Category Archives: Entrepreneurial Business

Start Up Entrepreneurs: Your probably small, but do all you can to be big

We like what you guys are doing but there’s no way we’d replace the aorta of our communications infrastructure with a beta box from a 20-person startup” – Director of IT, Fidelity Investments (circa 2002)

Call it the enterprise startup conundrum: how do you earn legitimacy if no one will give you an opportunity to become legitimate? The enterprise world is different from the consumer world: barriers to entry are higher, switching costs away from incumbents are bigger, and the risks for failure (for both buyers and sellers) are greater. And while there’s definitely no single right answer, an enterprise startup that can’t crack this conundrum is a dead enterprise startup.


At IronPort, we had built a radically better email gateway. It crushed the popular and arcane sendmail — the free, open-source software that we aimed to replace — in every dimension. Our product was even cheaper to own, as it ran on one-tenth the hardware, but we were unproven and email was mission critical. To make matters worse, for our early adopter industries (ISPs, media, tech, and financial), no email service meant no work. We were so good, yet so puny.

We felt like the little kid that kept getting turned away at the height chart at the rollercoaster — we can handle the ride, just give us a chance! Somehow, we had to find a way to look bigger and more credible quickly. After an intense brainstorming session, we hit upon a really important concept: since perception was reality, any weakness that the customer couldn’t see and couldn’t touch did not exist. By being absolutely maniacal about each of our customer touch points, we would appear to be far bigger than we were. No matter how rinky-dink the “man behind the curtain” was, it didn’t matter because the Great Oz would be massively impressive. We called it “Project Blowfish.”

We examined everything the customer could possibly touch. It had to look like it came from the big boys: Cisco, Microsoft or Apple. How would they do it? We asked and researched. Here’s what we came up with:

  • We looked big. We paid up for the best graphic designers for the website, business cards, and the sales collateral. Heavy cardstock business cards. High gloss datasheets and well-written content. Smart, insightful— as perfect as possible.
  • We felt big. Our appliance that sold for $50,000 was at its core a cheap-looking Dell 2650 2U rack-mounted server running our software that cost $3,500. At great debate from our board, we hired IDEO (www.ideo.com) to design a thick, aluminum faceplate and backplate with our branding. And they did it for equity. (Here’s a picture: http://www.ironportstore.com/web-security.asp). The shipping box was packed smartly with very high quality cardboard that had our logo silkscreened all over it. It was reminiscent of how Apple packs it products.
  • We projected total professionalism. For the physical manual, we took inspiration from the Sony Handycam and the Cisco Router manuals. It had clear diagrams, was well organized, and had a laminated Quick Setup guide. We shipped all of our evaluations out via Fedex next day, which made a really strong impression on customers who typically waited weeks for competitor’s products. They got it much faster than expected and when they opened it up -everything they saw was impressive.
  • Our ads were on brand as well. We took out full-page ads in major IT publications. Great product pictures, clear, clean, and uncluttered messaging.

All of these details mattered, but the key to the entire plan to make our little company appear big was to perform like the very best large companies. For us, this meant dramatically beefing up customer care (CC). In general and especially in high tech, CC had been a backwater — treated like a cost center to be minimized. Since this was arguably the most important early customer touch point, we took a completely opposite approach: we treated it like a marketing expense. With a firm belief that this was the primary catalyst for word of mouth, we invested heavily in the entire post-sale ecosystem. Our approach was to answer email inquiries instantly and telephone calls on the second ring with little to no hold time. We concentrated on how to deliver the best possible experience first and then went back and figured out how to cost-optimize it later. Here are a few ideas that ended up working:

  •  For the first six months (until we were absolutely overloaded), the entire leadership team was on the CC email alias. We were aware of every issue, saw the thoroughness and timeliness of the responses and chimed in with suggestions. This helped set the customer care culture: it was damn important and always had a bright light on it.
  • We hired the best of the best to lead CC and gave them a ton of autonomy to make decisions quickly. (I’m extremely proud that our first two heads of CC subsequently became venture-backed CEOs: Cyan Banister and Patrick Peterson.)
  • We hired the best all-around athletes, paid them above market, trained the hell out of them and then gave them a legit career path into sales engineer, engineer or CC management. We hired for friendly, intelligent and responsive…
  • We tracked all of the metrics relentlessly and then posted them everywhere. Big screen monitors hung in CC and showed constantly moving progress charts which then linked to internal status websites and dashboards. We had green signal lights around the office that turned yellow and red when a customer was on hold too long. The visibility throughout the company helped to make it a special place to work.
  • We opened in different time zones early for 24-hour coverage. We found that the best people would rarely work the graveyard shift so it was much better to hire in a time zone when they were naturally awake. I remember this saved our bacon during our evaluation at Goldman Sachs. Goldman, based in NYC, had a CC acid test for hot tech companies, especially ones from California. They’d send in an urgent email at 7am EST or 4am PST. Our newly opened CC center in London picked it up in 30 seconds and gave a detailed fix and thorough answer. They were floored.
  • We had a direct connection between CC and product management with regular reviews. In fact, some of our best ideas came from customers working through problems with a CC rep.

