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Posts Tagged ‘Serial Entrepreneur’

Made.com Secures $3.75m To Assault Designer Furniture Industry
Made.com, a web-based furniture company, has raised £2.5million from investors to launch its service which connects buyers directly with manufacturers thus cutting out middle men.

The backing comes from Lastminute.com cofounder Brent Hoberman now of mydeco.com, PROfounders Capital (whose investors include Michael Birch ex of Bebo), investor John Hunt and Marc Simoncini through his investment vehicle, Jaïna Capital.

Made.com was created by 28 year-old serial entrepreneur Ning Li, who was a cofounder of Paris based MyFab.com which has proved the feasibility of connecting furniture buyers with makers.

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EC Roundup: F is for founder… and focus… and forgetting about competitive analysis

Here’s the latest from VentureBeat’s Entrepreneur Corner:

Ask the attorney: What the heck is Class F stock? – You know what Class A stock is, but what is Class F stock and what benefits does it have for founders? Attorney Scott Edward Walker fills in the details – and explains why it might be good for you, but could scare away investors.

Just getting started? Focus on this to get to the next level – While you might be focused on your revenue and profitability growth cycle, the real secret to success lies in your people and strategy, says Pamela Springer,CEO of Manta, in this primer for new entrepreneurs.

Death by competitive analysis – Competitive analysis tables are a standard of any presentation to potential investors – but serial entrepreneur Steve Blank says they’re also often responsible for screwing up more start-ups before they have a chance to get going.

In favor of software patents – With Apple and HTC battling it out these days, software patents aren’t real popular to a lot of entrepreneurs. But Alain Ranaud, founder of FairSoftware, says they’re legitimate tools, though they’re definitely in need of some fixes.

Entrepreneurism: The age gap – Running a start-up in your 20s can put you at a disadvantage, since so many people assume younger entrepreneurs don’t have the experience to know what you’re doing. A who’s who of young entrepreneurs discusses the issue in this podcast from Stanford University’s Thought Leader Lecture series.

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Study: SaaS Pricing Is Still Opaque And Freemium Is Rare

If you are building a SaaS (Software as a Service) venture, you should be thinking hard about your pricing strategy. It may be the single most critical decision you make. Pricing impacts your marketing, financial and organizational strategy. Are you selling an expensive, complex enterprise solution? Or a simple impulse purchase that an individual can make with a credit card? Will you offer a free, a.k.a.freemium, option?

You cannot fudge these decisions, you have to tell customers how much it will cost before they can commit. To provide input into this decision, it is good to learn what your peers are doing. So I researched 103 SaaS vendors to see how they handled pricing.

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This guest post was written by Bernard Lunn, a serial entrepreneur. In 2010 he is focusing on how the Internet is disrupting the capital markets after the financial meltdown, and also on what is happening as SaaS crosses the chasm to the mainstream. In 2009 Lunn was the COO of ReadWriteWeb. In earlier times he has built ventures at the intersection of software, media and outsourcing. Comfortable with globalization, he has built ventures in Europe, America and Asia. You can follow him on Twitter.

The Sample Set: 103 SaaS Ventures

How many SaaS ventures are there today? Nobody knows. I can see all of the public ones, and most of the ones that get serious VC money, and those that break through to some level of success. I found 103 of them. But I know that for every one I find, there are probably 100 more. But I think that I found 103 pretty important SaaS ventures and that 103 is a reasonable sample size. You can find the full list here. Here is how I categorize them by funding stage:

1. VC (institutional round)= 62%
2. Bootstrapped (maybe angel, but no investors on the record)= 16%
3. Publicly traded= 22%

Only 30% Really Want You To Call Them

I looked at all 103 to see how many have an 800 number right there on the front page with a big invitation to “call us right now”. That is a sign that they have invested in an inside sales team that can take an inquiry and convert it to an action.

The answer is only 30%. That was lower than I expected.

