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

Posted April 17, 2011 by Anthony Hess
Categories: IETechstartup

(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.
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Tech Startups: Idealista

Posted April 4, 2011 by Anthony Hess
Categories: IETechstartup

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.

Tech Startups Session 4: Coches.com

Posted March 23, 2011 by Anthony Hess
Categories: IETechstartup

Today the talk was from Iñaki Arrola, Founder and CEO of Coches.com.  A few years ago, Arrola and his team had the opportunity to obtain a top domain name – coches.com – and went for it.

Iñaki Arrola

Today they are the biggest car site in Spain, and I am going to use this blog to discuss some of the lessons he gave us.  It was interesting in this case because many of Iñaki’s suggestions were not things that he really appeared to follow rather than just telling us all the things he did really well.

  1. Don’t start businesses with friends/relatives.  Apparently this didn’t turn out well for Iñaki.
  2. If you give employees equity it can be a problem for them because it has value only once you sell, so they may become trapped in their position.
  3. People overestimate the amount of sales, so dividing by ten will probably give you an accurate view.
  4. You need an in-house technical capability, at least so you know how much things should cost to develop.  Their businesses didn’t have these skills for the first three years.
  5. User experience skills are good to have, even though his team didn’t have them at first.
  6. Be honest with your investors (a common suggestion!).  They really want to see honest people to deal with and an investor is investing in the person more than the product.
  7. Focus on the things that you users want to do – don’t just put a bunch of things on your web site.
  8. Being an entrepreneur doesn’t have to ruin your life.  Your wife is your biggest stakeholder – if she’s not behind you then you won’t have a wife or a business.

Some keys to success specifically for coches.com:

  • High quality cars
  • communicate with the users – be close to them
  • a focus on the core needs of the users
  • no ads, but know what the user is doing on your web site
  • speak well of competitors – wide range of views not just about their own site in their social feeds
  • The name – in fact, coches.com often benefits when a similarly named competitor runs offline ads.

Some questions that I have are the following:

  • (I asked during class) A mobile app?  Yes, they have one coming, but they have some issues to work out and have to decide how to do it.

Note – carros.com exists and isn’t apparently being used for anything useful.  Perhaps someone wants to buy a domain name for car sales? 🙂

Session 3: Managing the Tech Startups (Updated with Questions)

Posted March 21, 2011 by Anthony Hess
Categories: IETechstartup

Today’s Talk, Jorge Mata.  After starting in consulting and large companies, Jorge became an entrepreneur in his mid 30s.  He has extensive experience in raising capital to fund start-ups.

Some points from today’s talk (generally translated into my words):

  1. Scalability is key to investors.
  2. You don’t have to invest your own money, because your focus will then just be on making your money back and you won’t be focused.
  3. Consider joining another start-up, its not just about making your own.
  4. Jorge likes to see running companies, not just ideas.
  5. Treat your investors well.  This means you communicate with them, good news and especially bad.
  6. The climate for raising money is getting better and better.
  7. A local CEO is very useful for navigating cultural differences.
  8. Jorge likes to see start-ups that are solving process problems, not just new platforms.  How can technology make actions easier for end users?
  9. You don’t want to pay for advice, because they will have a conflict of interest.
  10. Timing is very important when selling your company.
  11. Be willing to make rapid business model adjustments to match a dynamic market.
  12. Understand what your investors are looking for in terms of return (including time-frame).
  13. Don’t forget to focus on the problem you are solving when you design your business.  Value proposition!
  14. FoodieSquare! (no Tech Startup class is complete without a Foodiesquare advertisement)
  15. Social is a great, low cost tool for promoting a start-up.  Google is expensive.
  16. Valuation targets.  3 million for Angels, 7 million for VCs.

Great talk today – lots of interest and motivation.  Will follow up with questions later.

Some questions that came to mind today were:

  1. What are some ways to prove a scalable business model without an entrepreneurial history?
  2. How do you prove your company is worth millions with no track record?  What specific things can you do to reassure/prove it to investors?

New York Times paywall

Posted March 20, 2011 by Anthony Hess
Categories: Information Technology

I’ve now learned to never use the quick post option unless its really a quick post 🙂

One of my favorite web sites, The New York Times, has decided on restricting access and bringing its paywall back (I never knew there was one before – I guess I never read it then).

The Announcement

Basically, if you go over 20 views a month the Times wants you to pay a few hundred dollars a year.  I wish them luck, but to me this is a very bad sign for them.  Nobody wants to pay that much money when so much of the rest of the web is free – and so many other businesses are very profitable following modern web based models.  The Times seems to want to revert to an era where they were only distributing newspapers and getting paid for it, unfortunately they just haven’t found a way to do that.  When the marginal cost of distributing information is dropping toward zero, it’s very difficult to get people to pay you for it.  This reminds me of the music industry a few years ago.  Like the RIAA, they deserve to get paid for their content, but also like the RIAA they are going about it the wrong way.

So what should the Times have done?  Well, this is a bit harder to figure out.  They’ve done some experimenting with blogs (free/low cost production), but apparently it wasn’t enough.  Perhaps better targeted ads, or improved social capabilities, or providing some other thing you can’t get everywhere else is the way to go but they’ve decided that the old way of doing things is the best.  We will see how it goes, but I don’t think it will last a year.