Ironically, the most fanatically apostle customers were the ones that had the biggest problems—catastrophic failures. It was during those times that we showed our mettle. We had a funny saying about it: “When you save someone from drowning, they quickly forget that you were the one that pushed them into the pool in the first place…” In retrospect, by focusing on all of the touch points in an effort to look bigger, we actually became that company. What started out as a bit of a façade became real and we grew into the oversized shoes.

Scott Weiss is a general partner at venture capital firm Andreessen Horowitz. He is the former co-founder and CEO of IronPort Systems, which was acquired by Cisco in 2007.

Source: http://gigaom.com/2011/10/04/project-blowfish-look-like-the-brand-you-want-to-be/


Ten Highly Successful Bootstrapped Start-Ups

Who says a bootstrapped startup can’t succeed?

A lot of entrepreneurs think they need piles of money to make their startup a success, but that’s not always the case. Here are 10 bootstrapped companies that did it on their own with no outside funding.

Startup #1: Goldstar
Goldstar is the world’s largest online seller of half-price tickets to a broad range of live entertainment.

How’d they do it?
Starting with $1000 ($800 being paid to the state) Rich Webster, Jim McCarthy, and Robert Graff noticed something wrong with the ticketing business.

Venues were giving away tickets for free to shows that were unsellable. Instead of being able to fill up a show, venues found themselves with a lot of unwanted seats. The trio quickly realized that it was a lose-lose situation for both the consumers and the venues, and decided to take action. “No venue wants to be told that their product is worthless, and no customer wants to go see a show that’s unsellable,”  said Robert Graff.

In October of 2001, Webster, McCarthy, and Graff decided to do just that and GoldStar was born. They were able to get the company off of the ground by focusing on their solution for popular undersold shows.

Already disenchanted with the waste of funds and inefficiency caused by accepting VC investments they’d seen at another Startup, the trio decided against seeking any outside funding. “We purposefully didn’t want anyone else’s money because we didn’t want their advice” said Graff.

Today, Goldstar works directly with 4,000 venue partners to connect them with their huge and growing audience. Venues list tickets with Goldstar to sell to their members for a discounted price. The company has over 1.5 million subscribers and offers over 900 tickets to events at one time.

Startup #2: Carbonmade
Carbonmade helps over 100,000 people create online portfolios that require zero HTML skills.

How’d they do it?
Starting as a tool for one of the founders to update his portfolio, co-founders Spencer Fry, Dave Gorum, and Jason Nelson launched a self-funded, $12 per month plan in 2007, alongside their established free plan.

Looking back on their previous experiences working at startup companies, the founders decided to bootstrap their business in lieu of seeking outside funding. By generating a steady revenue from consulting projects and sales, the founders were able to spend time growing their business slowly.

Instead of spending tons on advertising, the site got noticed when bloggers started sharing the site with their communities. They continued to gain traction up until 2010, when they were able to exclusively focus on growing the site.

Today, Carbonmade is a bootstrapping success story, growing from a tool built for a personal portfolio to being used by over 200,000 people to showcase their artistic talents.

Startup #3: Litmus
Litmus is an email marketing tool allowing 30,000 customers to test their designs in all major email and mobile clients.

How’d they do it?
Founders Paul Farnell, Matthew Brindley, and David Smalley started Litmus in 2005 with a used computer and $800 dollars. While still in college doing freelance web design they realized that there was a need for a faster and less expensive cross-browser testing tool.

In order to answer their need and test if they could build a better service, they built the site and launched in one weekend. Farnell shared this first version with a group of designers on an email list he had been a member of for years.

Charging from the start, their initial version allowed users to see a web site on only a few different web browsers. Within a few months they had received positive feedback and around a 100 paying customers.

