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Kim-Mai Cutler

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Ten days ago, the social video app Cinemagram was hovering around No. 50 in the iOS U.S. photo and video category. The company needed about eight Amazon servers to keep itself running. It had a respectable number of downloads, but no real pop.

Then it released a new version that, among other tweaks, required users to create accounts in order to use the app  – effectively making Cinemagram a social network rather than just a GIF creation tool.

Temo Chalasani

The pickup was nearly instant. Cinemagram shot up to the top of the App Store — it went as high as No. 2, and is currently No. 4. The five-person company needed as many as 720 Amazon servers before figuring out how to be more efficient. They’re now at about 300.

Today, the app is nearing five million downloads, with hundreds of thousands of daily active users growing at a rate of 10 percent to 15 percent per day, according to internal metrics.

(Check out the App Annie charts to see how things shot up shortly after the new release on Oct. 10.)

I met Cinemagram founder Temo Chalasani for a hurried lunch amid Amazon outages on Monday, during which he described a bit more about how his company emerged from relative obscurity to madcap momentum.

To be sure, it’s entirely unclear what angle this particular growth event will look like in a few months. Will this be the beginning of the Cinemagram hockey stick? A spike that recedes back to normalcy? Will everyone get caught up in the “is-it-the-next-Instagram?” hype and then regret it?

Chalasani is the first to admit that there are many mobile social video apps. And many of them are trying various tricks to make video more snackable and mobile-friendly — for instance, Vine, which was recently bought by Twitter before even being released, promised to make it simple to make little video summary highlight reels.

And, actually, when I first talked to Chalasani in April, he wasn’t calling Cinemagram a video app. Rather, it was a GIF creation app. Basically, you could make a sort of hybrid photo-video where you animated one part of a photo while leaving the rest frozen by “masking” it. The effect can be really cool and mesmerizing when done right.

It turned out that people liked creating these nifty, artsy GIFs, but they also just liked making short, silent personal videos. A few months ago, Cinemagram started offering the option to post straight videos without doing the GIF animation trick. Today, 75 percent of Cinemagram videos have no masking effect.

Still, the original concept of animated GIFs provided some constraints for videos that actually work nicely on mobile phones. Cinemagram’s “cines” are limited to two seconds, and are silent. They’re so short that they’re basically just moving pictures. And they automatically repeat, so they’re easy to tune in and out of.

“This is not the kind of video you would find on YouTube,” said Chalasani.

Rather, it’s the kind of video that’s incredibly easy for people to make and watch on mobile phones.

Chalasani pointed out that two seconds is actually a normal limit for the length of a shot you’d see in a movie — only a professional editor would cobble tons of these little shots together.

A couple seconds is not enough for a plot, but you can maybe get across an emotion or a mood.

As such, cines tend to be quite personal. But like any other social network, Cinemagram benefits from the halo of celebrity users. Below is a popular cine of rapper Tyga’s brand-new son, from a few days ago.

So is that the lesson, then? Slap a social network onto a nifty video app and you’re done? Maybe, but it wasn’t just that, Chalasani said.

For instance, one other recent trick that helped boost Cinemagram growth was better social sharing. Of the major social networks, only Tumblr supports GIFs. So Cinemagram made a sort of widget that makes its videos play in Facebook news feeds.

TechCrunch’s Kim-Mai Cutler also notes that Cinemagram isn’t the only mobile social media iOS app that seems to be growing like a weed; Snapchat is another recent standout. (Super-secret tip: For more on Snapchat, come to our Dive Into Mobile conference next week.)

Cinemagram raised a $1 million convertible note over the summer, and much of the team is in the process of moving from Montreal to San Francisco. Currently, my Cinemagram feed is jam-packed with Silicon Valley investors giving it a whirl.

Besides the VC money, Chalasani and the team do have some semblance of a business plan. They already have a relationship with Red Bull to make highlight reels out of user-submitted cines.

But right now they’re just trying to keep up with hypergrowth.

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Crashlytics, a Cambridge-based startup that helps developers understand how and why their mobile apps crashed, is taking another slug of funding with a $5 million round led by Flybridge and Baseline Ventures. The company’s co-founder Wayne Chang said the company decided to take funding after its $1 million seed round was oversubscribed. (This round was also oversubscribed.)

“We liked the investors that we were working with,” Chang said. “Obviously, we liked the valuation and the terms of this round, too.”

