First thing I received this morning was a message on Facebook about a job posting for a developer. This person responded with a very curt "$10/Hr for a web developer: People cut grass for $10/Hr". I was very surprised by this response to say the least. This person had been offended by our offer and wanted to let me know it.
The message this morning got me thinking about how lucky I am to have found two partners already in building Wombitt. Finding people to help you build out the concept is instrumental in reaching your goals. The question is where do you meet these partners. Ideally you will meet them through normal social circles. The next best place to meet potential partners would be at networking events like Facebook Camp, or DemoCamp. Here you will meet people interested in new technology, who perhaps will even be entrepreneurial. Given my experience this morning I should probably say that job boards are last resort, but we found one of our partners through a job board and he has worked out fantastically, so I suppose it is hit and miss.
The most important thing you can do to bring partners on board is to explain your concept in easy to understand terms, creating a description that highlights the benefits more than the features. For example,"Wombitt is an easy to use search engine that makes word of mouth reviews between friends instantly accessible online. The benefits of which will save the user money and time in making their own purchases". This little skill has been the hardest part of pitching for me because my natural inclination is to veer to the abstract rather than concrete.
Finding partners is an essential part of starting up because it helps vette your ideas through the filter of other people's opinions. In starting with bodbook almost a year back, the concept has changed so considerably because I was constantly trying to recruit additional help. If I had tried to go it alone we wouldn't have arrived at the most important insights that define where we are going and the problem we are solving. Good help is hard to find, but is immeasurably valuable when you do.
Wednesday, October 24, 2007
Monday, October 22, 2007
"What's the Need?"
A little bit of a digression but related to the overall theme of starting up. I received an email from a developer asking me about my opinion on a startup he was thinking about getting involved in. The startup is kind of like a rating service about bosses. You can give your boss a rating along a spectrum of good-bad. Kind of like "Digg", with good bosses ending up higher on the scale than bad ones.
On first glance this seems like a good idea. Everyone has a boss, not all are great. This could help users find the better ones. If you pose this concept to your friends you will probably get some enthusiastic responses. However, you have to look more closely at a concept to determine if it really is worth pursuing. In this case you have to ask the question "Why would the reviewer share a rating?" In business they call this the "Value Proposition" or "Pain Statement". What is the compelling reason that the user would "Need" your offering? If there is no compelling need the chances of success are lower. Finding that sweet spot is a key consideration in getting investors. If you can't point to a compelling need with a smart strategy for filling it, you are highly unlikely to get money from sophisticated investors.
The good news on this is that you don't have to to come up with the solution to a "pain" right away. It is more important to find a big enough area of interest for you to start doing some heavy research in, and then finding what in that area needs the most intervention. If you can find a way to apply web technology to a big problem, you are well on your way to a successful startup. For example, we started bodbook with an idea about connecting friends with word of mouth about movies they had seen. We went about creating this social network with some cool features and then released it to the public...it bombed. Luckily, despite at first not realizing what was most compelling about what we were doing, we were able to reorganize around the core concept of sharing word of mouth. Given that our first offering failed we are lucky to be working in a big area with lots of need, we just have to iterate within it until we find our sweet spot. That should be your goal also.
On first glance this seems like a good idea. Everyone has a boss, not all are great. This could help users find the better ones. If you pose this concept to your friends you will probably get some enthusiastic responses. However, you have to look more closely at a concept to determine if it really is worth pursuing. In this case you have to ask the question "Why would the reviewer share a rating?" In business they call this the "Value Proposition" or "Pain Statement". What is the compelling reason that the user would "Need" your offering? If there is no compelling need the chances of success are lower. Finding that sweet spot is a key consideration in getting investors. If you can't point to a compelling need with a smart strategy for filling it, you are highly unlikely to get money from sophisticated investors.
