Rewarder Taps the Crowd of Amateur Detectives and Problem Solvers

The San Francisco startup Rewarder scored one of its first investors through a unique move: it found the venture firm director a replacement part for his vintage BMW motorcycle.

It wasn’t just an oddball favor. The successful quest for the rare bike part was a demonstration of Rewarder’s core mission, says co-founder and CEO Kendall Fargo. The new social marketplace helps people solve problems by connecting them with someone in the world who knows the answer, says Fargo, a serial entrepreneur and pioneer in e-commerce.

“If we could map the world’s expertise, we could solve people’s problems so much better,’’ says Fargo. Members of his network offer money rewards for advice, referrals, or even a bit of sleuthing—from finding a lost pet to finding a dad not seen for 10 years.

One of Fargo’s Facebook connections, Chris Hollenbeck of Granite Ventures, noticed some of the first bounties offered when Rewarder was still in private beta testing. Hollenbeck asked if he could use the fledgling network to start a hunt for his elusive BMW motorcycle part, the fuel injection controller for a 1990 BMW K75S. He offered a $100 reward.

Within two days a student had located the part in Los Angeles, Fargo says. “Another guy knew where to get the part in Poland,’’ he says.

Granite Ventures and Radar Partners led a Series A funding round for Rewarder that netted $7 million from VC firms and angel investors. Rewarder announced the financing this month as it launched a public version of the Pinterest-style social networking site. Hollenbeck joined Rewarder’s board of directors, which also includes investor Eric Hahn, founding partner of the Inventures Group of Palo Alto, CA; Doug Mackenzie, a cofounder of Radar Partners; and private investor Trevor Traina.

Rewarder's front page as it appears to logged-in members

Fargo says Rewarder had already attracted 100,000 members and a total of $10 million in reward offerings while it was still in the private testing stage that began in the summer of 2011.

Members have offered rewards as small as $2 (for a pomegranate sauce recipe) and as big as $100,000 (to find a buyer for a development in the US Virgin Islands). The largest reward won so far was $10,000, for helping a moving company expand nationwide by finding an investor willing to pay $100,000 for a half-ownership in the firm, according to the Rewarder CEO.

Still unclaimed, though, is a $2,000 bounty for locating the Death Eater costume designed for the elegant villain Lucius Malfoy of the Harry Potter movies.

Rewarder’s revenues come from a 15 percent service fee. This is subtracted from the reward before the money is passed along to the winner. For example: A member offers $100 to anyone who can find his stolen antique garden gate, and another member finds the gate for a sale at a boutique two states away. The gate’s real owner pays $100 to Rewarder, which pays the successful sleuth $85 after subtracting its fee.

In most cases, the user who posted the offer chooses a single winner, and provides feedback to the rest of those who responded.

Those who offer bounties must pay Rewarder a deposit of as much as $25 in advance. If the total reward offered is more than $25, the remaining amount is charged when the winner is chosen.

Fargo sees the network as a place to get a little money into the hands of non-official experts such as students, stay-at-home mothers, and people who don’t like their jobs but are passionate about their hobbies.

“We believe everyone has knowledge and expertise that has value to someone else,’’ Fargo says.

Visitors to the Rewarder site must become members to offer rewards or propose solutions. They’re encouraged to join through Facebook and create detailed profiles listing their areas of interest. Through an “ever-evolving algorithm,’’ Rewarder alerts members by email about rewards they might be able to earn. It also tracks the online behavior of members, giving them a reputational ranking.

“It’s our highest priority to make sure it’s a trustworthy community,’’ Fargo says.

Fargo’s entire career has been devoted to e-commerce, beginning in 1994 when the Internet was just developing, and social networking wasn’t even on the horizon. After helping to develop a series of startups, Kendall founded StepUp Commerce, which figured out a way to extract inventory data from local merchants’ bookkeeping reports so it could help them sell merchandise online. Intuit bought StepUp in 2006, hired Fargo, and made StepUp into part of its QuickBooks product.

Fargo left Intuit in 2008, but he and his former Intuit colleague Graham Rasmussen kept in touch. Rasmussen took a job at Localyte, where he helped travelers find services at their destinations. Fargo and Rasmussen started to speculate about the next evolution of online commerce. Their plan for Rewarder emerged by early 2011.

“I really believed commerce could be much more personal,’’ Fargo says.

The rise of social networking created the needed framework, because people are now comfortable with sharing their personal interests and passions, Fargo says. With Rewarder, they reap answers to their problems only to the extent that they share their requests on Facebook, Twitter, and other networks. They can also help their friends earn a little money by alerting them to other members’ reward offerings, Fargo says.

Rewarder not only allows members to seek expertise, but also permits people with skills to ask for help finding customers. For example, independent music teachers offer small fees to Rewarder members who identify students who then sign up for instruction. Entrepreneurs can receive multiple referrals by creating an “ongoing reward’’ that stays active even after one or more winners have been paid.

Fargo sees Rewarder as quite different from TaskRabbit, a growing crowdsourced services company based in San Francisco. TaskRabbit is an intermediary that helps users find local people they can hire to pick up groceries or weed the garden, Fargo says. Rewarder allows members to tap into a global pool of expertise, he says.

“About 75 percent of our rewards have no local component at all,’’ Fargo says. He prefers to compare Rewarder with the crowdfunding site Kickstarter, where people chip in money to support artists or entrepreneurs whose work they admire.

“Those are projects around shared passions,’’ Fargo says.

Fans have described Rewarder as “a reverse eBay,’’ a treasure hunt, or a “voyeuristic journey of what people are willing to pay for,’’ Fargo says. “I think we’re in a category of our own,’’ he says.

Hollenbeck, the venture investor, agrees. He says the successful search for his motorcycle part made him more confident that Rewarder would be a good investment. “It just provided a concrete example that the knowledge I needed was out there,” Hollenbeck says. “It works , and it works quickly.”

Rewarder’s nine employees now occupy rented digs on Market Street, on the borders of San Francisco’s financial district near the original site of Fargo’s prior successful startup, StepUp Commerce. His new social marketplace site is hiring, and Fargo is hoping to have a million users a year from now. With more users, problems will be solved more quickly, and more rewards will be offered to a community with a wider range of expertise, he says.

“Once you get to a million, it really takes on a life of its own,’’ Fargo says.

Bernadette Tansey is Xconomy's San Francisco Editor. You can reach her at Follow @Tansey_Xconomy

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