Archive for the ‘IETechstartup’ category

Tech Startups: Final Thoughts and DealBoss

April 27, 2011

I wanted to go ahead and post my final thoughts on IE Tech Startups and talk about our new business here as well (taken from the paper I wrote on the topic):

Introduction and Thoughts
As an aspiring entrepreneur, IE Tech Startups was one of the most useful classes that I have had during my time in the MBA.  I am a co-founder of a Spain based startup called Deal Boss, SL (www.dealbossapp.com is the English language web site – the Spanish version is coming soon) and I found a lot of the material applicable.  For example, when we were talking about Todotaladros.com with Alberto Torrón I kept thinking about the possibility of funding our startup from a normal corporate type position and then transitioning to full time as the business grew.  It was also interesting to see how some of the lessons around staffing and outsourcing portions of your business as a launch strategy aligned with our near term concerns.

Product
Our smartphone application (currently in the submission process with Apple) is currently focused on using the iPhone to make it easier to find and use the discounts offered from the “daily deal” sites (such as Groupon) coming into existence around Europe.  In terms of features, the application aggregates Groupon, Groupalia, and Offerum into a single stream of deals.  Users can easily browse Spain based deals by map, list and cover flow, with sorting by date, price and category. Deals are displayed automatically for the user’s city (detected using location services in the mobile), but the app also allows viewing other supported cities. The app also allows users to buy, save, set a calendar/reminder, and share deals on Facebook, Twitter, and through email.

In the short term we would like to continue to improve the user interface, include more deal vendors, and focus on getting the app into the hands of as many users as possible so we can get feedback to improve.

In the long term we hope to find ways to improve the application to provide greater deal management functionality, such as email alerts to users, customized searches for specific deal types, following specific businesses and any deals from them, and easier to use calendaring of deals.  We also want to move quickly to work with the deal vendors on their plans to offer instant deals and hopefully provide an avenue for consumers to pull out their mobile, see any instant deals near them, then walk in and redeem those offers.  In addition, we plan on adding the Android platform to the existing iPhone support.

Business
In terms of the business, the initial revenue stream comes from the commissions provided by the deal vendors to DealBoss when a sale is made.  In March 2011 we signed an agreement with Groupon for 10% of sales, although we expect other vendors will offer less.  As soon as the application is approved by Apple, the DealBoss team is going to continue negotiations with other deal vendors in order to obtain funding streams.  In addition to more deal vendors, DealBoss is planning (starting in 2012) to provide subscription based marketing analytics to businesses looking for additional information about their customers.

Currently DealBoss is trying to raise approximately €250,000 in order to fund development for the rest of 2011.  As a result, I especially found the classes with investors to be particularly useful – in terms of how investors viewed potential companies (Rodolfo Carpintier) and how different VC deals can be structured (Roberto Saint-Malo).

Although the explosive growth rate of deal sites should offer an excellent market opportunity in the near term for a high level of profitability (I’m not including the chart on this blog post), there is a long term risk that the market will consolidate into a very small number of deal vendors, making the product less useful.  We can mitigate this by providing other deal sources outside of simply daily deals, but it may also provide an exit opportunity for an interested buyer who wants to compete in mobile.

Near Term Future
In the next few weeks DealBoss will be launching a Spanish language web site including a product video (the current product video is in English), finishing the approval process with Apple in the iTunes store, adding content providers, and making small improvements to the application in response to customer feedback and additional beta testing.  We will also begin the transition from a team of six to a team of two plus four part time advisors and attempt to maintain a functioning business with a minimal staff.

Final Thoughts on Course
I absolutely loved the way we got to meet with real entrepreneurs and investors and learn about their challenges and viewpoints.  I think the only challenge is deciding when a course like this would be best to take, by term five we were all either immersed in our own startups or looking for employment.  However, any earlier and it wouldn’t have been as “real” and useful for us as we are working on our businesses.  Either way, this was one of the best and most useful courses I took during my time in the MBA and I thoroughly enjoyed it.

Tech Startups: Rodolfo Carpintier, Internet Investor

April 18, 2011

Today, April 15th 2011 was the last class in IE Tech Startups.  We learned even more about what investors value in a startup and how they view things.  The class started an hour and a half earlier than the previous classes, resulting in more than half the class missing the session.  Unfortunately, I was feeling a bit under the weather so my ability to focus was highly varied … but it was still an excellent class, just like all the others.

Instead of going through a PowerPoint deck, the speaker, Rodolfo Carpintier of Digital Assets Deployment led us through how an investor would look at a business by having one of my classmates diagram her business, Watchfit, on the board.  Going through such things as expected valuation, equity distributed between equity and partners, and the expected sales it was a thought provoking exercise and I wish I had it on video to replay as I am sure it would be useful in understanding the thought process of investors.

