Signs of Life in Digital Death

The Internet and social media have changed the way people live and interact. But what happens to our digital identifies—Facebook pages, Twitter feeds, email logins, Web domains, etc.—after we die? Should we even care? And should VCs invest in startups that cater to it?

Those are some of the questions Jeremy Toeman grappled with before he founded his digital afterlife startup called Legacy Locker. Two events happened in his life that convinced him there was an unmet need in the market.

First, his 94-year-old grandmother passed away. She was an active Hotmail user who exchanged messages with friends around the world. But Toeman didn’t have her account password, so he couldn’t get into her account and notify her far-flung network of her passing.

Second, not long after, Toeman was on a turbulent flight when he realized his wife did not know many of his own online passwords, including a GoDaddy account in which more than 100 Web domains were registered in his name.

“I saw a huge opportunity here,” says Toeman, who went on to raise a six-figure angel round of funding to build Legacy Locker. The company, which launched two years ago, operates much like a digital safety deposit box, holding passwords to a user’s online accounts for safekeeping. For every account stored, a beneficiary is assigned, and when a person dies, Legacy Locker securely delivers the account information to the named beneficiaries.

Toeman is betting that, at some point or other, we will all come face to face with our digital mortality. But, so far, most people are choosing to turn the other cheek. Most digital death startups measure their visitors in terms of thousands, not hundreds of thousands or even millions. Legacy Locker, for instance, only has about 10,000 users.

“The number one issue here is timing,” says Hans Koning, a venture partner at Solid Venture, an Amsterdam-based firm that led a $1.5 million investment in Respectance.com, an online tribute and memorial site where users can share photos, messages and video of loved ones. “We know we are pushing a concept that is ahead of the market, but we also recognize that we are on the right track.”

There are about 50 or 60 businesses in the digital afterlife industry, according to The Digital Beyond, a blog dedicated to the topic. But most are just basement operations. Only a few, like 1000Memories, DataInherit and Respectance have raised venture funding. Several others, such as Legacy Locker and Entrustet, have raised angel rounds and may soon go out for venture funding.

“The market is currently a battlefield for several innovative companies,” says Walter Huersch, an executive partner with Zurich-based Zühlke Ventures and an investor in DataInherit. “We believe that the digital afterlife market is still in its early stage and will strongly grow in the coming years.”

The industry got a big boost when prominent venture firm Greylock Partners—which has backed Facebook and LinkedIn, among others—announced a $2.5 million investment in 1000Memories earlier this year. The company also raised an additional $500,000 from well-known angel investors Chris Sacca, Ron Conway and Mike Maples.

“We feel like there is no past tense right now on the Internet,” says Rudy Adler, co-founder of 1000Memories, a destination site where users can record and share their memories of loved ones. “Sites like Facebook and Twitter are all about the now. There is this big chunk of the Internet that is missing.”

We believe that the digital afterlife market is still in its early stage and will strongly grow in the coming years.”

Walter HuerschExecutive PartnerZühlke Ventures

That void is what drew Sacca to invest in 1000Memories. Just prior to backing the company, he lost a close friend. Everyone in his circle was looking to him for advice on where to collect photos, stories, and tributes. Sacca was frustrated because he couldn’t find a solution that was beautiful and functional, short of coding up something new from scratch.

“That experience was at the front of my mind when I invested in 1000Memories,” he says. “There was nowhere on the Web optimized to create a positive, sentimental, participatory and permanent remembrance of a loved one.”

Adler argues that sites like Facebook are not the right place to memorialize the departed. In fact, many people find it downright creepy to encounter the profiles of dead friends and family members on their regular social media sites. However, Adler believes this disquieting experience of running into so-called “Facebook ghosts” will cause more people to start thinking seriously about the concept of digital death, and will gradually draw more visitors to consider it.

San Francisco-based 1000Memories is hoping to attract users by offering its service for free, and by doing its best to respect the dead and the people who mourn for them. It is also proactively creating memorial pages for celebrities in an effort to drive traffic and provide a public forum for mourning. Most recently, for instance, it created a memorial page for the Egyptian protesters who died during that country’s popular uprising. Adler says his company created the page in response to user demand.

Adler admits there are some “sketchy” practices in the online obituary space, but he says 1000Memories will never emulate them. For example, 1000Memories says it never places ads on a memory page. Also, it will not offer a free guestbook for a few weeks, and then threaten to shut it down if it does not receive a monthly hosting fee from the family.

For monetization, right now, 1000Memories is following the tried and true path of the world’s most successful social networks—namely, build up as many users as possible and then figure out how to make money later.

“We have a unique opportunity to digitize humanity’s history,” says Adler, who is thinking big for his site. “There is no reason why we can’t create a place where all our stories can be told, shared and preserved for eternity. This has never been done before.”

But investors are not quite willing to think big and bold when it comes to digital death. At least not yet, says Nathan Lustig, co-founder of Entrustet, a 3-year-old site that allows users to prepare the last wishes for their digital assets. He raised $175,000 in angel financing for the company.

“There are some VCs who will never invest because of the nature of the space,” Lustig says. “Some people don’t want to deal with anything that has to do with death just because it’s not a fun and cheery subject. I think that automatically eliminates about 25% of the investor population.”

In Lustig’s pitch to investors, he frames his company in a way that underscores the massive size of the opportunity.

“Three Facebook users die every minute,” he says. “That shows the scale of the problem. And about $700 million dollars in digital property gets lost every year that people don’t transfer to loved ones.”

There was nowhere on the Web optimized to create a positive, sentimental, participatory and permanent remembrance of a loved one.”

Chris SaccaAngel Investor

But no company ever got rich by marketing to dead people. That’s why Entrustet is recruiting funeral homes, insurance companies and estate lawyers as channel partners that can resell its services. The company also launched a new product for people who want to conduct a digital property search after a family member dies.

In one case, Entrustet was hired by the family of a 43-year-old man who suddenly passed away. It turned up 15 online accounts, including a funded PayPal account and a Web domain for his business that was set to expire.

As more Internet users die off, the problem will get increasingly worse, insists Lustig. “No one is immortal,” he says. “It is clear that one or multiple companies will win in this space. There is just no way that nothing will happen.”

But there’s another big problem with the digital afterlife industry: nobody is quite sure what demographic to market. Is it 20- and 30-somethings with extensive online presences and hundreds of friends on Facebook? Or is it 40- and 50-year-olds with 2.5 kids, a mortgage and an estate plan?

At first, Toeman of Legacy Locker thought it was the latter. He ran the numbers and found that one in three U.S. households with children under 18 has a last will and testament. That comes to about 12 million families in America in total. And of those 12 million, about 900,000 make or update a will each year, Toeman says.

But the numbers didn’t pan out quite the way Legacy Locker anticipated.

“In all candor, the market is a lot slower going than we expected,” he says.

The company is now launching a new set of products and services that are more targeted to a younger customer base.

But, again, targeting death-related services to youth isn’t easy.

“I talked to one investor who was convinced that young people just don’t do funeral prep,” he says. “Clearly, this is a harder space than most people think it is.”

Still, Toeman is sensing new life in the digital death market. “Investors know something big is coming,” he says. “They just aren’t sure whether it’s today, tomorrow or years from now.”