The good news on this is that you don't have to to come up with the solution to a "pain" right away. It is more important to find a big enough area of interest for you to start doing some heavy research in, and then finding what in that area needs the most intervention. If you can find a way to apply web technology to a big problem, you are well on your way to a successful startup. For example, we started bodbook with an idea about connecting friends with word of mouth about movies they had seen. We went about creating this social network with some cool features and then released it to the public...it bombed. Luckily, despite at first not realizing what was most compelling about what we were doing, we were able to reorganize around the core concept of sharing word of mouth. Given that our first offering failed we are lucky to be working in a big area with lots of need, we just have to iterate within it until we find our sweet spot. That should be your goal also.
Thursday, October 18, 2007
Funding
The only thing you can be sure of with funding is that it is elusive at best, so should you get some, be a miser with it, because you can't be sure when revenue or additional funding will come through.
Our experience with funding has been that it is extremely hard to get and will run out more quickly than you would imagine. We spent 3 months from application to approval to get our initial round of funding, $15000, from the Canadian Youth Business Foundation...and in retrospect that was the easiest money we could get. This is not to say that there isn't easier money to be found, it was just that we had no access to it.
If you have family that will support your efforts you should try to tap them first because their confidence in you will inspire confidence from friends and others. Beware though, taking money means risking their respect if you squander it in any way.
We went the opposite route in taking a bank loan and therefore were able to show a prototype. With that said, it didn't make our fund raising much, if any easier because the people you are pitching have to have some sense of what you are doing before they will put a dime in. For example, I have a cousin who married into money and was part of a successful business. I pitched her and her husband and walked away without a dime. The reason, they could not evaluate the opportunity because they had no sense of what it took to build a successful web company and the potential returns of doing so. On the other hand, I pitched a small number of my friends and was able to snag a small investment from a couple of them. The lesson I suppose it to pitch whomever you can because you never know who the idea will catch with.
The next level of investor is an even more elusive one. The "Angel" investor is usually a former entrepreneur who has cashed out of his own business and is now looking for the opportunity of cashing in on new business without the massive headache that running one's own startup entails. Angels can basically be found in only two ways 1. Angel Investing Clubs: These clubs group Angels together to evaluate potential deals that have already been vetted by professional evaluators. They usually aren't interested in seed deals like the one you would be bringing them. 2. Social Networking with other entrepreneurs. Most successful entrepreneurs had to raise money to do so, therefore they usually have contacts with Angels. If you want to tap this resource contact entrepreneurs who you think you might have something in common with and introduce yourself. You will usually find these people very accommodating and willing to help an entrepreneur just starting out.
The next level of investor is the Venture Capitalists. These people are professional investors and are just about impossible to impress without what they call "Traction". If you want to make these guys take notice you need to show results. They are however worth shopping your idea around with because they can bring high level issues to your attention that you may not have thought about. The downside is that they also may use your information to help out entrepreneurs they have in their portfolio already. My advice, tell them enough to basically describe your concept, without giving them the "Secret Herbs and Spices" that you believe will make customers keep coming back for your product.
When presenting to anyone take their criticisms in stride and try to learn from them. We have written our business plan so many times I can barely remember what the original concept was anymore. With that said, i know that what we are creating is exponentially better than what we started with, and much of that can be directly attributed to feedback from potential investors.
Next week I will write about recruiting the team, and building the product.
Our experience with funding has been that it is extremely hard to get and will run out more quickly than you would imagine. We spent 3 months from application to approval to get our initial round of funding, $15000, from the Canadian Youth Business Foundation...and in retrospect that was the easiest money we could get. This is not to say that there isn't easier money to be found, it was just that we had no access to it.
If you have family that will support your efforts you should try to tap them first because their confidence in you will inspire confidence from friends and others. Beware though, taking money means risking their respect if you squander it in any way.
We went the opposite route in taking a bank loan and therefore were able to show a prototype. With that said, it didn't make our fund raising much, if any easier because the people you are pitching have to have some sense of what you are doing before they will put a dime in. For example, I have a cousin who married into money and was part of a successful business. I pitched her and her husband and walked away without a dime. The reason, they could not evaluate the opportunity because they had no sense of what it took to build a successful web company and the potential returns of doing so. On the other hand, I pitched a small number of my friends and was able to snag a small investment from a couple of them. The lesson I suppose it to pitch whomever you can because you never know who the idea will catch with.
