Matt Brezina, Penn State Alum, Co-founded Two Multimillion-Dollar Tech Startups
Matt Brezina knew from an early age that he wanted to start his own company.
Growing up in State College in the early 1990s, Brezina had wanted to make some pocket money for the freedom to enjoy childhood luxuries, like a bicycle or a movie ticket. But while his friends took up minimum wage jobs to achieve that end, Brezina decided that, if he was going to make money, he was going to work for himself.
“I realized that the only job opportunities available had strict hours and paid poorly,” he said. “When my first neighbor offered to pay me to mow her lawn, in one hour, I made more than any of my friends made working at the Waffle Shop in five.”
Brezina’s lawn-mowing business was his first, but certainly not his last. Fast forward to today, and he is now one of Penn State’s most successful tech entrepreneurs because of his role in co-founding two multi-million dollar software startups: Xobni, which Bill Gates once called the “next generation of social networking,” and Sincerely, which was recently named Apple’s chief rival in the mobile gifting industry by the Los Angeles Times.
But it all began with his early childhood business ventures, through which Brezina learned that the best way for him to both love his work and to still make a living was to start his own companies.
“Plus, I chose my hours,” he said. “I was hooked.”
The dream begins at Penn State
By the time he started school at Penn State in 1999, Brezina had graduated from mowing lawns to pursuing an entrepreneurial dream at a higher level: someday starting his own car company.
“And, being excited about the future, environmental concerns and sci-fi — it just seemed obvious it would be an electric car company,” he says.
The car business was a bit of a family tradition for Brezina. His father had grown up restoring old cars with Grandpa Brezina; appropriately, the younger Brezina spent his childhood with his dad in the garage, rebuilding engines and doing body work on a 1964 Mustang, a 1963 Thunderbird, a 1957 Ford Fairlane, a 1957 Thunderbird. And, for his 16th birthday, he got an 1983 Ford Ranger, which he made his mission to restore to its former glory.
“I’d rush home from school every day excited to work on my project,” Brezina said. “I rebuilt the fender from fiberglass. I sandblasted a bunch of rusted-out parts of the body, repainted the whole car, installed a new stereo, and did a ton of work on the engine and electrical system.”
It was only natural that this formative experience working with classic cars influenced Brezina’s choice of major at Penn State — Electrical Engineering, with an eye on developing the control systems and batteries for a next-generation electric car, years before Paypal’s Elon Musk launched his acclaimed electric car startup, Tesla Motors.
A member of Penn State’s Schreyer Honors College, Brezina worked on three undergraduate research projects and wrote his senior honors thesis about research he completed on infrared missile guidance systems for the Naval Research Lab. He was far from a bookworm, though. Active outside of the classroom, literally, Brezina played almost every conceivable intramural sport — leading Schreyer teams to a championship in IM Flag Football and the finals of IM Basketball — and spent many weekends camping, canoeing, biking, and skiing around Pennsylvania and down the East Coast.
Brezina, a trumpet player and a pianist, also started a few bands during his time at Penn State, with which he would play venues ranging from cafes to bars to frat parties. He performed with one of the jazz ensembles in Penn State’s music department, too.
Between his academics and his extracurriculars, Brezina also managed to fit in a rager or two every weekend or so, bucking the (mostly inaccurate) stereotype that Schreyer Scholars spend their weekends studying in the library. “I partied enough,” he says. “That is an important part of Penn State.”
And by going to house parties, cheering for the Nittany Lions at Beaver Stadium, running for student government, and winning IM sport championships, Brezina forged lifelong friendships with the Penn Staters that became his college band-mates, his fellow stock trading enthusiasts, and even some of his future business partners. In fact, the attorney that represented Sincerely in its recent acquisition by Provide Commerce was one of Brezina’s friends from when he lived in Atherton Hall as an underclassman.
Graduate school falls short
Brezina graduated from Penn State in 2003 as an accomplished Nittany Lion, compiling a 3.9 GPA in his four years at the university, but he left Happy Valley without a startup company to call his own.
His eyes were still set on founding his electric car company, so, post graduation, Brezina looked to his professors, his parents, and the media’s portrayal of startups for advice on how to achieve his dream. All three pointed him toward what seemed to be the established process for starting a successful company at the time:
- Go to graduate school.
- Become an expert in his field — in his case, electrical engineering.
- Then, start a company with a grad school classmate.
After all, this was the path taken by Stanford Ph.D. classmates Larry Page and Sergey Brin, who founded a company called Google, and Stanford Master’s classmates David Filo and Jerry Yang, who started a company named Yahoo.