Included in that first version was a “coming soon” section, listing additional features that they had planned on adding. Instead they ended up listening to what their customers wanted and adding completely different features.

“These were the things that we thought were cool and we thought people would be excited to use, and, to an extent, people thought they were cool ideas, but they would say, yeah, they would be good, but what we really need is this other thing, which we maybe had considered but had ruled out as not being that important, said Farnell.

Today, Litmus has had over 30,000 customers, 1 million+ in revenue, and is growing by around 10% a month. They have no plans of selling the company or taking in outside investment. Farnell says,  “Why would we want to give up the flexibility and freedom we have right now?”

 

Startup #4: Github
Source code hosting for companies and open-source projects, Github is used by nearly a million people to store over two million code repositories.

How’d they do it?
Founded in 2008, GitHub offers public and private source code hosting to companies and open source projects using either git or subversion.

Chris Wanstrath, PJ Hyett, and Tom Preston-Werner began GitHub as a solution to their own problem: they loved git but there was no way to share their codes with others. Started as a weekend project, the three spent money out of their own pockets to cover the cost of a domain, hosting, and started sharing their idea for free with their friends.

When they made the decision to make GitHub into a full time business, they scraped together the funds needed to setup a legal entity instead of seeking outside aid.

The real challenge they faced was supporting themselves financially as the business grew. Opting to eschew the traditional road of venture capital funding, Tom worked both at GitHub and at a full time job, while Chris and PJ consulted on the side. They paid themselves small salaries and setup monetary goals for the business each month. With some effort and patience, the three watched their salaries finally grow as profits from their paid plans started rolling in.

Today, GitHub has over 100,000 users, thousands of paying customers, and almost a million repositories – with thousands more added each day. In January 2009 they wonaCrunchie for best bootstrapped startup.

 

Startup #5: FastSpring
FastSpring is an all-in-one e-commerce, merchandising and fulfillment solution to sell digital products online with over $45 million in revenue.

How’d they do it?
Started by four previously successful startup founders that were working for the same company, FastSpring was created  in order to solve current industry problems. Realizing that customer service, new technology, and price were important to businesses selling digital products, the founders began working together remotely to address the market needs.

Agreeing that bootstrapping the company was “common sense,” they started with $30,000 contributed from their own pockets. The biggest issue that the four founders ran into was finding a suitable name for their company.

Playing catch up to their competitors co-founder Dan Engle stated that they, “under estimated the quantity and quality of the functionality that we would need to build in order to even be on par with other companies in this space.” However one thing that they did do from the beginning was to talk to potential customers in order to find out which essential features were needed before launch.

Taking no salaries and doing all the work themselves, three of the four founders lived off of prior businesses they were running while the fourth was able to work on the business while living off his savings. They slowly built up their salaries as they brought in more customers and now are able to pay themselves a “nice” income.

Today, Fastspring can hardly be called a startup anymore; it processes payment pages for over 8,500 clients, has earned over $45 million in revenue, and been featured in 2010 as the Inc. magazines 41st fastest growing company.

Startup #6: SparkFun
SparkFun is an online store for electronic bits and pieces that brought in revenue of over $10 million in 2010.

How’d they do it?
After blowing up some electronic parts and searching the internet for replacements, founder Nathan Seidle saw a business opportunity for an online electronic parts store.

Starting the business with about $2500 in credit card debt, Seidle originally purchased a random assortment of products, unsure of what would sell. Orders started trickling in, about 1-2 per day, and all of the sales profit was funneled back into the purchasing of more products to sell on the site.

About reinvesting in his company Seidle said, “You take all the money you make and buy more inventory with it…I think it was more than 3 years before I was able to buy a new winter jacket.”

Seidle quickly realized that a bootstrapped startup is a cash guzzler and tightened his belt on personal expenses while continuing to expand his product base.

Today, SparkFun has a wide following and boasts over $10 million in revenue. From it’s humble beginnings in 2003 in Seidle’s living room, SparkFun has grown into a favorite supplier for the increasing popular “Maker” community.

Startup #7: Grasshopper
Grasshopper is a virtual phone system for entrepreneurs, allowing 100,000+ small businesses to create a more professional image.

How’d they do it?
Grasshopper was started when two college classmates, David Hauser and Siamak Taghaddos , wanted to solve the problem of  how to create a professional image while just starting a business.

Allowing entrepreneurs the capability of giving phone number extensions, even while working remotely, helped them seem like a larger company. “It is a capability [that lets] a one- to five-person team of entrepreneurs sound like a big company,” Taghaddos said.

