In the spirit of Agile, here’s my retrospective on when we realized the primary objective is to build a business & not to get funded.
Inflating Our Own Bubble
Back in June 2009, I read about the TechCrunch50 2009 contest & while we barely had any running code, submitted an entry. My collaborators thought it was a bit of a stretch, but we all agreed it’s nice to set goals. So while trying to get a grip on what was required of us, I immersed myself in TechCrunch stuff. From what I understood, there was a common theme emerging – get funded & get out. And making it to the semi-finals only encouraged me.
I Think Our Bubble Has a Leak
Signed Copy of Guy Kawasaki's Reality Check
We thought we had something that was so paradigm shifting, yet so simplistically obvious at the same time, that we’d have no trouble bringing on a CEO to help us reach Jason’s Promised Land. But it wasn’t happening like that. And as time passed, we realized that if we wanted to see our dream change the world then we couldn’t wait on someone else to make it happen.
Paradigm Shifting
That primed us for This Week in Startups #46 with David Heinemeier Hansson | ThisWeekIn. Fast forward to 1:10:45 and there you have it. It was paradigm shifting, yet so simplistically obvious. Just build a profitable business and the problem will be solved. Read his and Jason Fried’s Rework and you’ll get it too!
Trolling for Customer Development
The other day I was perusing Twitter when I saw Ben Yoskovitz’s
A few tweets later, I was signed up and working with one of BeanSprout‘s founders – Artie Patel. I told him “Ideally, we’d like to hook up with someone like Localeze“. To which Artie responded; “They’re a customer of ours. Let’s see what we can do to help.”
Lessons To Learn
I’m actually planning on meeting Artie next week when they present at International Startup Festival – Montreal, Canada, July 13-15th 2011 where I’ll be volunteering for my Starving Startup ticket. Stay tuned for more details about how another startup delivered an awesome experience & whether it can help us learn to build a ______ profitable business.
The Reese’s Peanut Butter Cup is a metaphor for life. What seems completely new is often just an unexpected combination of the familiar but previously disconnected. This is Innovation 101, but too often we forget, and think the one asset we have is the answer, rather than asking what we can bundle it with to transform its value.
In my previous post, I described how I was struggling with my lean start-up sales and marketing efforts on seemingly two separate fronts. In keeping with my perseverance theme, here’s how I combining these two into one complimentary offering, yet still affording me the possibility of either one, or, better yet both launching a business.
Ingredients
My peanut butter – AnotherSocialEconomy: A service that anonymously connects consumers – who already know exactly what they want with local retailers – who actually have it in stock. It’s like Google Local Shopping only way simpler and more accessible for small and medium-size businesses (SMB).
My chocolate – edu.cyn.in: A social software platform enabling collaboration not just within the class, school but across geographies. It’s like Facebook, YouTube, Flickr, MSN, Twitter, Blogger, Wikipedia, iTunes, Digg, Google Calendar and more, all in one integrated and monitored web site.
Directions
Offer limited edu.cyn.inmembership to local schools and organizations providing extra-curricular activities for free.
Offer limited edu.cyn.ineducation and mentoring services to students, teachers, staff and parents on how to get the most of the platform with regard to sharing, commenting and rating content – for free.
Offer limited edu.cyn.in education and mentoring services to students, teachers, staff and parents on how to get the most of the platform with regard to self-organizing projects and events thereby reducing phone calls and oodles of emails with attachments.
Our Reeses Pieces should consist of a hyper-local (thanks Flack Maguire) online community of consumers and retailers/merchant/service providers. If we succeed in educating and mentoring are target edu.cyn.in audience, we could have one, or, two adult pair of eyes for every student pair of eyeballs. So one class of 25 students could yield anywhere between 2 and 50 additional eyeballs on edu.cyn.in. The better we educate and help folks adopt the social software, the greater chances we have of increasing those hyper-local eyeballs. The more eyeballs, the greater the chances we have of getting folks to use AnotherSocialEconomy’s Widget. More local consumers, more local merchants.
Additionally, since we’re also Cynapse Reseller, we’ve also introduced a whole new crop of highly qualified prospects into our sales funnel.
Stay Tuned
Please feel free to comment below and let me know your predictions. Will our ingredients yield another Reeses Pieces, or, is this plan going to curdle? Just remember, the alternative approach could be to pay Google AdWords $7500 a month for pay-per-click search engine marketing (SEM) and pray that’s cheaper than the time and hosting frees we’re currently investing.
