To incubate or not to incubate, that is the question

In recent years, there has been a trend towards start-up incubation. Building and taking to market a novel startup is fraught with challenges. Successful and unsuccessful entrepreneurs alike have likely confronted many issues that newly minted entrepreneurs are faced with every day.

A lot of seasoned entrepreneurs are now giving back to the community by mentoring the greenies through various program formats. Because this is a new category, it defies categorization, but I’ll give it a shot anyway.

1) accelerators
There are a number of small groups of perhaps two or three entrepreneurs that will provide their mentorship services for a fee or equity. They are typically boutique organizations with varying degrees of competitiveness and have limited availability to provide direction and guidance with largely unstructured programs. One example is colorjar, led by Jeff Hoffman of Priceline fame

2) incubators
Incubators provide startups with a class-like program, either full-time and intensive, or part-time. Some will work with your existing concept but more often than note, they will encourage you to evaluate whether or not you have the right idea, segmentation, etc. Techstars and Y Combinator are two more established intensive incubators. The founder institute is a more recent entry with a part-time curriculum in 9 cities.

3) camps
There are also a number of part-time accelerator like programs that take place over a shorter period of time. These can provide good networking opportunities and potential link building.

My experience?

Incubators
Techstars
I applied to techstars and attended their techstars for a day in Boulder. There were roughly 150 entrepreneurs and high caliber presenters including David Cohen who founded the program, Seth Levin of the Foundry group and a number of mentors who had successfully founded tech companies including past participants in the program. I did not get in to the program, as accepts almost exclusively companies that have more than one founder and has an acceptance rate that is more competitive than Harvard.

The Founder institute

I did get in to the Founder Institute. But didn’t make it past the first session. I found the curriculum to be thoughtful and probably very useful if I were at the ideation phase. But the program would have encouraged me to completely re-assess Smedule and given that I’m pretty vested, that’s not the approach I’d want to take. So, buh buy FI

accelerators
Colorjar
This is a newer entrant that positions itself as getting involved only in ideas that they fall in love with. They are more entertainment-oriented as evident by their website. I got a referral from someone in tech who I deeply respect, so I thought I would see where I went with this. Had a couple meetings including a pitch to Jeff Hoffman, which I thought went well. He said my idea was a good one and went on to say:

There are three barriers to building a viable product and bringing it to market:

1) the idea isn’t a good one
2) the cost to get it to market will exceed the value prop
3) there is a low return on the value prop

Interesting I thought. At least I have the first one down. I suspect that colorjar anticipates that there will be a high cost in getting Smedule to market which is evident from the fact that I didn’t hear from them for months after that initial conversation. And I’m inclined to agree. This business to business to consumer model is not an easy nut to crack. But crack I will!

Generally speaking I think these programs could be very useful under these conditions:

– your concept is very early stage
– you have a technical resource/co-founder who can get stuff done and maintain the business while you, the business person, run the business
– you have lots of free time
– you need money
– you don’t have much experience in new product development and business development

Facebook vs Adwords

The Facebookoff
There are some good articles that draw a comparison between facebook advertising and Adwords. I am not attempting to do a quantitative analysis, rather have had some pronounced anecdotal findings.

After a month of running parallel campaigns in Facebook and Google, Facebook wins.

Why?
1) targetting demographically
http://www.Smedule.com is more relevant to younger people who live in an urban environment. With Facebook, we can target our campaign to facebook users based on age, gender, where they live, and other criteria. Not so with our friends at Google, at least any age/gender association is derived from the browser and an assumed affiliation, therefore questionable.

2) impressions vs clickthrus

With Facebook you are able to designate how you want to pay, by impressions or by clickthrough. The benefit of paying by impression is that, theoretically, you pay very little per exposure which is a useful way to build a brand. Establishing the same budget for clicktroughs resulted in fewer impressions and ironically a
lower overall clickthru rate. With adwords, you pay per click. So, if you have a desired position per keywords, you pay based on the likelihood that someone will click accordingly. But, if for whatever reason, you don’t meet those expectations, Google simply will not display your ads.

3) More characters and a picture for facebook

Adwords(of the non-banner variety) has an upper limit of 95 characters. This is challenging if you want to communicate a concept with any degree of complexity.