Looking to follow in the footsteps of Larry and Sergey and David and Jerry, Brezina decided to apply for Ph.D. programs in electrical engineering and was accepted to Stanford, which was in many ways the dream school for entrepreneurs looking to start the next Google or Yahoo. He decided to attend the University of Maryland instead, though, partly because it offered him more money and required less teaching but also because he wanted to live with and spent time with his younger brother, who was then an undergraduate at College Park. Besides, Stanford was most renowned for producing software companies and Brezina was a “hardware guy,” then interested in building electrical control systems rather than a web service or computer program.
However, grad school was a far cry from what Brezina had expected. He was seeking the same serendipity that brought together the legendary co-founders of Google and Yahoo. What he found instead were students interested primarily in theoretical mathematics, which the practical-minded Brezina wasn’t exactly excited about. He wanted to create a product that people could use immediately; he wasn’t as thrilled by solving math problems on a chalk board.
And the Ph.D. coursework was a struggle for Brezina, whose proficiency in high-level math paled in comparison to that of his foreign classmates from China and India.
“God, it was painful,” he said. “I don’t remember it specifically, but I’m sure I cried.”
A stranger on Craigslist
Two years into his Ph.D. program, Brezina met a stranger on Craiglist that would turn his life on its head.
Brezina had posted an ad looking for a new roommate for the summer of 2005 to replace his brother, who had gone home for the break. It was through this posting that Brezina connected with Adam Smith, then an MIT student, who was looking for a place to live while he interned in Washington, D.C.
To Brezina, who wanted to be able to focus on his Ph.D. thesis, Smith seemed like a “focused nerd, too,” who would be a good, quiet roommate.
“He ended up being way more influential in my life than I would have ever imagined,” Brezina said.
Six months after that summer, during which the two roommates became close friends, Smith called Brezina out of the blue to ask him to drop out of Maryland and join his nascent software company, the soon-to-be-named Xobni.
Xobni (“inbox” spelled backwards) would be designed to take advantage of the largest trove of personal data on the web — email. Companies like Facebook and Google make their living on aggregating personal information provided by users, but buried within an email client like Microsoft Outlook are more user metadata than either company could ever hope to collect.
At the time, Brezina wasn’t satisfied with the direction that his life was taking. He still wasn’t happy in grad school, and his long-term girlfriend had just broken up with him. So, reasoning that he had little to lose, Brezina committed to Xobni, packed a one-way UHaul, and moved everything to Boston, where Smith was living after dropping out of his Master’s program at MIT.
Meanwhile, Smith and Xobni had just been accepted to the third-ever class of YCombinator, the venture capital fund and startup accelerator that had just spawned a tech company called Reddit.
YCombinator and the birth of Xobni
Years later, Brezina would describe YCombinator as the “new” graduate school. In other words, YCombinator was the place for young entrepreneurs like Brezina to meet their future business partners. It was what Stanford was to Google’s Larry and Sergey and to Yahoo’s David and Jerry.
“I don’t think I’ve ever found a group of people that I more closely identify with,” Brezina said. “It was intoxicating.”
Despite being a “hardware guy” that had never worked on a software project like Xobni, Brezina quickly picked up the coding skills necessary for the day-to-day grind of running an early-stage tech startup. He and Smith, shacked together in the same bedroom of a friend’s apartment, survived on a small living stipend from YCombinator — enough to pay for luxuries like Hot Pockets and Chips Ahoy cookies — while their startup company subsisted off of small initial funding (about $15,000 in what’s called “seed capital”) from the accelerator.
YCombinator’s value to the two of them could not be measured in money alone, however. Notably, the program allowed Brezina and Smith to meet Paul Graham, YCombinator’s mastermind; a talented coder that they failed to hire named Drew Houston, who would later start Dropbox; and Gmail creator Paul Buchheit, who introduced the Xobni founders to his friends in Silicon Valley and would later invest in their company.
Meanwhile, Brezina and Smith raced to finish the first incarnation of Xobni, dubbed “Xobni Analytics.” A utility for Outlook, it was meant to analyze email traffic — number of emails sent, response time, and follow-up time were some of its metrics — in the same way that Google Analytics analyzes web traffic. The founders envisioned that it’d be sold to employers, who would use Xobni Analytics to monitor the email productivity of their employees.
The development of Xobni Analytics began every day at noon and ended at 4 or 5 a.m., when Brezina and Smith would “rush to bed before the sun would come up.” The founders almost never went outside except to get caffeine (coffee or bubble tea), play basketball, attend weekly Tuesday night dinners with the other YCombinator teams, and, on one weekend night a week, go out partying.