The Reese’s Peanut Butter Cup is a metaphor for life. What seems completely new is often just an unexpected combination of the familiar but previously disconnected. This is Innovation 101, but too often we forget, and think the one asset we have is the answer, rather than asking what we can bundle it with to transform its value.
Peruse my blog and you’ll see I pretty much chronicle my experiences as an ultra light, non-funded, start-up entrepreneur. You’ll also see that I divide my time, not necessarily equally, among two main efforts: 1) called :Twetailer, which has morphed into :AnotherSocialEconomy and 2) :edu.cyn.in. While both were born out of a burning desire to correct something I found profoundly wrong, yet so “simple” to fix, I’ve always considered them to be worlds apart. That was until I tried to fill a void in my execution plans – sales & marketing. Now I know these are not subjects to be treated lightly but, in my own defense, I was primarily concerned about the Guy Kawasaki lesson How to Change the World: Defensibility. With all that reasonably taken care, I started educating myself on Search Engine Marketing (SEM). As a matter of fact, my very last post was how I used that new knowledge to rethink AnotherSocialEconomy’s :Widget. Who knew? It was not only another entry point/channel/stream into the system (remember, I’m a techie) but it actually competes – quite nicely, with Pay-Per-Click (PPC), Cost Per Click-through (CPC) and Cost Per Action (CPA).
Selling sucks
In the early days, I tried getting schools to pay for the edu.cyn.in service but, being a techie and not a sales rep, failed. There was either not enough budget to go around, not enough qualified staff to support the service, or, simply the FUD Factor (Fear Uncertainty and Doubt). But I’m a persistent bugger and based on my prior experience with social software on the Internet, within enterprises and even within schools, I just couldn’t give up.
I knew the service was greatly appreciated by the kids. I knew the service was greatly appreciated by educators – albeit a special select few. And as a parent, I also knew the frustration of organizing events, committee meetings, car pools, other extra-curricular activities and even purchasing related goods and services.
And on top of all this pressure to sell edu into schools, I was still struggling to sell AnotherSocialEconomy – which needed a way to reach retailers & consumers.
Started getting that sinking feeling
Things just seemed to be getting worse. Was I going to be one of those start-ups with a great idea – in my case, two great ideas that no one other than myself, Dom & a few others knew about? It’s not like I don’t know my limitations. I think I’m a pretty good technical business analyst, software product manager, maybe even a social media manager. I love pre-sales demos, presenting at shows and conferences, have a pretty cool online education story to tell, love story telling and I’m pretty pleased with my stickman videos and presentation creations. But I just can’t seem to get past this marketing & sales hump. I’ve tried to bring in others but it just hasn’t gelled yet. Maybe some seed money would be the way to go. Either way, if I don’t get any traction, I’ll probably have to drop edu. Yikes! That would really hurt because not only have the Cynapse folks been more than fair with me (I’m also a struggling Reseller), it would mean that my daughter Sara & friends would lose the service.
Perseverance
Back in my IBM days, Perseverance was not only a welcomed characteristic, but encouraged too (by some). In a company of over 390,000 (at the time), it was all too easy to say things like; “I’m waiting for so-and-so to get back to me”, or, “Today’s first agenda item is to decide when we’ll meet again to discuss this matter”. If you truly wanted to make a difference, you had to persevere – you had to press on people, press a few buttons, or, as my wife Anna says, I just had to continue being the real pain in the ass I can be.
Dropping edu, dropping, AnotherSocialEconomy, getting a real job are options I’m just not ready to accept yet. What I really have to do is find a better way to persevere.
Suggestions?
Do you have any suggestions on how I can make edu & AnotherSocialEconomy work for each other? Stay tuned for Part 2.
CPM: Cost per thousand impressions CPC: Cost per click-through CPA: cost-per-action Conversion Rate: The percentage of visitors who take a desired action Customer Acquisition Cost: The cost associated with acquiring a new customer
What it feels like trying to figure out Search Engine Marketing.
Searching for Search Engine Marketing
I recently signed up for Google AdWords and started playing around with its campaign site. After twenty, or, thirty minutes, I started getting a splitting headache and through frustration, closed my Google Chrome browser and defiantly opened up Firefox. Now to be fair, I had no business signing up for AdWords, since I can’t even spell S-E-M (SEM) but, I was determined to get a better understanding of what I could be missing. Being a start-up and desperate for bootstrapping sales, it seemed only logical to investigate.