With Facebook, however, you have up to 25 characters for the title, with a body of up to 135 characters. And you can add a picture for visual impact. I found a picture of a person was more effective than simply posting a logo(roughly twice as many clickthrus). But perhaps displaying a logo is a better long-term strategy for brand building.

4) Pricing accuracy
Both Adwords and Facebook will provide you with a recommended price per click or for placement based on key words used and audience characteristics. In Google’s case, for example, you can pay or bid for a top position(top ad, top three, etc).
While the projected cost for placement fluctuated in both cases, I found that Google was not running my ads based on the placement I requested and was presumably paying for. In all cases with Google, I requested top three placement, and found that more often than not, my ads were below the top three, completely eclipsed by the bottom of my screen. Facebook was much more consistent with the pricing and I maintained a more steady rate of clickthrus.

Advertising on Yelp

When Smedule rolls out to end users, it will be advertising almost exclusively online. Given that we are integrated with Yelp.com that is a logical first choice, but alas, they don’t promote online businesses.

But I was able to come up with some useful tips for businesses that are hoping to leverage Yelp’s advertising.

1) Businesses are placed favorably if they have more reviews and quality reviews. If, for example, a business owner creates lots of Yelp profiles for the sole purpose of reviewing their own business and don’t post a picture or review other businesses, those reviews are viewed as having a lesser quality. The business, therefore, will receive a lower placement than others with more robust reviews

2) Add your business to Yelp and you will be able to access additional feature for free, including the ability to post picture, etc.

3) Want to see how the demo works? Go to: https://biz.yelp.com/demo and add your business or a sample business to see how you are positioned in relation to other businesses in a similar category

I have heard positive things about the results from advertising on Yelp. So you may want to investigate it for your own needs, even if you won’t see us on there:)

Direct sales – early adoption

It’s been a while since I read Dante’s inferno, but I don’t think there is a level of hell devoted to direct sales and if it were up to me, I would add one. Yep, it sucks in a big way. I have a revolutionary product and I think that is part of the challenge, having to educate and inform customers about the concept- in addition to having to sell. Here I was thinking that people would be rolling out the red carpet for me as I walked through their doors, but many of them aren’t super savvy when it comes to technology so alas, no red carpet.

This is still a work in progress, but one week in to it, here are my recommendations if you are planning on performing direct sales for your start-up.

1) Start as early as you can. the sales cycle could very well take much longer than you expect.
2) Adopt a tool or a methodology for tracking opportunities early in the process. And consider if you will potentially have a distributed sales force. If so, an online tool is likely best for your needs. I am converting data from a spreadsheet to a sales tool(salesforce.com) they have a competitive introductory rate and I am likely to have a sales presence that extends beyond my desktop. Despite being early in the process, it will be tedious to upload leads to the tool and I wish I had done it a week ago.
3) Don’t rely on marketing alone. I admit, I was hopeful that after a direct mailing, my inbox would be flooded with requests for demos, pricing information, and autographs. Sadly I have yet to receive my first autograph request…or any others. Based on my mailing, so far, roughly 2.5% of the businesses that received direct mailings have accessed the website, which is a far cry from my expectations. Rome wasn’t built in a day. Nor is your brand.
4) Be smooth, but not too smooth. I have worked on my positioning, but have to refine my pitch. Off the cuff is nice theoretically, but hasn’t worked for me thus far.
5) It’s a numbers game. Be aggressive with your goals and sales metrics and stick to them.

Sorry if you’re going to have to suffer through the 100th tier of the inferno. But as a consolation, I’d gladly provide you with my autograph!

Introducing Smedule.com!

Smedule is now live in Denver!

What is it? A web application used for scheduling hair styling, waxing, spa treatments, manicures, tanning, etc. It works much like opentable.com, except it’s for beauty services.

How does it work? Businesses will use the web application to manage their calendars. In September, once we have enough area businesses signed up, we will then roll it out to you and other consumers who will be able to schedule services based on their criteria(time, location, price, ratings, etc).

Why would businesses want to use this? In short, Smedule does the marketing for businesses through traditional channels(search engines, social media, PR, tradeshows, advertising) and drives new business to area beauty salons. The businesses pay only for new appointments that Smedule.com drives to local businesses, so it’s essentially free marketing for them.