Note: Some companies have an 800 number on their Contact Us page. I did not count those. Most will go to a switchboard or voice mail. If the number goes to a sales team that is hungry for leads, you will want that number as prominent as possible.

I expected more to use inside sales to convert to action. There may be three reasons for this.

1. They are selling at such a low price point that it is not economical to have a human salesperson in the loop. I saw a few companies in this category. This is what might be called the Google strategy: The sales person only gets into the loop after a large company has already gone far down the adoption road.
2. They prefer to have prospects fill in a form so that a sales person can call them. As most do not show their pricing online (see next section) this seems a likely explanation. It is the traditional enterprise way. But I question if this way works in the SaaS model, and in an online world where site visitors want instant gratification and are nervous about getting spammed if they give out their information.
3. They don’t have the money to build an inside sales team. This seems unlikely given that our sample set was larger SaaS ventures.

Only 24% Show Pricing Transparently

I looked on the front page for a link about pricing and I dug down a level to find it there. Only 24% display pricing in the transparent manner that I think as the norm for SaaS (usually with multiple tiers). That is being generous; in our interpretation of “transparent” I included some who have one price with a line saying “pricing starts at x-dollars” that is really a come-on to get somebody to call.

I notice that Salesforce, the bellwether of the SaaS industry, has both transparent pricing (and a big 800 number invitation to call them). Other leaders with pricing transparency include Zoho, 37 Signals, Constant Contact, Xero and Timebridge.

Only 6% Have a Freemium Plan

That was the big surprise. Freemium is being discussed almost as the de-facto pricing strategy for SaaS. Note: I did not include a free trial as freemium. Most vendors have a free trial. Freemium means free forever, albeit with limitations.

Some experts are questioning this freemium orthodoxy. In particular I like the work being done by Lincoln Murphy (right), an SaaS expert at Sixteen Ventures. You can find his paper entitled The Reality of freemium in SaaS here. It is a good primer on freemium but once he explains the basic rationale, he goes on to suggest caution. His best advice is that you need to really understand what value you are getting back from your free users. He makes it clear that a no-think freemium tactic (”put it out there for free and figure out conversion later”) is often a disaster.

However, if freemium is the orthodoxy I expected more companies to offer a free option. The 6% freemium rate can be explained by either A: the vendors figured out what Murphy is saying and so don’t offer freemium, or B: the vendors are locked into old enterprise styles of selling and marketing. They may be SaaS-modern on the delivery side, but they are legacy on the sales and marketing side.

It is probably a mix of the two. The lack of pricing transparency indicates that B is more likely in most cases.

CAC Ratio: Where This All Comes Together

CAC (customer acquisition cost) is one number you should obsess about if you run a SaaS venture. Bruce Cleveland, the SaaS-focused partner at InterWest Ventures (see the ReadWriteWeb interview here) has a good post that outlines his definition of CAC. There are different ways to look at CAC, but I think Cleveland’s makes the most sense in the real world. Here is how he calculates the CAC Ratio: ($ Total Sales + $ Total Marketing)/$ First Year Contract Value.

He goes onto say, “The objective is to make the CAC ratio less than 1, which implies a customer acquisition payback of a year or less.”

That is controversial. Some would allow ROI over the years of Lifetime Value (LTV). Read his post why that is a bad idea operationally. (Cleveland was one of the original members of the Siebel executive team, so he talks from operational experience not MBA textbooks).

However, whether you measure CAC over one year or multiple years, the CAC ratio is how your investors will measure you. It will determine your capital efficiency, which determines how many times you need to go back to investors for more money.

I believe that vendors that don’t offer a clear path to revenue online (through transparent pricing and, for higher priced products, an inside sales) will struggle to have a best-of-breed CAC ratio.

What Is Your Experience?

Is a CAC Ratio below one feasible? What freemium strategies are working? Is it viable to hide pricing behind a lead generation form?

