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2 Start-ups at SXSW Trying to Disrupt the Economy

Location-based apps are this year's SXSW GroupMe and Twitter. Zaarly and LocalMind are two to put on your radar.
Localmind allows users to ask and answer questions about neighborhood restaurants, stores, and events.
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Location-based mobile technology is sweeping through SXSW this year.

Consider two of the hottest apps, Highlight and Glancee, which allow users to search for and browse other users within a nearby radius, similar to how Grindr or the OKCupid app let users find each other nearby. Certainly, there's no dearth of experts predicting that this is going to be a popular new field.

"Highlight and several of its competitors, including Glancee, Kismet, and others, are the apps everyone seems to believe will be game-changers at SXSW this year, much as Twitter, Gowalla, Foursquare, and GroupMe were in the past," noted Daniel Terdiman at CNET.

But this article isn't about Highlight or Glancee. After all, connecting with strangers in public places may be helpful for networking, but it may just be a little too, well, creepy for mainstream adoption. In other words, these ideas are ideal for use at SXSW, but for real, everyday life? It's unclear. They're also not all that helpful for small business. So while early-adopters are fueling today's downloads, it's unclear if the trend is really a trend, or just a flash in the pan.

Instead, let's take a look at two business-friendly apps with proven business models that are gaining serious traction: Zaarly and Localmind, two companies that, in their own way, are attempting to redefine commerce, transactions, and even how the economy works, through location-based mobile technology.

A Social Commerce Revolution

When I sit down with Bo Fishback, the founder and CEO of Zaarly, a social commerce engine that allows users to buy and sell items from people in their neighborhood, he explains Zaarly's (rather simple) business model: The company takes a cut of every transaction. Right now, Zaarly tags a 10 percent fee onto the transaction, but Fishback admits that's subject to change.

Founded just last year, Zaarly has high hopes. The company raised a $15 million round of funding in October, and hired 39 employees within the year. Meg Whitman, the former CEO of eBay and the current CEO of HP, joined as a member of the site's board. And though the app and website have about 300,000 users, its founder believes they'll hit the million mark within the year.

Fishback, who has founded five previous companies and was recently the president of Kauffman Labs, says that Zaarly, and location-based social commerce, is just hitting its boom cycle.

Already, thousands of small businesses have realized the potential to use Zaarly, and Fishback says New York has been a particularly succesful market.

"This isn't a small idea," he tells me. "This could very well be a $50 billion company one day."

Forget Yelp or Google; Go Directly to the Source

Localmind's tagline is "Know what's happening. Now." So say you're at dinner with your friends, and want to have a nightcap at a local bar, but don't know of any bars in the area that have room for a big group. Pop open Localmind, find a user at a bar in the area, and simply ask them, "Hey, is it crowded over there?"

Right now, there's no monetary incentive for the other user to respond, but Lenny Rachitsky, the app's founder and CEO, tells me that "a significant percentage" of its 100,000 users respond to questions. With a reward system similar to that employed by Foursquare, Rachitsky hopes to fundamentally change how recommendation software—like Yelp—connects people to each other.

Localmind raised about $600,000 eight months ago, and plans to raise a second round in the next few months. The company has four employees (and an intern) based in San Francisco, and was founded last year.

"We offer the ability to connect to an event and ask what's happening," says Rachitsky. "In that way, we're like the reverse Twitter: Instead of waiting for someone to tweet at an event or a place, you can directly ask them a question. It solves a problem you have pretty much daily or weekly."




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