The next level of investor is an even more elusive one. The "Angel" investor is usually a former entrepreneur who has cashed out of his own business and is now looking for the opportunity of cashing in on new business without the massive headache that running one's own startup entails. Angels can basically be found in only two ways 1. Angel Investing Clubs: These clubs group Angels together to evaluate potential deals that have already been vetted by professional evaluators. They usually aren't interested in seed deals like the one you would be bringing them. 2. Social Networking with other entrepreneurs. Most successful entrepreneurs had to raise money to do so, therefore they usually have contacts with Angels. If you want to tap this resource contact entrepreneurs who you think you might have something in common with and introduce yourself. You will usually find these people very accommodating and willing to help an entrepreneur just starting out.
The next level of investor is the Venture Capitalists. These people are professional investors and are just about impossible to impress without what they call "Traction". If you want to make these guys take notice you need to show results. They are however worth shopping your idea around with because they can bring high level issues to your attention that you may not have thought about. The downside is that they also may use your information to help out entrepreneurs they have in their portfolio already. My advice, tell them enough to basically describe your concept, without giving them the "Secret Herbs and Spices" that you believe will make customers keep coming back for your product.
When presenting to anyone take their criticisms in stride and try to learn from them. We have written our business plan so many times I can barely remember what the original concept was anymore. With that said, i know that what we are creating is exponentially better than what we started with, and much of that can be directly attributed to feedback from potential investors.
Next week I will write about recruiting the team, and building the product.
Wednesday, October 10, 2007
Welcome Redeemer College
If you have come all the way to the bodbook blog via The Redeemer College newspaper you must be interested in learning how to startup a web company. If you have come via any other signpost on the web this may still be of interest to you.
In the article for “The Crown” I started with the basic question that a startup must ask: “What if?” In the case of bodbook we asked “What if we could create an online social utility that could help students use their numbers to save money through group discounts”. If you read back on this blog you will see how much we have changed our concept, and yet the guiding principle of “What if?” was always the same. You can assume that your concept is going to change many times before launch, so make sure that you know what direction it is you want to go before you head out onto the road.
Once you have your “What if?” start to shop the idea around with friends and family. Resist the temptation to conceal what it is you are doing. Despite your belief in the area of interest; you are going to find people mostly indifferent, and sometimes seriously opposed to the concept you are proposing. Most entrepreneurs go through a stage where they don’t want anyone stealing their idea so they won’t share it unless someone signs a non-disclosure agreement in blood. This is exactly the worst thing you can do. In shopping your idea around you are going to get a ton of criticism about why what you are trying to do won’t work. That may seem like a bad thing; but it is really the first step in shaving away the completely impossible from the highly improbable. The sweet spot is in doing the highly improbable because that is where you start to find your niche in the marketplace by doing something your competition can’t or won’t do. One caveat, if you find that everyone thinks that your concept is great then your audience is either too mindful of your feelings, or your initial question is too pedestrian and therefore is already being done by somebody somewhere.
Once you have a “What if?” slightly tested in the fire of public opinion, it is time to start to write your first executive summary of a business plan. This little document of 2-4 pages will help get you in the door with potential investors, but more importantly will start to get you thinking about some key questions that you will need to answer as you begin to build your business.
The key questions that you need to answer in the exec summary are:
Concept: What exactly are you trying to accomplish. In the case of bodbook we were trying to use the web to create a way for students to organize themselves around events so that they could gain group discounts.
Why your idea improves upon what already exists: In our case we felt that students were paying full price at movies and restaurants around the campus because they weren’t organizing around one or two places. We felt that if we could help them organize around a single movie theatre or restaurant they could gain a group discount.
How much money you will need: The answer to this question is often difficult at such an early stage. The best estimate you can make is to figure out some initial goals such as build a prototype and do a beta test in a relevant market. Once you have these goals in mind you can start to figure out your expenses relative to the amount of time you project to accomplish the goals. Then add six months of expenses to the estimate. Adding six months is a good safeguard because everything takes longer than you first estimate. And whatever you do, spend the money as if it will take the extra six months.