Freemium photo credit: ReadWriteWeb
Discuss

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How the Cathedral and the Bazaar Is Shaping the Future of Comics

Today’s startups, entrepreneurs and investors live and die by what seem like a series of holy proverbs. “Release early, release often” is perhaps one of the most poignant phrases when considering product launch and feature scope. On this cold Saturday, we’re paying homage to the origins of the concept by recognizing one of the seminal works in programming philosophy, and looking at a recent startup that’s taken it to heart.

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In the late nineties Eric S. Raymond presented The Cathedral and the Bazaar convincing Netscape to publish open source code. The work’s premises “given enough eyeballs, all bugs are shallow” and “release early, release often” were meant to justify early releases and crowdsourcing community feedback. While his work originally made a case for open source releases, it has gone on to inspire many outside of the open source realm.

Lead by Micah Baldwin, TechStars’ comic platform Graphic.ly is launching its beta version under the “release early, release often” tenet. Said Baldwin in a recent blog post, “If we are truly going to get the community involved, we need them involved early and often. We need them now.”

ReadWriteWeb first covered the mobile comic platform in November under its original name, TakeComics. Since then the company has rebranded as Graphic.ly, announced raising a little over a million dollars from Starz Media and appointed Baldwin as CEO.

As a serial entrepreneur, Baldwin rationalizes his company’s early release saying, “So many young entrepreneurs get stuck in the ‘What if’ world and try to release the perfect app. At Graphic.ly, we just released our Baby Beta, which frankly sucked. Badly. But we are getting amazing feedback, and its clear that it will be such a better product in the long term.”

Baldwin is using a combination of GetSatisfaction and Zendesk to manage early-stage feedback. Graphic.ly is also looking to adapt products like Google Moderator for proactive feedback in order to engage community members in the engineering and product discussions.

When asked about possible outcomes for the release, Baldwin replied, “The worst case scenario is that we don’t engage our community properly and lose their trust. There is nothing more dire than lost trust. The best case is that everyone who uses Graphic.ly sees their fingerprints all over it and shows it to their friends proudly, saying ‘I built that. That’s something I did.’”

The service’s first batch of invites got out tonight, to register for the service fill out the form here.

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EC Roundup: The soda principal and legal tips for securing angel financing

Here’s the latest from VentureBeat’s Entrepreneur Corner.

3 key legal tips for securing angel financing – Securing angel investing can be a confusing process for the start-up owner. Scott Edward Walker, the founder and CEO of Walker Corporate Law Group, gives three legal tips to help you ensured you’re not taken advantage of.

Can a single bottle of soda decimate your company? Absolutely. – Sometimes financial decisions that are seemingly rational on their face can be disastrous – and lead to major problems for a start-up. Serial entrepreneur Steve Blank describes an effect he has witnessed several times when a seemingly small perk is removed.

Three ways to avoid dog whistle marketing – It’s hard to make an impression as a start-up –but the reason no one’s hearing you might be avoidable. Jim Nichols, senior partner at Catalyst:SF, gives a few ways to make your message stand out.

The start-up chronicles: Experiments with Twitter – Serial entrepreneur has never been a big fan of Twitter.  So as he rolls out his latest venture, he hasn’t been real optimistic about its traffic-generating prospects. But a little trial and error has shown him there might be promise after all. Here, he runs down what he did to gain followers – and how the results have been.

Your most important support staff - Good employees are important, but if your family isn’t behind you in a start-up, it’s going to be a much harder road. Frank Levinson, founder of Finisar tells of a particular Christmas that his family postponed opening gifts to help with some critical company functions.

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EC Roundup: Someone stole my startup idea, and how to achieve grandiose failure

Here’s the latest from VentureBeat’s Entrepreneur Corner:

Venture Capital 2009: The year in review – Despite the dire headlines, there were some important trends that emerged in 2009. Grotech Ventures general partners Steve Fredrick and Don Rainey run down things many start-up market observers seem to have missed.