What this means is that you will be able to go to the website, specify, for example, that you want to get your hair cut tomorrow afternoon at 2pm within 2 miles of your zip code and don’t want to pay more than $40. Click “smedule it” and you will be able to pick from among qualifying partner businesses, book the appointment and voila! No cost to you, no credit card required, easy peasy! But don’t throw away your phonebook yet, we won’t roll to end users until September.

FREE for the first three months for all area businesses that sign up by the end of August. Then if you decide to maintain your subscription, you only pay for business that Smedule generates. You can apply discounts to further encourage customers to fill unused spots. And better still, if you refer your local spa, salon, or nail salon we will give you a $10 finders fee once they start actively using the calendar and publishing their availability to smedule.com.

For more information go to http://www.smedule.com or contact us at info@smedule.com

Smedule coming soon to Denver!

With every product launch there is natural tension between feature completion, quality, and time.

Right now, Smedule is looking pretty good and is almost entirely feature complete with the exception of some reports and super user interfaces. Works like a well oiled machine. Looks great, so I’m thinking it’s time…

I was originally hoping to launch April 1. The past couple months have been much needed time to put the finishing touches on the site. I’m aiming for June 1 for a “soft launch” not too much fanfare until the end user rollout in July. Will need to focus on business recruitment first.

Keep checking back…it’s coming!

http://www.smedule.com

Purchasing a mailing list

So, there is the old fashioned way of getting names for direct mailings, you know, flip through the phone book and manually write down names and addresses. And there is the new-fangled way, where you log on to a web site, make a couple selections based on region, business(or individual) attributes, enter your credit card and in minutes have a complete list of qualified addresses.

I did some research on mailing list purchase companies. You typically can purchase names starting at around a nickle for one-time use. Multi-use lists with expanded results(say you want to know how many employees a company has for example) start to cost a little more, closer to a quarter per name.

I went with directmail.com due to ease of use and a fast website that wasn’t too salesy. And after making a few selections, I was diverted to “geoselector.com” where I then was able to select my region on a map, and other criteria. (I believe geoselector is a datawarehousing company that provides mailing list information to businesses that likely pay to purchase the data.) All sounds pretty nice, huh? Don’t get too attached to the idea yet.

After purchasing a list of roughly 1400 business names, I was able to retrieve the file a couple days later. And you know what? It’s all garbage. Some sites with 7(!) contact addresses. Businesses that are defunct with current data. But the worst part is that many many contacts are missing. I conducted an informal search of seven area businesses to see if they were on the spreadsheet. And only one of them actually was! Imagine doing a direct mailing only to find that 15% of the recipients are accurate!!!

So, don’t throw away your phone book yet! If you are planning on doing a direct mailing, I strongly suggest that you purchase a small test list and verify the accuracy of the data. This one says the data is “phone-verified and updated montly” so perhaps worth checking out?

If you can shed any light on the vagaries of mailing list purchasing, please share your experience by providing a comment.

Setting up a merchant account and accepting credit cards online

Another one of those seemingly simple tasks that is a hairball to execute.

There are a number of ways that Internet businesses are able to process payments. And a number of payment methods that can be used.

There are essentially three tiers or layers to processing a credit card payment:
1)The Gateway Used to receive the credit card payment information using a device(scanner) or interface(web page) and transmits that information to:
2) The Merchant Account which processes the payment(and or refund) securely maintains the funds, then transfers funds to their final resting place:
3) The Depository This is a standard bank account, can be personal, but unless you want Joe Shmoe showing up on your customers bills, suggest opening a depository account in the business name and using said account as the repository so that bills appear in the business name

1) The Gateway
You will need to determine how you will process the credit card payment. Will you use one of those swipe devices, or terminals? Or will you be processing online credit card payments(paid by entering credit card information directly in to application or web page). If you are transaction-oriented, like selling shoes where there will typically be a one-time transaction with the customer, paypal and google checkout both have products you can use, and there are others(Yahoo, etc) Initially, I over-simplified this aspect of the selection process and wanted to use Google checkout because doing so would have gotten me a credit with Google ad words. I was equally determined not to use Paypal, having had some recent fraudulent charges made through Skype on to my paypal account. There are lots of sordid stories on Paypal if you want to take a look Sadly, Google checkout is not properly designed to process recurrent charges for predefined billing cycles, one of my key requirements. I just read a user group post dated 12/1/08 that said it’s coming “soon”. So keep an eye out.