Crashlytics provides developers with an online dashboard that helps explain where mobile app crashes might come from. It details the device’s state at the time of crash (software version, orientation, model, etc.) and even shows developers the exact line of code that the app crashed on.

Chang says that’s a big step up from what Apple provides. Usually if an iOS app crashes, the user deletes the app or leaves a bad review. Chang says that Apple’s own crash reporting system might take a few weeks to reveal what’s going wrong.

The company has some early momentum to show. Chang says that more than 500 organizations are using Crashlytics and that the company’s SDK is on tens of millions of devices.

He touts an enviable list of clients like Path, Hipstamatic, Highlight, Yammer, Box and SoundCloud among dozens of others. A point of pride for Chang is that Crashlytics SDK is very small — think 40 kilobytes. So that should help prevent developers from running up against app size limits in the iOS or Android app stores.

But the big picture isn’t just crash reporting, as you might guess. Crash reporting is a start.

“Our end goal with Crashlytics isn’t do to crash reporting,” Chang said. “We want to be best service for that and then quickly move beyond that to address other developer needs.”

P.S. You may know Crashlytics from controversies such as the debate over how to replace UDIDs on iOS devices. The company came in with its own solution called SecureUDID, that gives developers an identification scheme that won’t violate Apple’s new policies. Apple is deprecating an older identification scheme called UDIDs amid privacy concerns.

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The startups that presented at Y Combinator’s Demo Day last week were remarkable in their own right, but perhaps the most striking thing was the sheer number of them.

With 66 companies and 180 founders in this season’s batch, the auditorium at Mountain View’s Computer History Museum was practically bursting with angel investors and reps from every notable venture firm last week. And that was just the latest class. Since 2005, Y Combinator has since spawned more than a dozen batches of startups including Dropbox and Airbnb. The last two classes alone have created more than 120 companies.

So it raises the question of how Y Combinator has been able to grow in size while sustaining both the quality of startups it churns out and the value it provides for founders.

Essentially, how do you scale a company that creates companies?

The Strategy and Vision

“Our whole approach to scaling Y Combinator is the standard approach to scaling software,” said Paul Graham, Y Combinator’s co-founder.

There are a couple rules, he said. 1) You can’t predict in advance where the bottlenecks will be so you just keep going until you hit the next one and 2) You can always scale a lot more than you originally predicted. ”When you scale things, they often turn into other stuff that you would have never imagined,” he said.

Graham doesn’t have an exact size in mind when accepting companies for a new class. The early-stage venture firm accepts as many companies as the team thinks are worthy. Nor does Graham know how large Y Combinator should ultimately be.

“Imagine if you had asked Mark Zuckerberg that question when Facebook had just two universities,” Graham said. “A lot of what drives us is curiosity about what happens when something like this gets bigger.”

Indeed, some of the other partners liken working at Y Combinator to building a university or a new type of institution that’s never been seen before.

“If you think of YC as a corporation or a company, it has these characteristics that every big company would love to have,” said Harj Taggar, an alum who later became a YC venture partner. “It’s a bunch of smart people working on projects that they love and have upside in. But they are all linked together and get the benefits of being a part of a larger group. YC is effectively inventing a new form of organization.”

Given the scale of Graham’s ambition (which shouldn’t be surprising since he tells founders to have “frighteningly ambitious” startup ideas), we walked through some of the many bottlenecks YC has faced through the years:

Applications:

Y Combinator’s increasing cachet has brought a ballooning number of applications. Last October, Graham said that the firm was seeing about one submission per minute on deadline day for the most recent class.

Every one of the firm’s venture partners used to read every application. Now they don’t. They might read one-third of the applications. It’s the alumni who make the first pass, depending on how much time they have. Some do none while others read as many as 100 applications or more.

“We went back over the years and saw that we had never accepted a company for an interview where the alumni were majority ‘No,’” Taggar said. “This weeds out really bad applications so we can focus on the borderline ones, which take more time.”

But just in case they miss a potentially good company, Y Combinator is starting to use data mining software. They’ve fed a program all of the old Y Combinator applications to find predictors of success and apply them to new submissions, creating a backstop in case they miss something.

“There are two kinds of mistakes: funding a bad startup or missing a good one. Our biggest fear is missing a good startup,” Graham said, adding that Dropbox’s co-founder Drew Houston was actually rejected the first time around. They’ve used the program to generate a top 10 list of factors predicting the probability of acceptance. ”I don’t want to share it, but it was fascinating,” Graham said.