How you will make money: This question is relevant to friends, family, and professional money. You should have a plan to monetize your idea if you want to attract some money to finance your goals. A simple one page summary excel sheet outlining how much money you think you can make, and how much it will cost to run the business should suffice at an early stage. If it isn’t enough, just inquire from you potential investor what additional figures they need to make a decision.
A short section on strategy to market, including promotions, should be included: For example, with bodbook we suggested that it would take approximately 2-3 months to build the service, and we would promote it via the school newspaper and facebook flyers. Another caveat, the investor just wants to know that you have started to think about the various ways to accomplish your goal, so don’t worry too much about actually creating the perfect market strategy.
Competition: If you were to build what you are proposing who would want to see you fail? In our case, we thought that facebook might have a problem with us because we were trying to service the same market as them. We also thought organizations such as Student Price Club might view us as competition.
How you will overcome resistance by your competition: This is a relatively easy question to answer once you have honestly put your concept to the fire of public opinion. Once you have shaved away the impossible from the improbable, compare your offering to that of the competition and refine the concept again until you have the offering that your competition is either unable, or unwilling to match. If in that sweet spot you can create significant value in terms of saving the user time and/or money you have a competitive advantage.
Management team: This is where you list your accomplishments as individuals to inspire confidence in those considering investment. At this stage of your lives you are unlikely to have done much in the way of business, but you may have done some things that make you stand out from your peers. For example, if you have won academic or athletic awards list them, if you have T.A’d list it, if you have been an R.A list it. While at the highest levels of investment these accomplishments won’t mean much, at the initial level many investors will take your level relative to others your age as a good sign of potential.
Summary: Bring the entire document together in a paragraph or two outlining the opportunity and making a call to action. The executive summary will help coalesce your ideas into something tangible for your team and investors. Don’t worry about making it perfect, just have a reasonable, defensible answer for everything you say in it. If your business planning turns out to be anything like ours turned out; then you will be reworking your exec summary many, many times before it turns into something that really reflects reality.
Coming up with an initial idea and starting a rudimentary executive summary should take you less than a week, so in my next post I will talk about some possible funding sources that can help make your idea a reality. See you next Thursday.
In the article for “The Crown” I started with the basic question that a startup must ask: “What if?” In the case of bodbook we asked “What if we could create an online social utility that could help students use their numbers to save money through group discounts”. If you read back on this blog you will see how much we have changed our concept, and yet the guiding principle of “What if?” was always the same. You can assume that your concept is going to change many times before launch, so make sure that you know what direction it is you want to go before you head out onto the road.
Once you have your “What if?” start to shop the idea around with friends and family. Resist the temptation to conceal what it is you are doing. Despite your belief in the area of interest; you are going to find people mostly indifferent, and sometimes seriously opposed to the concept you are proposing. Most entrepreneurs go through a stage where they don’t want anyone stealing their idea so they won’t share it unless someone signs a non-disclosure agreement in blood. This is exactly the worst thing you can do. In shopping your idea around you are going to get a ton of criticism about why what you are trying to do won’t work. That may seem like a bad thing; but it is really the first step in shaving away the completely impossible from the highly improbable. The sweet spot is in doing the highly improbable because that is where you start to find your niche in the marketplace by doing something your competition can’t or won’t do. One caveat, if you find that everyone thinks that your concept is great then your audience is either too mindful of your feelings, or your initial question is too pedestrian and therefore is already being done by somebody somewhere.
Once you have a “What if?” slightly tested in the fire of public opinion, it is time to start to write your first executive summary of a business plan. This little document of 2-4 pages will help get you in the door with potential investors, but more importantly will start to get you thinking about some key questions that you will need to answer as you begin to build your business.
The key questions that you need to answer in the exec summary are:
Concept: What exactly are you trying to accomplish. In the case of bodbook we were trying to use the web to create a way for students to organize themselves around events so that they could gain group discounts.