Google Sales to the Rescue, sort of
The very next day I received a call from a Google Sales Rep – Terry Dewey, who was incredibly helpful, and patient, in walking me through the site & giving me my very own S-E-M 101 Course. But, by the end of the call, there was one thing terribly obvious to both of us. If I couldn’t manage to spend $7500 a month on AdWords advertising, then there simply wasn’t any point in getting started.
WCT: Wholly Crap Through
At $7500 a month, with an average of 3% conversion rate, my customer acquisition cost was probably going to cost me more than I was going to make.
Reality Check and The Referral Engine Bibles
So needless to say, I’ve abandoned my jump into SEM and have returned to the teachings of Guy Kawasaki’s Reality Check & John Jantsch’s The Referral Engine. If I understand correctly, the key to success is sharing with those who can help. So that’s the motivation behind the :AnotherSocialEconomyReseller and Referrer programs. Another lesson learned, is that I have to make it real easy for those folks to pass the message along and that’s why we developed the :Widget and the :Bookmarklet.
The Ultimate Cost Per Action (CPA)
CPA offers are the truest form of performance marketing. Rather than basing payouts on bulk traffic which may or may not convert, cost per action refers to compensating affiliates/publishers for real sales, leads, and other conversion metrics. This is often the most empowering method for advertisers, as they are able to gain direct results from their advertising budget. The CPA model is a risk-free approach to advertising that usually targets niche specific publishers or clever affiliates.
So for starters, here’s how our Widgets whip click-through and pay-per-click advertising for Influencers (MFCs).
Prep work:
Become an AnotherSocialEconomy Reseller
Post an AnotherSocialEconomyWidget on your blog, or, web site. The widget can be customized to your site’s look and feel so it doesn’t distract your readers.
Contact Retailers, suppliers, manufactuers, brands, distributors, and anyone else in position to close a sale – locally, or, online and have them register as AnotherSocialEconomyRetailers.
Blog, review, rate, do whatever you do to contribute valuable content.
Your readers can then fill in your site’s Widget to purchase whichever goods and/or services mentioned.
AnotherSocialEconomy will then notify all registered Retailers within range of the Consumer’s location and ask them if they have the goods/services available for sale.
Those Retailers with inventory on hand, then propose their goods to the Consumer via AnotherSocialEconomy.
Once Consumers confirm, they can then proceed to the local Retailer and pick up their goods.
Bottom line
AnotherSocialEconomy is about connecting serious buyers with local retailers. So only those Consumers interested in buying, will click-through. And only those Retailers in a position to close the sale, need to reply. There’s no conversion rates, or, customer acquisition costs to worry about. Retailers only pay when they close the sale.
But wait, there’s more …
And what about that kind Influencer? Since they Referred the request via their site’s Wdiget, they get to share in some of AnotherSocialEconomy’s proceeds. And in this particular scenario, since they- as a Reseller signed up the Retailer who made the sale, then they again, get to share in some of AnotherSocialEconomy’s proceeds. Now that’s some CPA, eh?
Thanks
I’d like to thank Michel Drouin for connecting the dots between click-through advertising and the value proposition of :AnotherSocialEconomy’s :Widget.
Stay tuned and I’ll let you know how this one works out.
In Chinese philosophy, the concept of yin yang is used to describe how polar or seemingly contrary forces are interconnected and interdependent in the natural world, and how they give rise to each other in turn… Yin yang are complementary opposites within a greater whole. Everything has both yin and yang aspects,.. constantly interacting, never existing in absolute stasis.
— Yin and yang – Wikipedia
Background
We’ve reached our techie milestone. We have quality code running in the Google AppEngine clouds. We’ve validated our concept with as many people that will listen to us. We’re at the point now where we have to validate with the market. We need users. More specifically, we need Consumers and we need Retailers. We need marketing & we need public relations (PR).
Challenge
So while the real techie – Dom Derrien, can breath a little easier, the other – me, with my techie background, has to go out and market the crap out of Twetailer. But, I’m not really a marketing kind of guy. While I absolutely love demoing and presenting and evangelizing, I’m not particularly strong at finding the right people to get in front of. So, I need to find myself a marketing guru. But being an ultra-light start up (read “living of my wife and kids”), I need to find a marketing guru – preferably one shooting for the social networking sphere, who’s willing to drink the Kool-Aid. Fortunately, Marc Bienstock likes Kool-Aid.
