How a Multimillion-Dollar Business Grew Out of a Hackathon

Published Aug-30-19

Breakthrough:
A popular messaging app that started life at a hackathon was later sold for millions of dollars.

Company:
GroupMe, United States

The Story:

As a melting pot of brilliant and creative ideas, hackathons are open innovation events that solve problems, improve products, generate new ones and can lead to the development of multimillion dollar-companies.

At the TechCrunch Hackday in New York in May 2010, Steve Martocci and Jared Hecht created and developed a prototype of the GroupMe messaging app, a group-texting service that creates private chat rooms around text messages for small groups. Fast forward the calendar to 2011 and Skype acquired it for a reported $80 million. This was a mere 370 days after launch. By 2013, GroupMe had more than 12 million registered users.

A Multimillion-Dollar Idea

The seed for the idea for the app was sewn a few days before the hackathon when Hecht's fiancé was complaining about an email chain she was on which kept on breaking down in real-time. Back in 2010 group chatting was mostly restricted to personal computers and it wasn't always robust. So Hecht and Martocci asked themselves a simple question: “How can we make group messaging better?”

Once at the hackathon the pair locked themselves in a room and fueled by pizza and beer settled down to work on their idea. They worked fast and within a few hours had the beginnings of a business.

"Around six to seven hours into it [the hackathon], Steve and I found ourselves pacing around the hallways at around 2 am talking about how this is actually going to be a business," said Hecht in an interview with TechCrunch's 'Founder Stories'.

Within 24 hours they had a working prototype. It worked well and buoyed by this and the progress they had made in such a short space of time, Martocci and Hecht were convinced they would win something at the hackathon. They didn't.

However, during the open innovation event, a high school friend of Martocci started telling everyone about the app and the pair showed it to their friends. They started using it and loved it. Word was spreading fast.

After the hackathon, the two innovators continued to work on their idea but it was becoming all-consuming and so they left their days jobs to work on GroupMe fulltime.

Continued Successes

Two months after the hackathon they accepted a loan from Hecht's parents to keep the app afloat. Competitors quickly emerged such as Apple's iMessage app, but Martocci and Hecht stuck fast to their guns. Soon they raised $850,000 in seed funding, paid back the loan and launched a beta version of the app.

By December 2010 450,000 messages were being sent on the platform a day and at the beginning of 2011 GroupMe announced a $10.6 million Series B round of financing. Meanwhile, the app’s popularity was growing and gaining widespread attention.

Following months of talks between GroupMe and Skype, the latter purchased the app, just one year after it was born.

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