Why your idea improves upon what already exists: In our case we felt that students were paying full price at movies and restaurants around the campus because they weren’t organizing around one or two places. We felt that if we could help them organize around a single movie theatre or restaurant they could gain a group discount.
How much money you will need: The answer to this question is often difficult at such an early stage. The best estimate you can make is to figure out some initial goals such as build a prototype and do a beta test in a relevant market. Once you have these goals in mind you can start to figure out your expenses relative to the amount of time you project to accomplish the goals. Then add six months of expenses to the estimate. Adding six months is a good safeguard because everything takes longer than you first estimate. And whatever you do, spend the money as if it will take the extra six months.
How you will make money: This question is relevant to friends, family, and professional money. You should have a plan to monetize your idea if you want to attract some money to finance your goals. A simple one page summary excel sheet outlining how much money you think you can make, and how much it will cost to run the business should suffice at an early stage. If it isn’t enough, just inquire from you potential investor what additional figures they need to make a decision.
A short section on strategy to market, including promotions, should be included: For example, with bodbook we suggested that it would take approximately 2-3 months to build the service, and we would promote it via the school newspaper and facebook flyers. Another caveat, the investor just wants to know that you have started to think about the various ways to accomplish your goal, so don’t worry too much about actually creating the perfect market strategy.
Competition: If you were to build what you are proposing who would want to see you fail? In our case, we thought that facebook might have a problem with us because we were trying to service the same market as them. We also thought organizations such as Student Price Club might view us as competition.
How you will overcome resistance by your competition: This is a relatively easy question to answer once you have honestly put your concept to the fire of public opinion. Once you have shaved away the impossible from the improbable, compare your offering to that of the competition and refine the concept again until you have the offering that your competition is either unable, or unwilling to match. If in that sweet spot you can create significant value in terms of saving the user time and/or money you have a competitive advantage.
Management team: This is where you list your accomplishments as individuals to inspire confidence in those considering investment. At this stage of your lives you are unlikely to have done much in the way of business, but you may have done some things that make you stand out from your peers. For example, if you have won academic or athletic awards list them, if you have T.A’d list it, if you have been an R.A list it. While at the highest levels of investment these accomplishments won’t mean much, at the initial level many investors will take your level relative to others your age as a good sign of potential.
Summary: Bring the entire document together in a paragraph or two outlining the opportunity and making a call to action. The executive summary will help coalesce your ideas into something tangible for your team and investors. Don’t worry about making it perfect, just have a reasonable, defensible answer for everything you say in it. If your business planning turns out to be anything like ours turned out; then you will be reworking your exec summary many, many times before it turns into something that really reflects reality.
Coming up with an initial idea and starting a rudimentary executive summary should take you less than a week, so in my next post I will talk about some possible funding sources that can help make your idea a reality. See you next Thursday.
Tuesday, October 2, 2007
A New Chapter in the Bodbook
We have decided to essentially turn over day to day of Bodbook to the students of Redeemer College if they are willing to accept it. I have been working on the spinoff project that I mentioned in the last post for the past two months and have come to the conclusion that trying to do both at the same time is just too much.
I really believe that bodbook could be something useful, so I am highly hesitant to simply forget about it, that is why I have decided to do an experiment in entrepreneurship and turn it over to the students at Redeemer College. A select group of students that identify themselves as wanting to be founders will have the opportunity to run it as their own business. They will make all the decisions, profit share, and shape it into whatever they feel it should be.
The only concession they make to me is that I remain Chairman so that they can leverage all that I have learned over the past year of developing bodbook, making contacts, raising capital...in short letting me shorten their learning curve.
I really believe that bodbook could be something useful, so I am highly hesitant to simply forget about it, that is why I have decided to do an experiment in entrepreneurship and turn it over to the students at Redeemer College. A select group of students that identify themselves as wanting to be founders will have the opportunity to run it as their own business. They will make all the decisions, profit share, and shape it into whatever they feel it should be.
The only concession they make to me is that I remain Chairman so that they can leverage all that I have learned over the past year of developing bodbook, making contacts, raising capital...in short letting me shorten their learning curve.
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