Grasshopper was started with approximately $250,000 from personal and family savings, as well as credit cards. Even though they started with $250,00 they used what is called “negative cash converting cycle financing.” This means that they did not spend money until they got it, allowing them to be extremely conscious of hiring and spending money.

Before they were even able to start building they needed to obtain the proper equipment. Without raising any funds, the founders decided to funnel what resources they had to achieve their vision for Grasshopper.

Profitable within 2 months, their first year Grasshopper had $423,000 in revenue, in 2007 $8.8 million. Today, Grasshopper has over 100,000 customers with pricing from $9.95 – $199 a month.

Startup #8: Clicky
Clicky is real time web analytics running on over 350,000 web sites.

How’d they do it?
Started in October of 2006, founders Sean Hammons and Noah Merritt, wanted to provide an affordable and simple solution to real time analytics. Why bootstrap? Hammons says, “Owning 100% of your company and not having to answer to shareholders is ridiculously satisfying.”

Initially made as an internal tool for a previous company Hammons and his previous boss Merritt realized the potential immediately. Funded by Merritt’s savings, Hammons coded the project for release over a fourth month period.

Without any strong connections at the time they spread the word by contacting hundreds of bloggers and posting in forums. With a marketing budget of zero dollars, they initially had trouble getting anyone to try their service out. Finally, a big break occurred when they were able to obtain a single blog post on a “largish web site.”

After a few months they were making money, and dealing with scaling problems. Without doing any marketing they credit their affiliate program to be a major factor in growth. From the beginning they had the affiliate program in place allowing every user to take advantage of  20% per paid refferal’s payments.

Today, Clicky has about 150,000 customers with 15,000 of those paying between $4.99 and $24.99 monthly, not including their custom “white label” service.

Startup #9: WooThemes
WooThemes is a one stop theme shop of designs and cutting-edge commercial themes for WordPress.

 

How’d they do it?
Working as a virtual team, Adii Pienaar, Mark Forrester, and Magnus Jepson founded WooThemes in January of 2008. Sales started coming in almost immediately, making it possible for the team to stop freelancing on the side and focus completely on the business.

Believing in organic growth, WooThemes has grown at a steady rate of 10 – 15% monthly. Buying themselves time initially by doing freelance work, they were able to avoid taking on any initial funding. “We’ve been making money from the very first minute we released our first themes, which means that we didn’t need to pay back loans or really invest in any infrastructure when we started out,” said Pienaar.

A positive by-product of growing their business organically is founder happiness. Pienaar says, “With WooThemes we’re trying to find that balance between financial ambition and the happiness that WooThemes creates in our individual lives.”

Today, WooThemes has over 40,000 users and more than 1.8 million downloads, generating over $2 million in revenue. Co-founder Pienaar gives this advice for hopeful startups; stick it out and bootstrap for as long as you can, seeking outside funding should be kept as a last resort.

Startup #10: AppSumo
AppSumo is a daily deals website for the coolest web applications in the market, bringing massive savings to over 200,000 happy web geeks.

 

How’d we do it?
Launched in 2010, AppSumo is a daily deals website offering the coolest web apps and digital goods for technology geeks.

It all began when our co-founder Noah Kagan was helping run a payments company for Facebook games and noticed that partners were having a hard time finding new cloud applications and innovations in web distribution. Noah realized this was a niche not to be ignored.

For $60 Noah hired an outsourcer to build the back-end of what would be AppSumo and Noah built the front end using open-source member registration code. Within a month the site was launched; traffic was generated via Reddit ads and Noah sold over 200 of his first deal – 50% off pro accounts at imgur.com.

Following that minor success, Noah teamed up with co-founder David Cramer. They came up with the company’s core vision: to help solve distribution for startups and eventually all digital goods.  David rebuilt the entire site in Django/Python and AppSumo launched it’s next deal in June 2010: a productivity bundle that was featured on Lifehacker. They sold 500 bundles, proving that this was a service the community wanted.

AppSumo exists for one reason – to make our customers happy and help them succeed by providing them with low-cost tools and learning materials that are relevant to their career and today’s business climate. Everyday, AppSumo offers a deal that’s guaranteed to help you win (or at least become a better entrepreneur).

 

Today, AppSumo has nearly 200,000 subscribers, thousands of paying customers, and a growing fan base of individuals, startups, and businesses.