After they pick a cohort of companies to interview, they fly them in. They used to do a single track interview process where every single partner had to be present in the room. Last time, they did two interview tracks with half the partners in one of two rooms that went through half the finalists each. This time, they might do three tracks simultaneously.

Following the interview, the partners decide immediately within the next five minutes about whether they should accept the company or not.

“We have to be very disciplined,” Taggar said. “By the end of the day, when you’ve done twenty-something interviews, you can barely remember what happened in the first one.”

Advising:

Y Combinator’s big initial bottleneck was that there was one Paul Graham, and he only had 24 hours in a day. So the company brought on additional venture partners like Gmail creator Paul Buchheit and alumni like Taggar, Posterous co-founder Garry Tan and Aaron Iba, who successfully sold AppJet to Google. Geoff Ralston, who was chief executive of Lala, the music startup that exited to Apple in 2009, is joining as a partner for this round. Plus there are part-time partners like Loopt co-founder Sam Altman and Justin.tv founders Emmett Shear and Justin Kan. They joined YC’s original partners Jessica Livingston, Trevor Blackwell and Robert Morris.

“It turns out that this is almost perfectly parallelizable,” Graham said. “I know from experience that one partner can deal with 20 startups and if we have 66 startups, we’re at more than 2X over capacity.”

All of the partners are available for office hours and there’s an internal scheduling tool that Y Combinator uses to gauge demand and urgency from founders. Ash Rust, who co-founded SendHub, had an HR issue once. He was able to get office hours within 30 minutes and the right documentation almost immediately after that.

“I know how hard it can be to get help as a founder if you’re not the belle of the ball,” Rust said. “But I’ve never experienced that here.”

If that still sounds a little impersonal for something as unpredictable and idiosyncratic as founding a startup, Buchheit points out that YC’s alumni network is now so large that the firm is starting to have world-class experts on running companies in many areas.

“As YC gets larger, it actually gets better,” Buchheit said, pointing to the firm’s 800 alumni. ”Half the time, I’m sending founders to talk to different alumni. If you’re doing a video startup, then I know the person you really ought to talk to is Justin Kan.”

The firm taps this alumni network when it holds mini-conferences around issues like user acquisition or iOS development.

“There’s this real feeling of appreciation,” Buchheit says. “The founders are very grateful for the experience, so they have a real loyalty and want to help out other companies. There’s a little bit of a pay-it-forward model built into the network.”

Tan even built a private social networking tool for YC founders. Taggar says it’s useful for putting faces to names and that they’ll probably add a section for skills like the ability to code in Python and so on.

Y Combinator’s emerging network effects:

Not only are alumni helping with admissions and advising, they can serve as market-makers for new startups. Many of mobile payment startup Stripe’s customers are part of Y Combinator while Exec is now offering special corporate accounts to run errands for other startups.

“Y Combinator has a built-in economy,” Buchheit says. “We have this tremendous network and another YC company can be your first reference customer when others won’t take the risk.”

Then if one company isn’t quite a home run, its founders and employees will likely be able to find work at another Y Combinator startup. When Jeff and Dan Morin were considering next steps after working on event startup Anyvite for a few years, Graham paired them with another founder, Olga Vidisheva, from the most recent batch. Now they’ve rounded up funding from Greylock Capital, Andreessen Horowitz, SV Angel and Benchmark Capital to bring independent fashion boutiques online at Shoptiques.

The alumni also come back to Demo Day to angel invest in startups from later batches and companies like Parse, Carwoo and Dropbox have raised angel funding from other alums.

Demo Day and Investors:

Maybe the next big bottleneck is the most obvious one: helping investors wade through the dozens of startups it launches every half-year. The firm had to move Demo Day to The Computer History Museum because its offices no longer had space to fit the hundreds of investors. Y Combinator is also reaching the upper limit of how many startups can pitch in a single day.

Getting through 66 pitches is a slog. ”I don’t think we could handle a Demo Week,” Buchheit joked.

Taggar says he’s thinking about how to make it more efficient for investors to set up meetings with the right startups following Demo Day. Right now, the partners just have a mental map of the investor landscape and try to route the right companies to the right investors.

The week after Demo Day is an especially intense one as entrepreneurs and investors try to lock down deals. It’s kind of a weird biannual version of mating season.

With all the investor interest, the founders clearly don’t see Demo Day as the issue.

In fact, Rust had something else on his mind — how to efficiently get food on speaker nights. ”Seriously, the only scaling problem is the enormous dinner line,” he said.

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