They lived like this for four months. “We had nothing else to think about but our product,” Brezina said.
But by the time they completed Xobni Analytics, Brezina and Smith realized that they had built the wrong product. For one, it was “creepy” in that it would allow employers to essentially spy on their employees. More importantly, though, it wasn’t a service that people would use on a day-to-day basis; Xobni Analytics’ beta testers, while impressed with the product, would only check it a few times a month. In other words, Xobni Analytics probably wouldn’t have been able to sustain an active user base.
Brezina and Smith, who had been pitching Xobni Analytics to investors, arrived at the epiphany that the most marketable aspect of Xobni was its focus on the personal aspect of email, not its data on email flows. Email was about relationships, they realized.
“Email clients at the time were just a big list of messages,” Brezina said. “They didn’t treat people as important or unique.”
This was in late 2006, when companies like Facebook were just making their rise. Brezina’s Xobni, on the other hand, was already in the process of developing a vastly more powerful social network built around email. Xobni Analytics evolved into what would later be named Xobni Insight, which created profiles on a user’s Outlook contacts that included their phone numbers, profile photos, mutual contacts, shared conversations, and even the time of day that they were most likely to check and respond to their emails. All of this was accomplished by extracting social data from email, which the founders viewed as an untapped gold mine.
Xobni’s objective was to make Outlook and other email clients “socially aware,” something no company on the market was accomplishing at the time. Years later, their revolutionary approach to email would be adopted by companies like LinkedIn.
Building a social networking utility was beyond the manpower of Brezina and Smith alone, however; to expand Xobni, they needed to hire additional talent. It was around this time that the founders attempted to acquire the services of Houston, a coder so gifted that Steve Jobs would later personally recruit him for Apple. Houston, however, turned down Xobni’s offer (and he would turn Jobs down, too) and opted instead to start a cloud storage service that became Dropbox.
Brezina and Smith were unsuccessful in recruiting Houston in part because they had no money and it was difficult to hire talent with no means to pay them. This was one of the reasons behind Xobni’s move from Boston to San Francisco; in Silicon Valley, the founders could raise some capital with which to hire a staff for their company.
At the time, Boston-based venture capitalists were hesitant to invest in grad school dropouts that had “never held a real job,” never mind that Google’s Larry and Sergey had never worked “real jobs” either. Silicon Valley investors were a different story. They made the “right investments,” according to Brezina. They were willing to take a risk on dropouts like him and Smith.
So, after scrounging together $80,000 in early-stage angel investments — including one from Gmail’s Buchheit — Brezina and Smith moved Xobni out west, where they would settle in a North Beach apartment complex that would come to be known as the “Y-Scraper.”
Over to San Fran and into the Y-Scraper
The “Y-Scraper” was so-named because it eventually became a collaborative living space for many YCombinator alumni, including Houston, Justin.tv‘s Justin Kan, Reddit‘s Steve Huffman, and Scribd‘s Trip Adler, Jared Friedman, and Tikhon Bernstam.
It was a “1960s, gulag-looking” building, according to Brezina. He and Smith had arrived in San Francisco without a place to live, so they ended up crashing with the Justin.tv crew, then the only other YCombinator startup at the Y-Scraper. For their first few weeks in the city, they slept on Kan’s floor, under his kitchen table, before deciding to rent out a Y-Scraper apartment of their own.
The apartment was an ideal living space for the Xobni founders, partly because the rent was reasonably affordable. “And electricity was included, which was valuable when we were running six or more monitors and sometimes even servers out of our apartment,” Brezina said.
But the main appeal of Y-Scraper was its wealth of entrepreneurial talent. The early YCombinator entrepreneurs were all close friends with one another, so Dropbox, Reddit, and Scribd decided to follow Justin.tv and Xobni over to San Francisco and into the gulag-looking apartment complex.
Dropbox’s and Reddit’s founders were a walk-down-the-hall away from Brezina, if he ever needed advice on a new Xobni product. If Xobni was drawing interest from an investor, Brezina could walk a flight of stairs and introduce that investor to Justin.tv or Scribd. And, if any of the founders needed a break from the 12-hour coding days that were required of a startup tech company, they could easily get together, walk downstairs, and grab a round of beers at a nearby bar within a few minutes.
Y-Scraper was a circus in the best way for a young entrepreneur. Its resident companies were launching groundbreaking new products, left and right. Some of them were receiving acquisition offers from big-time tech firms. Venture capitalists would even roam the halls of the apartment building, looking for the next big tech upstart to invest in.
