Just when it seems that the romantic era of garage-based startups is over, along comes San Francisco, Calif.-based Frugalo, a startup keeping the dream of having a home-based company alive.
"We are sitting in the dining room right now, drinking tea and eating toast," said Frugalo founder Michael Cieri, who sits across from the other founder, Scott Reynolds. They are working to get today's product launch up and running. A whiteboard with launch steps looms on the wall over their heads.
"We're going down the whiteboard to-do list and crossing things off," Cieri said. "Three more big steps to go."
This has been a three-steps-forward, two-steps-back type of company. The story of Frugalo provides a little window into the current startup climate: Many will enter an accelerator program and a few months later not quite make it to the next level, which would be a formal round of funding, a few more employees, and an office of their own. When the next level is missed, a team will either close up shop or head to the dining room and keep their dream alive.
Frugalo isn't giving up. The company was founded in June 2011, after both Cieir and Reynolds jumped from a sinking ship called Digg, the once-popular news-sharing site that has seen its U.S. traffic fall 50 percent over the last six months, according to Quantcast.
The pair, a software engineer and product manager, decided to start a "real-time recommendation engine" for daily deals and call it Frugalo. The goal is to automate the process of sorting through the slew of daily deals that flood e-mail inboxes (Yipit is a competitor). Frugalo analyzes social signals (have any of my friends purchased this?), trending signals (how many people have bought this?), and a shopper's past purchases to suggest the most attractive daily deals.
Back in August, Frugalo got a taste of office life, when it got the attention of AngelPad, a startup mentorship program backed by ex-Googler Thomas Korte. Ex-Googlers have respect for home-based startups. After all, Google was once one.
Korte, who was impressed by Frugalo's founders, invested $120,000 in seed funding and gave Frugalo access to AngelPad office space for three months. In exchange, AngelPad gets 5 percent of the company.
AngelPad has launched 22 companies since it began in August 2010. It invests between $25,000 and $120,000 in founder "stipends" and gives the startups access to an influential adviser network and a work space. Of those 22 companies, 19 have gone on to raise bigger rounds from other investors, and one was acquired (bonus points if you, CNET readers, can tell me which one it was.) AngelPad is now working with its third batch of startups, which never total more than 15 at a time.
When the semester is over, the startups leave the nest.
"We still go into AngelPad once in a while, but the official program ended about a month ago," Cieri said. "But now it's back to the dining room, where we'll continue to work until my roommate kicks us out."
Now that Frugalo is back on its own, the company needs to start fundraising or, dare I say, make money.
"We're in Silicon Valley. Why would we try to make money with a consumer product?" joked Cieri. "Initially, we'll monetize through affiliate marketing, but we're really focused on building a community of frugal online shoppers."
In other words, it could be a while before they leave the dining room. In the meantime, they're pretty happy being frugal.