My development team has pre-integrated with a popular gateway, authorize.net, therefore I decided to go with that as my front-end for credit card processing. Keeping it simple…and cheap.

2) The Merchant Account If you want to process credit card payments, you need a special account that will receive payments, process refunds, etc. This is the “merchant bank” and they come in all shapes and sizes. I found that brick and mortar banks are typically expensive. What do I mean by expensive you might be wondering…. If and when you end up processing credit card payments, you need to pay various fees including:

– transaction fee. Each transaction comes at a cost somewhere in the 25 cent range
– “interchange fees”. Every time a purchase is applied to a credit card, the vendor pays a percentage of the purchase price to the credit card house(Visa, Amex, etc) this is generally 2% and up.
– monthly account maintenance fees. I’ve seen them in the $20 – $40 range

Wikipedia does a good job of explaining the fee structure of merchant accounts if you’d like to know more.

Authorize.net was recently acquired by Cybersource a merchant provider. Cybersource has the most competitive rates that I was able to find, comes recommended from some friends who have used it, and has clean integration with authorize.net, and it’s easy to apply for. Enough said.

3) The Depository There is one final piece to the puzzle. I need a “Depository” or old fashioned bank in to which my funds will be deposited once there are funds that need a place to go(ahhh, we can dream…). What was my criteria? Cheap and easy. I just went with the Wash Mutual, soon to be Chase, that is a block away from my house, and doesn’t charge fees for business accounts. Just like opening a personal account except I had to bring my document declaring Smedule as an LLC and it took a lot longer.

Lessons learned:
Think long and hard before using your credit card to buy your non-fat vanilla no whip sugar-free mocha as the coffee shop could well end up paying close to 40 cents just to process the transaction!

If smedule doesn’t make it, I will open a new credit card company, Sarahcard and take over the world!

Appendix:

Pricing for Authorize.net and cybersource, sent to me by their account manager(not available on their website):

Payment Gateway Account

• Setup Fee – $99 (reduced from our standard $299 rate)
• Monthly Gateway Fee – $20
• Gateway Per -Transaction Fee – $0.10

Merchant Account (If you do not already have one)

• Per-Transaction Fee – $0.25
• Visa/Master Card Qualified Discount Rate – 2.19%
• Monthly Fee – $9.95
• Monthly Minimum Fee – $25
• Please see the fees page in the application for the full list of Merchant Account Fees

Direct marketing campaign for the launch

The site will be live early April, so it’s time to start making things happen. I have one direct campaign planned for launch time. I have essentially two target markets; one is the business owners for the businesses that I will be recruiting to use my scheduling tool. The other target market will be end users of the tool.

My initial launch will be focused on business recruitment and that is what I will discuss in this blog entry.

I have a business degree with an emphasis in marketing with more than ten years of marketing experience. Ironically, I have never done a direct campaign.

So while I have a firm grasp of direct campaigns conceptually and have developed a lot of collateral over the years, the name acquisition and methodology have been quite different.

Some questions that I have:
– what format is most effective?
– how much content is just right?
– single or multiple mailing?
– tracking mailings?
– how to mail?

I have read that it is more effective to send direct mailings in an envelope as people are more likely to open an envelope and then you’ve got their attention.
Personally, I hate receiving those unmarked or deceptive envelopes that almost force me to open them only to find I’ve been duped again. ” A letter sent in a #10 business envelope that looks personally typed and is mailed first-class with a 25-cent stamp is almost always opened.*” So on principle alone(and to make a more green choice, I am going with something in a post-card like format.

After taking some time to draft the content, I tend to be too heavy on text. Additional research reveals a good strategy for designing post cards:
Use side A, the front of the post card to pull the reader in and get them to turn the card around and read the second side where you should have a value proposition and an abbreviated benefit(or benefits). Use this side to encourage the reader to take the next step, typically to go to your web site and read more about your product or service.

I understand that the more a prospect is exposed to an established brand, the more that brand awareness is built giving way to increased affinity for products and a greater chance that a customer will make a purchase. But with direct mailings, how much exposure is enough? I think I can hope for a 2.5% response rate with a single mailing direct mailing. I called a friend who had done a lot of direct mailings for a major telco company and she said that they saw results jump after the third mailing and with a follow-up call, they saw sales in the double-digits. So I intend to do three direct mailings with postcards and will follow
up either with a visit or a call.