Meanwhile, entrepreneurial talent was constantly flowing into the Y-Scraper, having learned of the apartment complex’s reputation for incubating new ideas and new companies.
“It was like a dorm. It was like grad school. It was like summer camp. It was awesome,” Brezina said. “It was unlike any other environment in the country, I think.”
The end of the Xobni ride
Xobni arrived at the Y-Scraper as a “lean” startup running on a few thousand dollars. By March 2007, it was a thriving upstart tech company that had just raised $4.26 million in its first major (“Series A“) round of investor funding. That was enough money for Brezina and Smith to hire a small staff of employees and prepare their email-based social network, Xobni Insight, for its public debut.
Xobni Insight launched in Sept. 2007 at what was then called “TechCrunch 40,” the first of TechCrunch‘s now-annual conferences and a two-day competition that pitted Xobni against 39 other companies for venture capitalist funding and press attention. Venturebeat quickly named Xobni as its frontrunner for the competition’s first prize, and though it was edged out for the top spot at TechCrunch 40, Xobni was nevertheless well-received.
The founders walked away from the conference knowing that there was a market for their product. People wanted Xobni.
For a time, it seemed like Bill Gates wanted Xobni, too. In 2008, the then-Microsoft chairman called Xobni Insight “the next generation of social networking” while personally presenting the Outlook plugin at Microsoft developer’s conference, sparking rumors that the software giant was planning to acquire Xobni. (The rumors were true, and Xobni ended up turning down Microsoft’s $20 million acquisition offer.)
However, despite Xobni’s early success and its positive reception among investors — it had raised $41.8 million in capital over a period of seven years — the company’s growth stagnated. It tried monetizing its Outlook product by implementing premium features; it expanded into other email clients and the mobile product market. But Xobni never became the company that Brezina and Smith had envisioned from its onset.
“Our business never grew as big as we wanted or as fast as we wanted,” Brezina said.
By the summer of 2010, Brezina realized that there little left for him to accomplish with Xobni; Smith had already moved on from the company in June, two months earlier. In actuality, the founders had perceived the “beginning of the end” for their roles with Xobni as early as 2008, when they were pressured by the company’s investors into bringing in an external CEO, Yahoo’s Jeff Bonforte.
With Bonforte in the picture, Brezina and Smith relinquished control over their company’s future direction to the whims of its investors. “They started changing the company, and making decisions I wasn’t supportive of,” Brezina said. But he decided to stick around anyway, because he wanted to prove that Xobni could make money. He wanted to be sure that his company could survive as successful business before he left.
Satisfied that his company was in a good place, Brezina resigned from Xobni in Aug. 2010. (Xobni would be acquired by Yahoo for upwards of $60 million, three years later.) It had been a roller coaster of a four-year ride, and he needed a little time off to regroup and recuperate. Besides, he had wanted to make a trip across the country and around the world but was unable to because of Xobni’s demands, so it was as good of a time as any to do a little traveling.
Sincerely, Matt Brezina
He couldn’t stay away from Silicon Valley for long, though.
The familiar itch to start a company returned late in 2010 after a trip Brezina took to Hawaii, when he realized that most of his vacation photos were taken with his new iPhone 4 rather than with his bulky Nikon D40 DSLR. It was then that he saw the business potential of building an app around the iPhone’s camera. It was widely used, easy to operate, and, for a cell phone camera, it could shoot pretty damn good pictures.
Brainstorming for a product that he could use to launch his second startup, Brezina settled on two potential app ideas centered around the iPhone’s camera. One was for a social network entirely built around photos. (This was the concept behind Instagram; it might have been better if he had pursued that app idea instead, Brezina wryly noted in a 2013 podcast.) The other was for an app that would use iPhone pictures to create a physical product — a postcard that could be mailed directly from a phone to anywhere in the country.
Sincerely, which Brezina started with fellow YCombinator alumnus Bryan Kennedy, was founded on the premise that no digital product could reproduce the feeling of receiving a physical gift in the mail. And since the postcard was the “world’s simplest gift,” according to Brezina, Postagram was a natural starting point for the upstart mobile-gifting company.
On Sincerely’s end, Postagram was inexpensive to run; the postcards cost only 35 cents to produce and send. More importantly, Postagram was inexpensive on the user end. At 99 cents a pop, anyone could afford to send Postagram to friends and family, while the ubiquity of the postcard ensured that the app would appeal to a wide range of customers.
In this way, Postagram became the linchpin of Sincerely’s user base. Brezina’s first objective was to entice as many smartphone owners as possible into becoming Postagram users, thereby building a “physical social network” around the exchange of the app’s 99-cent postcards. As Sincerely diversified into other mobile-gifting products — greeting cards, photostrips, and even gift packages — Brezina could then introduce Postagram users to Ink Cards, PopBooth, and Sesame users, too.