Something that I thought was especially significant for me as a co-founder of DealBoss in Spain is the impact that the country of operation has on valuation and obtaining investment.  For example, because Spain is a relatively small market the valuation of startup companies here tends to be about half of that in the UK.  In addition, there are less angels here in Spain which reduces the choices you have for investment.

Lastly, here are some additional points I noted:

  • In a business plan, have no more than 15% percent of revenue come from advertising.  This is because you need a lot of users to make revenue from ads, in the hundreds of thousands.  So if you are Google or Facebook, I guess you can make some money this way but otherwise it’s tough sailing.
  • You should know who are your competitors, who has invested in them, the number of people needed after 5 years. etc.  I guess I had better get to work on this point – I generally just know how the competitors software works. 🙂  Perhaps that’s OK for handling the technical side of the business?
  • There is a great potential for bubbles in social network type of things.

A reference below that I didn’t get the chance to see until now:

http://www.dad.es/en/information/business-model-video – describes how the DAD process works when considering an investment.

Tech Startups: Pablo Larguía, serial entrepreneur, founder of Bumeran

April 17, 2011

On Wednesday, April 13th we had the opportunity to hear from Pablo Larguía, serial entrepreneur, founder of Bumeran.com.  Bumeran.com was a job web site, but focused on Latin America (sort of a Latin Monster.com) – which was a small market at the time.  Pablo was a fantastic and entertaining speaker, and he took the opportunity to talk about his previous ventures as well as his current one – La Red Innova.  La Red Innova is a conference focused “on innovation, internet and entrepreneurship where Spain, Portugal and Latin America meet the World”.

In contrast to many other speakers, Pablo advised us to get as much money as possible.  In contrast to the common “lean startup” concept, it was interesting to see someone recommend we get as much money as possible.  In my opinion, a lot of money is almost always better than not enough money, but there are some arguments for taking out less.  For example, you may want to maintain more control of your company.

Along the same lines, in contrast to the advice to “pick your VC carefully” Pablo recommended that we go to any VCs that you can get an audience with.  The reason is that at this stage we are unlikely to have much of a track record or choice in who funds us – but we know we need the money.  In my opinion if the choice is between going out of business and getting a bad VC, at this point I may go with the latter, but in general I do admit that the whole thought of giving up control of the business is a little scary.  Isn’t that why we became entrepreneurs?  Someone should have warned us about that 😉

Another piece of entrepreneurial advice was to learn to deal with uncertainty.  In Pablo’s career he’s been faced with no knowing where next year’s money was going to come from and looking at laying off all of his employees, yet somehow he kept the confidence to keep on going.  I can certainly relate to this feeling, not knowing where next month’s DealBoss funding might come from (along with my rent!).

Find a girlfriend before you do a startup because you won’t have time to find one.  This is an interesting contrast to the many speakers who talked about their relationships going south as a result of the long hours faced by an entrepreneur.  I guess the life of an entrepreneur is going to hurt your dating life either way, unfortunately.  I don’t think I like the sound of this 🙂

Be very confident, especially with VCs.  Even if your business is hanging by a thread, keep your confidence level up!

One other takeaway that I found interesting was the discussion of using an equity swap to move into a new market, in this case Venezuela. Pablo traded a small amount of equity in the larger company to take over the small one and move into a new market with Bumeran.

Tech Startups: Minube.com

April 17, 2011

Monday, April 4ths session was with Pedro Jareño from Minube.com, a social travel website.

In order to come up with their business idea, Minube started with an analysis of how people use the internet to get travel.  At the time, sites were focused on the booking component of the trip, yet there is quite a bit that happens before that.  The process looks something like:

Inspiration > Planning > Comparing > Booking > Traveling > Sharing Memories

Yet at the time there was no focus on inspiration, the beginning of the travel process.  Minube focused on gaining a strong understanding of the people using their site, and how they used it, and has turned that into their competitive advantage.  As we have often seen in this course, focusing on the user and their needs can bring you great competitive advantage.  In addition, Minube also noted that people like to share their experiences and help others, so by tapping this instinct to generate more content Minube.com works much like open source software.

One way in which Minube.com earns revenue is by operating a “metasearch” that allows user to find trips.  However, as everything in travel depends on Google and search engine position, they feel it will be some time before they can be well established in this area (because they earn a relatively small amount per transaction they need scale to make this generate a lot of revenue).  Minube also earns revenue via commission from sponsored content from both public and private sources.

