monday morning and Alan Clifford is cutting parsnips. The root vegetable will find its way into a beef bourguignon recipe before the French stew is packaged and delivered to kitchen tables across the District.
Clifford is no sous chef. He is the co-founder of Galley, a 4-month-old food delivery start-up. But when you’re a fledgling entrepreneur, no task — even cutting the parsnips — is too small.
The all-hands-on-deck mentality is a throwback for Clifford and co-founder Ian Costello to their early days at LivingSocial, the D.C.-based purveyor of online discounts. After more than five years with the company, the pair left in November to form Galley.
They are among a tribe of refugees who worked at LivingSocial during its rapid ascent and subsequent struggles, and have now set out to apply that experience to their own ventures — keeping up an enduring tradition in the tech industry.
“There’s a foundation where another generation of companies can be created. And an offshoot of that is another generation of companies. And an offshoot of that is another generation of companies,” said Tige Savage, a managing partner at investment firm Revolution and financial backer of LivingSocial.
The tendency for start-ups to give rise to other start-ups is a self-sustaining cycle that excites technology enthusiasts. It can create a concentration of companies that generate well-paying jobs and attract skilled workers, as well as give well-heeled financiers a reason to invest money in the region.
Nowhere is this more evident than Silicon Valley, where high-growth technology companies spin off new ventures, recycle engineering talent and grab billions of dollars from the world’s biggest venture capitalists. It’s the kind of ecosystem, built over decades, that other locales now strive to emulate.
LivingSocial’s ability to spawn a next generation of companies may be among its most significant contributions to the local economy, especially as its own promise to become one of the region’s banner tech companies has faded. After raising hundreds of millions of dollars from investors to expand globally, LivingSocial in recent years has shrunk from 4,000 to 1,300 employees worldwide and retreated from countries in Latin America, Asia and the Middle East.
“I have no doubt that this next generation of entrepreneurs and start-up community in Washington is going to be one of the lasting legacies of LivingSocial,” Savage said.
It draws parallels to AOL, the Internet pioneer forged in Dulles. The company had scores of engineers and sales representatives in the Washington region, but an ill-fated merger with Time Warner in 2001 and the relocation of its headquarters to New York in 2007 have substantially diminished its local impact.
Nevertheless, a number of the executives behind Washington’s established and up-and-coming companies — Ted Leonsis of Monumental Sports and Entertainment, Jim Bankoff of Vox Media, Fred Singer of Echo 360, to name a few — amassed wealth and business acumen at AOL.
LivingSocial itself is a product of this same cycle.
The company’s founding CEO, Tim O’Shaughnessy, spent nearly two years as a product manager at AOL in the mid-2000s, then moved to District-based health and wellness Web site Revolution Health. There, O’Shaughnessy met his three co-founders of the daily deals site. Steve Case, the top executive at both AOL and Revolution Health, also was one of LivingSocial’s earliest investors, adding the company to the long list of ventures he has backed personally and through his investment fund, Revolution.
Entrepreneurs with ties to LivingSocial cite a number of ways working at the company has helped them to strike out on their own. Chief among them is an inside look at how a company transitions from small start-up to a multinational corporation, and the many lumps taken along the way.
“LivingSocial just always had this tremendous dissatisfaction with the status quo. What can we be doing bigger and faster and better than we are today?” said Galley co-founder Costello. “That’s what I really try to take to this business everyday.”
Stephanie Olvey spent a year and a half as a product manager at LivingSocial before leaving the company in 2012. She has since started two companies, an online marketplace for creative services called Fortique and, more recently, a wedding dress rental business called Borrowing Magnolia.
While working in LivingSocial’s division devoted to new business initiatives, Olvey said she learned to test ideas to quickly assess their chance of success. If they don’t show potential, move on to something new.
Indeed, in an effort to recapture the fast-paced success of its daily e-mail deals in the early years, LivingSocial has tried many new business models— food delivery, live events and online retail. None took off.
At Borrowing Magnolia, Olvey and her co-founders weren’t sure how brides-to-be would respond to rented wedding dresses. Rather than spending a lot of money to buy designer dresses, the executives developed a model whereby women who have already walked down the aisle rent their own gowns and share in the profit.
“[LivingSocial] taught me to get comfortable with uncertainty and ambiguity with where things might go, where you might find value, what customers are going to like,” Olvey said. “It certainly taught me to be more agile in terms of business.”
LivingSocial’s shrinking workforce also creates a pool of available workers with experience in online commerce, marketing, business development, engineering and other disciplines that employers may want to scoop up.
When Susan Tynan formed Framebridge, an online custom framing business, in January 2014, she looked to colleagues from her two years at LivingSocial to act as employees, advisers and investors.
Today Framebridge has a staff of 20 in Lanham. Of the eight employees in corporate roles, six are former LivingSocial employees and a seventh is the wife of former colleague. Tynan’s financiers include O’Shaughnessy, the ex-LivingSocial CEO, and Savage, the Revolution investor, both of whom she met at Revolution Health and worked with at LivingSocial.
“The most important thing has been the network of people,” Tynan said. “I think, frankly, we did a lot of things right and learned a lot of good things at LivingSocial. But we made a lot of mistakes, too. This group knows all of that, the good and the bad. And we’re building on it.”
Perhaps the least tangible effect of working for LivingSocial, many said, is the passion for entrepreneurship it ignites in employees. Starting your own business is a high-risk, high-reward endeavor. Failure is likely. Struggle is certain.
Still, each of these first-time entrepreneurs said they found LivingSocial to be a nurturing environment where bold ideas were encouraged and people felt empowered to pursue them. That kind of work environment can be intoxicating.
“Growth is a very energetic thing,” Savage said. “It requires energy and it creates energy. Some people find that thrilling. Once you see that, you want to be part of that again and again.”
Lauren Werner and Mike Strouss worked at LivingSocial for more than four years, most notably standing up the company’s now-shuttered event space at 918 F St. NW. In that role, the pair worked closely with musicians and their management companies to book them for concerts.
Those interactions triggered the idea behind Choir.co, an equity crowdfunding Web site for artists and management labels to raise money from fans. A first start-up for both of them, Choir.co is slated to launch this spring.
“LivingSocial really provided the autonomy and support structure to fuel our entrepreneurial spirit,” Werner said. “They allowed us to really champion an idea from a sketch on a white board to execution.”
“Mike and I are hungry to build again,” she added.