By 2013, the then two-year-old Sincerely had garnered $5.5 million in investor funding. It wasn’t enough for Brezina to accomplish what he wanted with his company, though.
“Before a startup is profitable, it is basically always running out of money,” he explains. “I had to think a lot about where our next funding would come from. I had to dramatically prioritize who and what we could spend money on.”
It was around this time that Brezina started pursuing acquisition offers for his startup, for a few reasons. As a subsidiary rather than a standalone company, Sincerely wouldn’t have to build its own supply chain and it could take advantage of a parent company’s existing customer base. More significantly, Brezina could shift his attention away from the day-to-day finances of his company toward hiring new talent and developing new products.
Sincerely was acquired Provide Commerce, a San Diego-based e-commerce and online gifting company, last November. Now, with financial stability and the established online gifting infrastructure of a parent company, Brezina plans to expand Sincerely’s mobile-gifting offering from postcards and gift boxes to chocolates, flowers, and even bottles of wine that can be sent to friends and family with a swipe on a smartphone touchscreen.
“It is going to be an exciting year,” he says.
A vision for the future
Once upon a time, Brezina would have used Sincerely to generate startup capital for the electric car company he set out to start as a freshman at Penn State, in the same way that Elon Musk funded Tesla using the money he had earned by selling Paypal to Ebay.
Nowadays, though, Brezina is no longer interested in building electric cars, reasoning that the world needs fewer vehicles on the road. “Ultimately, our future will not and cannot involve people driving 30 to 60 minutes in a giant car by themselves to get to work every day,” he says.
Besides, what Brezina loved most about starting his own companies was not necessarily the final product — which was still important, of course — but the opportunity to bring smart people together in a “comfortable and supportive environment with flexible work schedules.” It wouldn’t have mattered if Sincerely was producing cars instead of mobile gifts; just by being able to run a business, Brezina feels as if he’s fulfilled his childhood dream.
“Building the company — the team, the work environment — is in many ways more satisfying than building the product or business model,” he says.
If he were to pursue any venture after Sincerely, though, it would involve building denser communities where “people can interact and ideas can collide.”
“Entrepreneurship happens at the intersection of cultures, identities, interests, and fields of study,” Brezina says. “For this to happen, you need density, so that random encounters — the coffee or lunch meetings, the beers after work, or conversations on the sidewalk — lead to new ideas and new businesses.”
State College in particular suffers from a lack of such density, according to Brezina. For one, the majority of businesses in the borough are located in “desolate office parks like Science Park Road or the ‘Innovation Park’” rather than downtown. Per Brezina, this means that a significant amount of local talent — young professionals, business owners, and families — isn’t mixing with the Penn State students and faculty downtown, a missed opportunity to foster idea-generating, serendipitous encounters. This shortfall is further exacerbated by a scarcity of non-student downtown residential housing, public transportation, and “third spaces” for people to meet outside of the home and the office like cafes, parks, and plazas.
“And we need a freakin’ decent grocery store in downtown State College, so people will want to live there,” he says. “So they can live and work downtown and won’t need to drive to get a tomato or a can of beans for dinner.”
On the other side of College Avenue, Penn State itself could stand to improve its entrepreneurial environment, Brezina says. He feels that, because of the university’s isolation in Happy Valley and the modest economic background of its average student, Penn Staters don’t think big enough relative to students from MIT, Stanford, and Ivy League schools.
“Often [Penn State students] think, ‘I’ll study electrical engineering and get a job at Lockheed Martin at the career fair,’” he says. “The kid at Stanford is thinking, ‘Who is this “Lockheed” guy? I’m going to start my own defense contracting company.”
To get Penn Staters in the mindset of starting companies rather than working for them, the university should help students get greater exposure to the outside world and its possibilities, according to Brezina. One way to do this is to increase funding for their travel across the country and around the world. Another is to encourage student entrepreneurship on campus, by creating more programs like the Entrepreneurship and Innovation Minor, or by promoting events like Global Entrepreneurship Week and student-run startup communities like Innoblue, which Brezina advises.
While Happy Valley may have a long way to go before it becomes a hotbed of innovation like Silicon Valley, Brezina is optimistic about the future of his hometown and alma mater.
“I couldn’t be more excited about the potential of State College and Penn State,” Brezina says. “And I couldn’t be more excited to meet people who want to push through the big changes we need, to prepare our community for the next 100 years.”