Lesson Learned
Twetailer was conceived and originally targeted for techies like ourselves – cube dwellers. Which is fine, since we never planned on using the line “If only 1% of China…”. So demoing to techies was never a real problem, despite some minor usability issues. But in order to get to the next level, we had to demo to prospective partners, prospective CEOs, prospective Consumers and prospective Retailers. And the further away we got from the cube dwellers, the greater the usability issue became for those higher up in the org chart – tower dwellers. Thankfully, everyone got the true value of Twetailer’s service: “Brokering Consumer Demand with local Retailers’ available Supply – via simple messages, for f(r)ee, or, Reverse Retailing”. But even our own accountant and lawyer turned on us with comments like “Can’t I just have one button to press? I’m not very comfortable with all this texting stuff. Hey, I have a great idea! How about an app for my Blackberry?”. Not bad for tower-dwellers, eh? 🙂
So now I think I understand. While I originally intended to service techie consumers, I needed non-techies to help me get that service to them. In other words, my techie solution had a non-techie dependency.
“Pivoting” is when you change a fundamental part of the business model. It can be as simple as recognizing that your product was priced incorrectly. It can be more complex if you find your target customer or users need to change or the feature set is wrong or you need to “repackage” a monolithic product into a family of products or you chose the wrong sales channel or your customer acquisition programs were ineffective.
Modified Business Model
Originally, the fee plan was to charge both Consumer & Retailer a transaction fee similar to that of Amazon Flexible Payments Service fees (about 3%). But after speaking to several people, it became clear we couldn’t build a sustainable business like that. The common thought was the best idea is to solve a real business problem and charge money for it. So we’re going to charge a monthly subscription fee for registered Retailers. And because Marc felt Twetailer was too generalized and people needed a sense of urgency to use it, we’ve also introduced a Reseller distribution channel with our first one being targeted towards golfers & golf courses. (Congrats to Marc for being our first Reseller!) And to address usability issues, we’re offering a Managed Service for those non-techie Retailers out there.
Modified Development Roadmap
As much as I didn’t want to go down this route until there was actual income to pay for it, I seem to be in a Catch 22: If we don’t build it, they won’t come. If they don’t come, then I can’t afford to build it. So we re-prioritized some things & built it – an Android app targeted for the Golfer (Consumer) wanting to find a local Golf Course (Retailer). And since Twetailer is vertical agnostic, we’re making the app open source so other’s out there may be encouraged to built their own vertical, or, reseller market using our open application programming interface (API). Oh and by the way, for those of you like my good buddy Rick Boretsky who think only techies have Android mobile devices, I encourage you to take a look a the First quarter 2010 information from The NPD Group’s Mobile Phone Track which reveals a shift in the smartphone market, as Android OS edged out Apple’s OS for the number-two position behind RIM.
Golf Pivot Videos
Please take a look at our pivot trilogy (less than 10 minutes) and let me know your thoughts. The first is intended to address our target audience with the second identifying their pain and the third illustrating our solution (for non-techies and techies alike).
Reflection
What do you think? Am I setting a bad precedence? Am I clouding my inability to market/sell my start up by throwing more code, time & energy at the problem, as opposed to, finding/solving the root-cause? Or, do you think this is a step in the right direction?
Twetailer: Brokering Consumer Demand with local Retailers’ available Supply – via tweets, for f(r)ee, or, Reverse Retailing.
Rehearsed version
Live version
Last night I presented the slides & recordings as above but did the audio part live. Technically, I had 10 minutes – 5 for demo & 5 for Q&A. I actually consumed 7 minutes, leaving on 3 for Q&A.
Here’s the Q&A (paraphrased):
Q. Do you have any retailers signed up?
A. That’s the stage we’re at right now. We actually have one, my Volkswagen dealer Volkswagen Des Sources. GregVW thinks its great for used cars!
Q. Is it fully functional?
A. Yes! The recorded demo part was just to make sure we didn’t run into any timing issues. We also weren’t sure about Internet access here – which as it turns out, there’s none. But Yes, it’s fully functional. You can even do you own demo by sending “d twetailer what-are-you-buying #demo” and a robot will play the Sales Associate role. If you want, try sending “d twetailer used vw 2010 #demo” and Greg may even play along too.
Man I told you… my day is, I come to work, I get paid, I go home. You think I want to do this all my life?
– Retailer Sales Associate (Let’s call him Trevor)
Like I care?