Another interesting thing to note about Minube, is that they did not launch in English.  As a Spanish speaking group, they wanted to focus on their strengths and also where the competition was less likely to be (in Spain, and in Spanish).  Now that they have gained size, they feel that now is the right time for an English language launch.  Also, in terms of launching in Latin America they lack the local connections there, even though the language is the same, and this has prevented that expansion.

Getting users is key because of the user generated content that drives the site.  They use contests to attract travelers, and inventiveness to have a friendly brand.

I think Minube was educational in a few different areas.  The lessons I took away were:

  • Be creative in how you raise revenue
  • Focus on the user’s needs
  • Be clever in how you attract users
  • Focus on your strengths along with your competitor’s weaknesses
  • The product is the key!

Tech Startups: Ronald Friedlander of ReviewPro

April 17, 2011

April 6, 2011: Today’s talk is from Ronald J. Friedlander, founder and CEO of ReviewPRO, a startup dealing with social media monitoring and reputation management for hotels. (see image at left to see how it works).

Ronald first came to Spain in 1999 – and was hired because he knew how to send an email.  Spain was definitely behind the United States in terms of the internet business.

Back in 2005-2006, no hotels were really monitoring their online reputation.  Ronald looked at trends and saw how user generating content was exploding (and thus, harder to track and keep on top of).  He founded the company in October 2008, based in Barcelona.  In contrast to what we have often been advised, to have deep industry knowledge, his sales guy has never worked in a hotel.

Some lessons:

1) If you get rejected, don’t do exactly the same thing and expect a different result.  When some folks in the class questioned this as lacking persistence, the point was clarified to mean that you have to be flexible and adjust your technique to fit your audience.

2) Product is key.  Clients are key.  This is a common theme that we have seen in the MBA and in Tech Startups.  In particular, in order to be successful as a business you have to have a good product and a great relationship with your customers.  Take care of them both!

3) Sometimes its good to not have industry experience – fresh perspectives.  In a greater sense I took this advice to also mean that you can find ways of turning a perceived weakness into a strength.

Ronald discussed some ways of capturing potential clients:

  • Buying attention (advertising).  Varies in price.
  • Beg for media (public relations).
  • Bug people one at a time (sales).  Expensive!
  • Earn attention by creating interesting and valuable content and publishing it online for free.  If you have the ability to create the content, in my opinion this is an extremely effective way of generating interest in your product.

Some additional closing lessons that we were given were:

  1. Do things differently and build stuff people value.  In other words, have a unique selling proposition.
    Everything you achieve will be determined by the relationships you have with others. In other words, relationships are key in business).
    It is critical to measure closely all the key areas of your business, you can’t manage what you can’t measure.  On the other hand, I would argue that there are some very important things to keep in mind here.  Measuring the wrong things is distracting, and measuring the right things the wrong way will lead to wrong decisions.
    Pick your partners very carefully – it is easier to get a divorce than get rid of a partner.  Take your time to pick the right partners, and do your due diligence.
    There are risks in taking VC funding, and you may end up essentially having options in a company that you don’t control.  The shareholder agreement is key to understanding the dynamics here.  This is something that we heard many times over the course of this course and is clearly very very important to understand.  Just getting VC funding does not mean it’s a “win” – be very careful.

Tech Startups: Todotaladros.com – a small part time startup.

April 17, 2011

(This blog was originally written two weeks ago – didn’t have time to post it)

Last week, we had Alberto Torrón, founder of Todotaladros.com, a simple store selling power tools.  It’s a “home based startup”.  This was especially interesting to a lot of us because we aren’t quite sure how we might find employment, or immediate funding for a full time company.

The backstory is that the company cofounder Javier was worried about his long term job security, so he had a problem driving him forward, and he was passionate about tools.  In addition, his wife needed to be employed and pay more into the Spain retirement system.  The company began with a soft, low cost launch by opening an eBay store.  eBay provided not only a mechanism for reaching users for sales, it also allowed them to essentially use the auction site as an advertising platform.  They stayed focused on very specific products / niches, and offered sites for each of those products.  The key lesson for me here is to start small, reduce risk where you can, and focus on specific product niches.

Today todotaladors.com is small, but growing ecommerce site.  Average sales are 1000 Euros a day, with essentially just two employees.  Because of their slow and steady growth approach and the lack of high amounts of initial investment required, this company has been profitable from year one.

