In the late 90’s and early 2000’s hundreds of internet companies were sprouting up weekly; entrepreneurs and investors saw the value of the nascent medium and wanted to get in early. One of the major flaws of internet businesses at this time was the way they were measuring success. Instead of using revenue or profit as an indicator of success, they were measuring growth via an increase in users or visitors. Entrepreneurs and investors justified using new metrics because it was a new medium. This led to unsustainable business practices and the dotcom bubble bursting.
When the cost of capital is low, it is easier for businesses. When cash becomes scarce, only companies who have built a sustainable business will be left standing when the dominos fall. There will always be ups and downs in the market and focusing on building a sustainable business when times are good will enable a company to continue operations when times are difficult.
We recently caught up with Jamie Hill, CEO and Founder of adMarketplace, a search advertising company which launched two months before the dotcom bubble burst in May of 2000. The challenges that adMarketplace faced were bad timing, capital was difficult to obtain, and their business was based on a new unproven medium. Jamie said “I learned the hard way that the company had to be nimble to stay alive.”
Launching a self funded internet business in 2000 has defined the core of the organization for adMarketplace. “It was important to me that we build a business that limits dependency on others,” says Jamie. Because they focused on being self sufficient, adMarketplace opted to build everything in house and invest heavily in talent. They also own their own data (which is an asset in their industry). Being self sufficient saved adMarketplace in 2006 when an exclusive agreement with eBay ended. They had to reinvent themselves, and had built the company in a way that allowed them to so. They had the data and client relationships to continue because of the decisions that they had made in the beginning.
According to Jamie, they were able to build a sustainable business over the years because they were realistic. “You have to be able to ask the tough questions and make the hard choices. We weren’t afraid to walk away from sunk costs to survive. Every step of the way we’ve outworked everyone else and prioritized knowledge wealth. We focused on building a transparent, healthy network and as it turns out, that’s great for building a successful business”
How would you build a sustainable business?
Many people believe that successful tech companies, like Apple, can be started from nothing by anyone in a garage or coffee shop. There is a lot more to it, however. Although there are many paths, how can you go from idea to launch to traction to success? After learning from your own experiences, the next best way is to learn how others have done it before. One of the most important parts of learning from others is realizing that the variables are always slightly different and you will need to tweak the steps and model as you go.
We recently caught up with Kevin Anderson, Co-founder and head of business development for Appetize. Kevin told us about the steps that Appetize followed in order to build the successful company they have today.
- Research: They initially spent time researching: which companies are offering similar services? How big is the market size? What types of revenue models would work for this business?
- Analyze: After gathering the information, they analyzed it. What did they need to do to create a successful business? What assumptions did they need to make? How would they reach their target market?
- Get the MVP into the market: After research and analysis, Appetize was convinced that the opportunity was big enough and worked on getting the Minimum Viable Product (MVP) into the market. Many tech startups leverage MVP launches to get feedback and tweak from there. This enables the company to spend less time and resources building out a spec that may not work.
- Listen to the market: Once the MVP is in the correct hands “having a passionate team that can pivot quickly, and keeping your finger on the pulse of what the industry wants are the true keys to starting a business,” according to Kevin.
- Innovate: Kevin says, “Our market sizing, competitors, and revenue models have all changed since we started. So, yes, make sure the opportunity is massive, but once you do, get out there with a product, listen to clients, and innovate quickly.”
Appeyize offers POS systems for live entertainment venues. Over the past few years Appetize has grown their platform from a mobile ordering app for fans to a suite of payment/POS products, which now includes a (1) mobile app and white label SDK, (2) handhelds for waiters/hawkers, (3) kiosks for line busting and luxury suite holders, and a (4) full scale POS for concession and merchandise stands.
What are the steps that have works for you to build a successful business?
As technology evolves burgeoning trends emerge. Right now we are seeing the wearables trend: Ringly, for example, connects an 18K gold ring with a semi precious stone to your mobile phone. It vibrates when you have calls/texts/etc from specific people. It is a challenge to project which trends will turn mainstream and which will drop off. (Remember Betamax?) A lot of assumptions need to be made.
We recently caught up with David Shim, Founder & CEO of Placed, to hear about his experience founding a company in the emerging space of local and mobile analytics in 2011. David remembers “The opportunity in local and mobile reminded me of the early days of digital, where web analytics meant log files, and third party ad serving was optional.” With his experience in digital media, David was able to draw parallels between the two and he saw significant potential.
“This comparison highlighted the opportunity in local to bring analytics and accountability into a space that represents over 90% of retail transactions in the US. The future of local, looks a lot like the current state of digital, where everything is measurable. “ David said.
Founded in 2011, Placed measures consumer locations, providing a view digital behavior, physical location, and the impact of media.
Which trends do you see becoming mainstream?
Coming up with business ideas can be challenging. James Altucher, an entrepreneur and best selling author, suggests practicing coming up with ideas (10 per day) in order to exercise the idea muscle. The more used to coming up with ideas, the more likely you are to come up with a good one.
But what about after you come up with a “good” idea? How do you know if it will work? We recently caught up with Mike Cooch, Founder of StartupProfs, a team of entrepreneurs who’s mission is to improve the lives of people around the world by helping them build their own lifestyle business.
Mike, who has had years of trial and error with business, has learned to evaluate new ideas carefully. He says: “The most important thing I’ve learned is that not all business models are created equal. Some are inherently better than others when it comes to enabling you to reach your personal and financial goals.”
Mike takes business idea evaluation a step further: not only should you see if your idea is viable, but you should also evaluate your idea based on the what it is that you would like to achieve in your life. A simple example: a person who would like the flexibility of working remotely should not start a business that requires them to be physically present.
Mike Cooch is a serial entrepreneur. Prior to StartupProfs, Mike was the Founder and CEO of Everon Technology Services, which he successfully sold in 2010. His businesses have been named to the INC Magazine List of Fastest Growing Companies three years in a row, and were also nominated as a Best Place to Work in their respective cities.
How do you evaluate your business ideas?
Venture Capital backed companies typically go through unique stages of business. Although experiences range and the timing of stages vary by company and industry, a typical VC backed company goes through the following stages.
We recently connected with David Daneshgar, Co-Founder of BloomNation, a community marketplace for people to list, discover, and send unique floral creations by local artisans across the country.
David describes the greatest challenge in finding an investor was “finding someone we really liked, shared the same vision and connected with to lead the deal…We realize that it’s almost like a marriage and you want to make sure that those are the people you want to work with for years to come.” Typically gaining a board seat, investors have deep relationships with the company.
BloomNation raised a Seed round of funding for $1.65M one year ago. Looking back over the year David’s advice to new entrepreneurs is to not over-optimize: “Everyone wants the best partners, the best valuation, to raise the most money, the least dilution, the best terms, etc. But you can’t have everything and the sooner you get a couple of your bucket list items checked off and just move with the business the better.” Prioritizing what is most important to the founders and being flexible on less important issues enables the company to progress quicker.
With about 6.5M companies being founded and 2,700 companies receiving venture funding each year in the US, not everyone will make the cut. David notes “at the end of the day by being venture backed, you are one of the very few that made it to this stage and now the most important thing is to execute.”
How would you execute a Seed round?