Weblogs SSL

Posted March 16, 2011 by Anthony Hess
Categories: IETechstartup

Today in tech startups we are going to talk about Weblogs SL (http://www.weblogssl.com/), with Julio Alonso.  They are a Spanish based company focused on blogging.

Here are some questions I have for the company:

  • I read about a controversy in wikipedia related to GPL software usage.  As Spanish is not my strongest language, I wasn’t 100 percent sure what the problem is but it appears as if they may not be sharing GPL based source?  Is this a GPL violation, or is the software modified in such a way that the new code doesn’t need to be shared?
  • Also, I read that they were using an Open Source ERP software called Open Bravo (http://www.openbravo.com) and I am interested in knowing more.

OK, class is about to start – I may update with more questions as they come to mind.

  • New question:  What are some ways you’ve kept your company small and lean?  How do things work from an operational perspective?

The future of mobile phones?

Posted March 15, 2011 by Anthony Hess
Categories: IETechstartup, Information Technology

So I’m sitting in a panel discussion at the IE Digital Forum and we have representatives from Google and RIM, among others, discussing the future of mobile computing, so I thought I’d chime in.

So I discussed some of the history yesterday, in the context of Microsoft’s struggles with Windows Phone 7 … or is it Windows 7 Phone?  I always get that mixed up.

So let me go in order from worst to best.

Symbian (and Meego). Since Nokia already announced they were migrating away from this platform, you can put a fork in it – its over for Symbian (and Nokia too, in my opinion – they may survive as a Motorola sized company but their glory days are gone).  The previous future platform for Nokia was Meego, which is based on Linux (like Android and Pre).  Without Nokia, I don’t see Meego happening at all in mobile phones.  Perhaps you will see it running your fridge in a few years.  Unfortunately, they couldn’t seem to get the thing out the door and have made an alliance with Microsoft to be a favored partner for the latest version of Windows Phone.  Unfortunately for Nokia this creates a number of questions.  For one, the first phone won’t even be released for a year while you’ve completely demoralized your internal and external developer community.  As a result, they are basically starting from scratch, and with an unproven platform in Windows Phone.  For example, if you can’t control your own software how can you truly differentiate yourself?  Even worse, if somehow their phones take off their apparent lack of development focus on value added software and services means that they can be easily copied by the Samsungs and HTCs of the world.

Windows Phone 7. I discussed some of the issues here so far.  Yes, if Microsoft can execute on this it will provide some level of strategic differentiation for their clients (the operators and manufacturers) then it can at least reduce the level of platform fragmentation faced by Android.  With that said, they can’t get updates out, they can’t sell handsets in large volume, and they really don’t have very many apps considering how mature the market is (10,000 for them, 100k+ for Google, 300k+ for Apple).  Even worse, they’ve just spent a ton of money (which I think is not a bad decision if it pays off) focusing on Nokia, which is likely to alienate their other partners into supporting Android even more, when Nokia can’t even get a phone out the door in a year.

RIM Blackberry. Unfortunately I think RIM, despite their past leadership in the market, probably is going to be relegated to being a low end platform for the next couple of years and if they don’t make a shift soon they will have to move to Android and then build their management services on top of it.  With that said, I’m intrigued by the potential of the QNX OS (soon to be) shipping on the Playbook tablet.  I don’t believe that RIM has announced that as being their future phone platform, but technology wise it’s ahead of the ancient blackberry OS.  I think that relying on another company for your operating system is a dangerous game, and if you play it you want to be HP and not say Dell.  I would be a lot more bullish on RIM considering their still considerable market share and brand name, but considering its been 4 years since the iPhone was announced and they still can’t compete with version 1 very well (or perhaps 2 is a better comparison, once Apple allowed apps).

HP / Palm Pre. I would have considered this company surely gone not very long ago, but considering that they appear to have a very good team behind the Pre (many Apple iPod / iPhone team alums), deep pockets in HP, and a leadership newly dedicated to cloud computing and software they could very well turn out to be the dark horse candidate.  The Pre operating system has always received good reviews.  Downsides?  They aren’t shipping a whole lot (if any) phones, and HP was never a phone manufacturer.  Even in the case of Palm, they did a lot better with the software than the hardware.  This would have been a great acquisition for Nokia a year ago in terms of product fit (not sure about the culture in Finland versus Silicon Valley), but it’s too late now.  Let’s see how HP can handle the Pre.  An interesting aside is that the culture of Apple, where many of the Pre team came from, originated at / was inspired by the old culture of HP, so they’ve come full circle.

Google Android + Apple iOS. I am cheating a bit by not picking a winner, but let me explain.  I think that Apple will continue to lead in terms of user experience, profit, and driving operating system innovation.  I think that Google will drive search, cloud computing, and form factor variety.  Google won’t make anywhere near the amount of money that Apple will, but I don’t think that’s their point.  They needed Android to prevent Apple from completely dominating the next generation of computing like Microsoft did in the 90s / 00s.  I think emerging markets will heavily break toward Android based devices because Apple simply will not make devices *that* cheap, or devices focused on specific niches.  Apple will gain market share in richer countries as a result of their increasing carrier presence, and especially once they add a lower price form factor like they did with the iPod.  One caveat in the rich countries is that I can’t predict how the vastly increasing presence of various computing devices in the near term will affect Android distribution – I don’t see iOS in your fridge, or your microwave, or your streetlamp – but maybe Google will go in that direction.