GroupMe’s Surprising Origins: A Conversation with Jared Hecht
By Annika Huprikar and Robert Eisenman
What’s Ahead:
Learn why entrepreneur and Magellan Ventures partner Jared Hecht first founded GroupMe.
Discover what Hecht wants all entrepreneurs and small-business investors to know.
Every day, we manage and grow our social networks. From the latest text we send to the family group chat to our next round of Snapchat streaks, we are constantly building relationships with others through the advancing digital medium. Another staple social platform used worldwide, particularly on college campuses, is GroupMe: a mobile group messaging app. Last week, we had the opportunity to talk with Jared Hecht, GroupMe’s co-founder and partner at Magellan Ventures, to learn more about his GroupMe journey and his world of experience in entrepreneurship and investing.
The origins of GroupMe go back to Hecht’s time in college, when he started a music marketing and production company. His first stint in entrepreneurship, he marketed live music events for bands he loved, particularly jam bands like Fish and The Grateful Dead. After engaging in a “Startup 101” crash-course experience while working for a year at Tumblr — a still-nascent blogging platform with only five or six employees at the time — Hecht and fellow co-founder Steve Martocci founded GroupMe, which would revolutionize our ability to stay connected with others, at music festivals and beyond.
Back in 2010, Hecht founded GroupMe in response to a very specific, perhaps surprising problem: the breakdown of communication at music festivals. As frequent concert-goers, Hecht and Martocci noticed the failure of Reply All SMS and data service at concerts and large events, and grew frustrated that these failures made it so difficult to stay in touch with friends at these events. Though we are spoiled with legions of social media platforms today, “iMessage” didn’t exist then, and the iPhone was just starting to become popular. Enter GroupMe.
After GroupMe came to fruition at a hackathon, the rapid rise in its popularity thrilled Hecht.
“It was exciting, chaotic. Daunting. All those kinds of things that entrepreneurs use to describe.”
“It was wild to have built something one night, wake up the next morning, and it takes off,” he said. “It was exciting, chaotic. Daunting. All those kinds of things that entrepreneurs use to describe.”
They partnered with music festivals to promote their product and get it into people’s hands, which then initiated a self-perpetuated cycle of growth as people began sharing the application with their own social networks.
GroupMe evolved as a tool not just for maintaining contact at large events, but to create groups to stay in touch with others in various social circles, from college friends to sports teams to dance troupes. It was important to Hecht that GroupMe facilitate a more genuine form of communication, where people could send things they wanted to those they were intimately connected with and knew, as opposed to broadcasting things to the entire world or thousands of followers. “We were building a social network that mimicked the real life social network,” he said. “A digital representation in a way.”
Of course, as with every new product, GroupMe evolved in another way that Hecht did not intend or necessarily agree with; it had come to his attention that group sizes were north of 1000 people, particularly for full-class college groups (Consider Exhibit A, the Harvard ’24 Crimson Crew GroupMe), and that was a completely unexpected result for him. Though Hecht and Martocci had designed GroupMe with a 10-12 person limit on group sizes, they received frequent requests to increase the limit to 100 people — but clearly that was just the beginning.
Throughout this entire rollercoaster of an experience, Hecht learned several important things that he wants all current and future entrepreneurs to know:
People matter.
Do it for the right reasons.
Be obsessed with the problem, not the solution.
People matter: “Co-founders matter deeply, people matter deeply. In fact, that’s the only thing that matters at the beginning. Period.”
According to Hecht, how you work together and problem-solve and the dynamic amongst the team is most crucial; people need to find people they trust and like, who will keep the group humble and honest. Hecht values this mode of thinking when wearing his investing hat: “I don’t invest in the idea, normally that’s when I get burned. I invest in the team, and the caliber of entrepreneurship.”
“Co-founders matter deeply, people matter deeply. In fact, that’s the only thing that matters at the beginning. Period.””
Do it for the right reasons: Nowadays, there’s such an appetite for entrepreneurship. We can’t help but flock to the success stories of individuals all over the media and wish we could do the same, but we tend to want this for the wrong reasons. “We see people getting lucky and rich and want to do the same,” Hecht said. He strongly believes that a good reason to start a company is because of a genuine interest in the problem space, and willingness to sacrifice X number of years to go after it.
Be obsessed with the problem, not the solution: The key to being interested in a problem space is to fixate on that problem, because that will always keep entrepreneurs intellectually stimulated.
Further takeaways stem from Hecht’s experiences during the acquisition process, when GroupMe was bought out by Skype/Microsoft. He learned the power of tactical negotiating and leveraging, especially when multiple parties want to buy a company. While negotiating, it’s important to ensure overlapping visions for the company’s future between the company’s executives and the potential acquirers, thus requiring social compact and trust. “You need to gel with the acquirer personally — not professionally, personally,” Hecht remarked. Additionally, he advises that the value of the company and its future should be one of the acquirer’s top three priorities.
As An Investor:
On the flip side, Hecht also pays it forward for future generations of entrepreneurs with his own investments. While he does not expect or seek large returns from his side-investing, Hecht has invested in startups turned successful, well-known companies including Codecademy, Transferwise, and Sweetgreen.
Hecht is not a thesis-driven investor. Instead, he looks at the entrepreneurs behind the company, seeking answers to these questions: Are they passionate about the problem they are trying to solve? Do they have the grit to continue when things get rough? Will they persevere through challenges with a high level of integrity? How does this person learn from feedback? Hecht believes one of the most important traits of a founder is their ability to recruit other individuals with skillsets complementary to the team. How will the founder convince others to join their mission? For his own team, Hecht tries to constantly recruit new members.
As a partner at Magellan Ventures, Hecht continues to invest in startups alongside long-time partner Steve Martocci. He also continues his role as CEO of Fundera, a small business loan company he co-founded in 2013 that was acquired by personal finance leader Nerdwallet in 2020.
Under his current role at Fundera, Hecht usually works more of a standard 9 a.m.-5 p.m. schedule. While this may seem contradictory to the classic idea of an entrepreneur working 24/7, Hecht makes it a priority to spend more time with his family. He has his own time in the morning with his kids, and arrives home for dinner every night. This schedule allows him to work efficiently and direct his energy where needed, and achieve a greater work-life balance. Hecht believes, however, that certain periods of his work require dropping everything else and focusing on one thing, such as closing company deals or making key hires.
Outside of his current work at Fundera, Hecht sees two main goals for the future: build more good companies with other great founders, and continue giving back to great entrepreneurs.
See Hecht’s latest recommendations
Twitter accounts to follow:
Ezra Klein (at the New York Times)
Heather Cox Richardson (historian and professor at Boston College)
Books:
“Ministry for the Future” by Kim Stanley Robinson. Hecht is a big sci-fi junkie, but to him, this novel almost doesn't seem like science-fiction — the story feels imminent over the next twenty to thirty years.