To track the success of the campaign, I will do two things:
1) am offering a promotion with a code that the businesses will need to enter when they register for the service
2) I will have a landing page that will not be accessible from the normal website. I will be able to capture visits to this page and use that to figure out how much web traffic I am generating with the direct mail campaigns

I also plan to use a sales-force-automation tool, ie salesforce.com to capture and track leads and will blog about that once I have researched available tools.

resources:
article on using envelopes for effective mailings: * www.nmoa.com/articles/dmnews/outerenvelopes.htm
article on effective post card copy and format: www.postcardsmart.com/basics_article1.php

Web development vendor selection process

First, I documented my initial set of requirements, or those that were slated for “phase 1” Then I started seriously thinking about how I was going to get the product built.

My first inclination was to reach out to my existing network. I have been designing software products for around ten years now. Over that time, I accumulated many good developer friends and colleagues with skill sets across the spectrum. I was seeking someone or a team with a comprehensive web development skill set including web application development, hosting, with a variety of web 2.0 experience. Not surprisingly noone wanted to work for free, or even cheap! Despite being in this pesky recession or ours, it seems that the good ones are still gainfully employed. So I was also unable to recruit any of the rockstars with which I had previously worked.

Then I started working through their referral list. Having just relocated to the Denver area, I, admittedly, was at a bit of a disadvantage.

I ended up with three solid leads:
1) Unleaded software/digital peabody
2) Market Creation Group
3) New media Denver

I had a very encouraging meeting with the business development lead at Unleaded Software. Which was followed by a thorough list of questions with a promise that I would receive a bid within a week of having had the initial meeting. The problem is, I made the mistake of disclosing my budget, much to my husband’s chagrin.

As a formality, therefore, I also pursued a bid from Market Creation Group. I had a brief call with their biz dev(sales) person, sent a comprehensive list of requirements. He too said he would turn around a bid within a week. But one question, “what is your budget?” I explained to him that I preferred not to disclose that information, because theoretically, the bid for my scope of work should really be irrespective of the budget, right? I mean, if it costs $20 to get your oil changed and you only have $10, then you’re going to end up driving around with sludge lubricating your engine until you come up with the cash, right?

The deadlines for both firms came and went with no bid. Several follow-up emails and crickets. Hmmmm. Apparently different rules apply in the world of IT out-sourcing.

At this point, I had already squandered several weeks waiting on bids one of which I was convinced was going to be the one.

I then went back through my emails, contacted the third vendor, New Media Denver. This time I didn’t even have to send them a big fat requirements document, all it took was an NDA to scare them off.

I was very anxious about my timeline and the opportunity cost of taking all this time off…I spent much of my idle time working on my business plan, and then, as a last resort, ended up working with a contact in India who has Oracle ERP development experience, but was eager to start a company and has a good network of affordable resources. He quickly recruited a team, reassured me that they would do the work within my budget whatever that was. We agreed that we would do a prototype, put together a project plan, review the requirements, then have a go no go decision. (as a side-note, I did have some philosophical issues out-sourcing the work overseas, but it seemed to me that the American companies weren’t interested in my business, leaving me little choice)

The prototype was really quite horrible. They were really backend developers who insisted they had front-end experience, including logo design. Take a look at their logo creation:

Smedule butterfly logo

I have to be honest, these were great guys, hard working, dedicated, if I had had more time on my hands, I would have liked nothing more to have worked with them. With a designer of course.

But I simply had to go back to the drawing board. I ended up escalating through my personal network and Unleaded software came back to me with a bid, more than two months later. They have done a lot of web development, though their web 2.0 portfolio is a little light-weight. The short version of the story was that they redeemed themselves, their bid was competitive, and I have confidence that they will deliver a quality product in an aggressive timeframe.

My takeaways in searching for a web design firm:
– figure out your high-level requirements quickly
– start looking for someone or a firm to perform the work as soon as you decide you want to move forward, the process could take a lot longer than you realize
– make sure you understand the skill set of each vendor/developer and recruit accordingly
– trust your gut. One of the companies suggested that I host 5k+ miles away and I was very uncomfortable with a “technology” company that over-looked key latency problems this would have introduced
– talk to lots of vendors, don’t keep all your eggs in one basket
– make sure you have a list of technology requirements in addition to functional requirements and go with a vendor that is aligned with your technology goals