Background
Over the past few posts, I’ve spent some time describing my Social Software in Schools project, which has been an absolute blast & has yeilded some surprising results. (But that’ll be another post.) However, I also spend my time on my true start-up – twetailer. Without going into much detail here, I’ll just put things in context by defining it as:
Twetailer: Brokering Consumer Demand with local Retailers’ available Supply – via tweets, for f(r)ee.
Prior to heading off to pitch a potential business partner, I decided to try out my routine on an unsuspecting Retail Sales Associate who I thought fit our personna – young, tech savy, looking for an easier way to get things done. My pitch demos how consumers Google for product reviews, make a decision, then search for a local retailer to make the sale. Part of the demo, demonstrates how local business directories / search engines were failing local retailers, thereby creating greater barriers for entry (sales) to their stores – partly due to their antiquated taxonomy/categories.
The story you are about to hear is true. Only the names have been changed to protect the innocent.
I approached Trevor – an unoccupied Carl’s Cameras Sales Associate, as opposed to, the older gentleman behind the cash register making sales. I introduced myself as being part of an Internet start-up company offering a free search service that matches consumers ready to purchase products with local retailers ready to make sales – all via Tweets/text messages. While Trevor didn’t use Twitter (too young), he was willing to listen, so I opened my MacBook & started my Keynote presentation. I went through all the slides/videos & stopped at the demo part to elaborate. Trevor was engaged! He had questions & thought it was “really cool”. He thought searching Yellow Pages for “cameras” locally was useless but did accept there may not be many alternatives, even after I demoed Google Maps local search. He wasn’t surprised to see Carl’s Cameras not among the initial Yellow Pages search results & conceded that no one walks into the store asking for “digital image processing equipment” – Carl’s Cameras taxonomy & there’s no way anyone in the store could change that. He loved the idea of “social tagging” Demand & Supply in the language (terminology) of the consumers’ & retailers’ & thought it was very practical.
However, here’s how the conversation continued;
Me: “Would you use Twetailer to help you close sales?”
Trevor: No. It’s not like I’m going to work here the rest of my life. My day is, I come in, I go home, I get paid.”
Me: But you could just sit down in the back room, have a coffee & make sales? Do you text message?
Trevor: Yah, for sure. But I’m not going to use my phone for work & Carl’s Cameras is not going to give me a phone to text.
Me: Carl’s Cameras doesn’t have to give you a phone to text. Especially, if you’ve already got unlimited texting. Tell me, if a friend texted you & said he knows someone looking for a nikon d5000, do you have any in the store, would you text back? Wouldn’t you text “Yes, tell them to come see me.”?
Trevor: True dat… of course I would.
Me: So what’s the difference with Twetailer?
Trevor: I guess nothing. But my day is, I come here, I work, I go home, I get paid. You know… you should really speak to Carl’s Cameras’ Regional Sales Manager. He’s a really nice guy & he’s gonna love this thing. He could probably get all the stores to use it. (He then went to get me the contact info.)
Me: Thanks so much for your help. I really appreciate it. Take care.
True Dat Story
I then glanced over to the cash, where the elder gentleman was eavesdropping from all the time, waited to see if he had anything to add & then left.
Following Up
In the days that followed, I tried on several occassions to contact the Regional Sales Manager. The phone number Trevor gave me was also listed on the web site. Yet everytime I called, the phone system went on & on about the office hours & no matter what options I chose, no matter what day, no matter what time, I always ended back at the beginning. For the record “Carl’s Cameras” is my alias for a national retailer!
Moving forward
A few days later, I demo’ed to Kevin Makice – author of Twitter API: Up and Running – O’Reilly Media. He had a funny/sad take on this story. His theory is that small/medium sized retailers – the Mom & Pop stores, are so busy treading water, that they can’t imagine stopping for 5 minutes to try something new, simply on the hope that it can change their world. This would be especially true, for a technology they don’t get – like Twitter/ text messaging.
Ironic, eh?
Unfortunately, the irony of the situation, is that text messaging/tweets empowers these retailers to get back in the digital age. There’s no need for static brochure-ware web sites – which they may have missed, or, are out-dated. There’s no need for online e-commerce shopping cart sites – which they probably can’t afford, or, could never see any return-on-investment. There’s no need for anything more that an old mobile phone that can text message & someone to push those little buttons.
All they need is someone like Trevor to give a damm. Someone who would probably love the excuse to text at work. Someone who would probably find it easier than answering the phone.
Lessons Learned
Next time, I’m going to demo someone on commission 🙂
Reflection
Have you had a similar experience? Is this a generational thing, or, simply a management issue?