Some keys to success:

  • Low TCO is a main target (my opinion: because they didn’t have huge investors backing them and were using their own money)
  • Outsourcing for all non customer related processes (my opinion: this allows you to have a lower staff and just focus on the things you believe are the most important to your business)
  • Use of their own capital – in this case they started with 40k Euros, mostly for inventory.  (my opinion: this allowed them to be able to focus on controlling their own destiny)
  • eBay offered/offers a nice entrance point into their store (my opinion: they can leverage off of the much larger eBay platform to reach an audience they wouldn’t reach otherwise)
  • Focused on customer service and close contact with their customers (my opinion: In particular with organic growth, you want word of mouth to be a key driver of your increasing sales.  In order for this to happen, you want happy customers.  Otherwise you end up having to spend a lot more time and money on your own advertising)
  • Software based on open source – Prestashop. (my opinion: the low up front costs and high degree of customizability associated with open source software can provide a nice boost, especially when you are starting up.)
  • Adjust business to their software. (my opinion:  this is typically good IT practice in general, but it is harder to drive competitive advantage if you are doing the same as everyone else.  In this case, it’s especially useful, however, because the company is small and not technology focused).
  • Visits from SEM (Google Adwords) and SEO, but lots of customers from word of mouth. (my opinion: They probably got more customers in the beginning from word of mouth, followed by eBay, then Google – and I expect as they grow in size this will be flipped in the opposite direction.  Word of mouth is so key with small businesses, as I learned during my time at a young internet service provider in the late ’90s.  We had a “invite 3, surf for free” where each person you got to sign up for internet access meant you would receive a third off your next month’s bill.  This was always cited as a key reason for our success in growing from 2000 to 30000 users in well under two years.)
  • Deliveries are fast! (my opinion: When customers get their products quickly, they are happier – leading to improved word of mouth).
  • Slow growth, more manageable. (my opinion: when you don’t have the time to focus on rapidly growing your business and the change that comes as a result, go with a slower more manageable method).
  • Chain of happy suppliers. (my opinion: When you are small and have little negotiating power, don’t make your suppliers unhappy.  Even better, happier suppliers means better performance from them – usually).

The todotaladros.com value proposition:  Cheap, Fast, Guaranteed, Reachable, Secure

Also, they weren’t afraid to use ideas gained from other startups:

  • Naranjaslola.com (an orange sales site) – Listen to customers (adopted easy payment methods).  Great customer experience in payment!
  • Amazon.com, eBay – once your site is big you can sell a lot, even if you don’t have the items in your physical possession.
  • buyVIP.com – the box is important.  It protects your product and until the end of its lifetime, it wears your logo.  This is also a key practice that Apple focuses on “out of the box experience”.
  • British approach to selling tools: If you can pay, we can find the tools.
  • Selling products by knowing the customers.  By this they mean that they know as much as possible about their customers profile so they can suggest other products that they may like.

Tech Startups: Idealista

April 4, 2011

Last week’s talk was given by Jesus Encinar, founder of Idealista.  Idealista replaces the paper based classified ads with a simple online site to find a place to live.

Here are some lessons from Jesus:

Lesson: If nobody else is doing it, maybe there is no market there.

This was certainly not the case when Idealista began – there were quite a few competitors.  Early on Jesus was faced with a challenge of trying to build a database.  The content is really king in a business of this type, and yet the existing data was poor quality and there were no private ads.  Users often wanted these private ads, so Idealista decided to focus on gathering the private advertisements instead of going with agents, as others had done, and aggregating.

Lesson: Focus on quality.

The question then became – How do you get the data?

Idealista actually walked around and talked to people; they collected telephone numbers, figured out who the private adverts were and put them into the system.  Started with 5,000 ads.  Launched only in Madrid, with a very limited set.  Later on expanded step by step.  Focused on being a *good* solution rather than a comprehensive one.

When it came to the design of the site, Jesus showed us a car demonstration of the model T versus another early car that required extensive user training.  It is clear that simplicity and design is important to drive sales.

Lesson: Focus on ease of use.

There are two keys to the ease of use of idealista:

1) Put only what is absolutely necessary, and customize each page only for what needs to be done on that page.

2) Break the processes into multiple small steps.  Make it easy to get things done.

International Lessons:

Idealista internationalized very early on in their life.  Here are some of the key lessons that we learned from their experience.

  • Be careful when you launch – incredibly difficult.
  • Looking for big countries with no dominant real estate player.
  • Italy was launched 2006, right about the same time as everyone else. (maybe the lesson is that a really attractive market is really attractive to everyone?).  Google, eBay, other smaller ones.
  • It can be more important to focus on being the powerful leader in your local market instead of weak in a lot of markets.
  • It’s easier to launch before everyone realizes that the market is strong.

Some other misc lessons are:

Prices for web site launches are radically less than they were 10 years ago when Idealista launched.  Jesus needed to raise six million Euros.  Hired Anderson Consulting to make their web site – a mistake in the end but at the time they wanted credibility.

Content is exploding – there are 4 reasons for this explosion.

Globalization, content of any site.

User generated content.

Digitalizing and history available in a big way.

End of distribution monopolies.