Someone stole my startup idea – Serial entrepreneur Steve Blank has started several business, but has only seen his ideas stolen twice – once very seriously. Learn how he reacted to the realization – and what he and his partners did to beat the competitor that was born of their marketing presentation.

How to avoid being blinded by the idea aura – Every idea is a world-shifting one when you initially conceive of it. But as you build it in to a company, doubt can set in. Is this part of the creation process or are you working on a dud? Brant Cooper, an independent consultant specializing in marketing and product management, looks at the phenomenon.

The start-up chronicles: Learning to listen to unpleasant truths – Asking for help when your business is struggling can be hard, but for many entrepreneurs it’s even harder to listen to the advice they seek. Cost Savings Guy CEO and founder Bruce Judson tells of his own travails in the latest installment in our ongoing series tracking the launch of a bootstrapped start-up.

How to fail… gloriously – Good funding, a good staff and a great product aren’t enough to guarantee success. Serial entrepreneur Eric Ries explains how one of his ventures burned through five years and $40 million in capital and still flopped in this thought leader lecture from Stanford University.

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Entrepreneur Corner Roundup: The disappearing office and battling inertia

Here’s the latest from VentureBeat’s Entrepreneur Corner:

Answering entrepreneurs most vexing questions – Running a start-up means making big decisions every day – and never being certain you’ve made the right one. Angel investor Jason Cohen writes of a new place for entrepreneurs to seek advice – from each other and industry experts.

What happens if the business sale falls apart? – Lots of start-up sales get as far as the escrow phase, but surprisingly few make it out. John Ovram, CEO of Exits and Answers, a social community for entrepreneurs selling their companies, says the best way to ensure a sale does happen is to keep working as if it never will.

Is the traditional office becoming extinct? – In less time than you might imagine, the morning commute could be little more than a memory. RingCentral, a cloud computing based business phone system provider, surveyed 350 small- and medium-sized businesses about their office structure and found a growing shift away from the traditional on-site centralized work force.

The start-up chronicles: Newton was right. Inertia matters. – Convincing customers to change their habits is, at best, an uphill battle. When serial entrepreneur Bruce Judson saw lots of traffic that wasn’t translating to sales at his new start-up, he diagnosed this inertia as the problem. Learn how he’s trying to fix it.

Want to be a CEO? Try product management first – Mark Pincus held a few jobs before becoming CEO of Facebook game maker Zynga. The one that he draws from the most, though, was his stint as a product manager – where he learned the importance of roadmapping, prioritization and customer understanding.

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Entrepreneur Corner Roundup: Business before health and what to do if you’re hacked

Here’s the latest from VentureBeat’s Entrepreneur Corner.

Sacrifice your health for your startup – You’ve heard about the importance of a work/life balance, but if you’re an entrepreneur, those rules often don’t apply. Start-ups are demanding beasts, notes angel investor Jason Cohen, and if you’re not completely obsessed with your company in its early days – often at the risk of your own health – your odds of success may be lower.

Killing innovation with corner cases – It’s good to think ahead, but focusing too much on the future and remote probabilities can kill innovation. Serial entrepreneur Steve Blank discusses how this corner case thinking can bog down a startup.

You’ve been hacked. Now what? – The first 48 hours are critical after your retail site is compromised by hackers. Chris Drake, CEO and founder of FireHost, Inc. gives you a to-do list to get back online and quickly restore customer confidence.

Moore’s Law beats customer feedback – Ignoring your customers doesn’t sound like a successful way to run a business, but Nvidia CEO Jensen Huang notes that by doing that – and trusting in Moore’s Law (which basically says tech performance will double ever year), the graphics company was able to survive and thrive.

The Start-up Chronicles: Who Is Invested in Your Success? – Start-ups face a variety of challenges on a day-to-day basis. This new weekly feature in EC gives an inside view of life in a bootstrapped startup. This week: Forming an eco-system.

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