nPost Blog

Is Apple Evil?

From Raw Thought (from Aaron Swartz)

Today’s iPad introduction has to be about the most depressing Apple product launch I’ve ever watched. As has been noted, Jobs’ Reality Distortion Field only works when he believes in what he’s selling and he didn’t seem to really believe in this. The audience must have further added to the disappointment, expecting a revolutionary product and only getting an oversized iPhone (iPod touch, actually).

That’s not to say the iPad won’t sell, or that I don’t want one. The scariest thing is that I think it probably will. It’s clear that Apple plans for the iPhone OS to be the future of its product line. And that’s scary because the iPhone OS is designed for Apple’s total control.

A lot of people have argued that requiring Apple to approve every application for the iPhone OS is some kind of “mistake”, something they’ll remedy as soon as they realize how bad things have gotten. But recent events — Phil Schiller’s personal interventions, comments on their call to analysts, etc. — have made it clear it’s not a mistake at all. It’s their plan.

The iPad is their attempt to extend this total control to what’s traditionally been thought of as the computer space. This is just the first step, but it’s not hard to imagine Apple doing their best to phase out the Macintosh in the next decade, just as they phased out OS 9. In their ideal world, all computing will be done on the iPhone OS.

And the iPhone OS will only run software that they specifically approve. No Flash or other alternate runtimes, no one-off apps or open source customizations. Just total control by Apple. It’s a frightening future.

I don’t know why they’re doing it. It’s hard to see how it makes them more money. (Curating all those apps must be expensive, not to mention the lost sales from the unapproved ones.) I can only presume it’s a result of Jobs’ megalomaniacal need for control — not only does the hardware have to be flawless, the software must be too. And the only way to ensure that is to have Apple approve every inch of it.

I love Apple products. I’m a huge Apple fan. I’d buy an iPad right now if I could. But, for the first time, I’ve got a real sinking feeling in my stomach.

Incumbents

From cdixon.org

Almost every startup has big companies (“incumbents”) that are at some point potential acquirers or competitors.  For internet startups that primarily means Google and Microsoft, and to a far lesser extent Yahoo and AOL.  (And likely more and more Apple, Facebook and even Twitter?).

The first thing to try to figure out is whether what you are building will eventually be on the incumbent’s product roadmap. The best way to do predict this is to figure out whether what you are doing is strategic for the company. (I try to outline what I think is strategic for Google here). Note that asking people who work at the incumbents isn’t very useful – even they don’t know what will be important to them in, say, two years.

If what you are doing is strategic for the incumbents, be prepared for them to enter the market at some point. This could be good for you if you build a great product, recruit a great team, and are happy with a “product sale” or “trade sale” – usually sub $50M. If you are going for this size outcome, you should plan your financing strategy appropriately. Trade sales are generally great for bootstrapped or seed-funded companies but bad if you have raised lots of VC money.

If your product is strategic for the incumbent and you’re shooting for a bigger outcome, you probably need to either 1) be far enough ahead of the curve that by the time the big guys get there you’re already entrenched, or 2) be doing something the big guys aren’t good at. Google has been good at a surprising number of things. One important area they haven’t been good at (yet) is software with a social component (Google Video vs YouTube, Orkut vs Facebook, Knol vs Wikipedia, etc).

The final question to ask is whether your product is disruptive or sustaining (in the Christensen sense).  If it’s disruptive, you most likely will go unnoticed by the incumbents for a long time (because it will look like a toy to them). If the your technology is sustaining and you get noticed early you probably want to try to sell (and if you can’t, pivot). My last company, SiteAdvisor, was very much a sustaining technology, and the big guys literally told us if we didn’t sell they’d build it. In that case, the gig is up and you gotta sell.

Should Apple be more open?

From cdixon.org

It is almost religious orthodoxy in the tech community that “open” is better than “closed.” For example, there have widespread complaints about Apple’s “closed” iPhone app approval process. People also argue Apple is making the same strategic mistake all over again versus Android that it made versus Windows*. The belief is that Android will eventually beat the iPhone OS with an “open” strategy (hardware-agnostic, no app approval process) just as Windows beat Apple’s OS in the 90’s.

With respect to requiring apps to be approved, consider the current state of the iPhone platform. There are over 100,000 apps and thus far not a single virus, worm, spyware app etc. (I don’t count utterly farfetched theoretical scenarios). As a would-be iPhone developer, I can report firsthand that the Apple approval process is a nightmare and should be overhauled. But what’s the alternative? Before the iPhone, getting your app on a phone meant doing complicated and expensive business development deals with wireless carriers. At the other end of the spectrum: If the iPhone OS were completely open, would we really have better apps?  What apps are we missing today besides viruses?

With respect to the strategic issue of tightly integrating the iPhone/iPad software and hardware, a strong case can be made that Apple’s “closed” strategy is smart. Clay Christensen has given us the only serious theory I know of to predict when it’s optimal for a company to adopt an open versus closed strategy for (among other things) operating systems. The basic idea is that every new tech product starts out undershooting customer needs and then – because technology gets better faster than customers needs go up - eventually “overshoots” them. (PC’s have overshot today – most people don’t care if the processors get faster or Windows adds new features). Once a product overshoots, the basis of competition shifts from things like features and performance to things like price.

The key difference today between desktop computers and mobile devices is that mobile devices still have a long way to go before customers don’t want more speed, more features, better battery life, smaller size, etc. Just look at all the complaints yesterday about the iPad - that it lacks multitasking, a camera, is too heavy, has poor battery life, etc. This despite the fact that Apple is now even building their own semiconductors (!) to squeeze every last bit of performance out of the iPad. Until mobile devices compete mainly on price (probably a decade from now), tight vertical integration will produce the best device and is likely the best strategy.

*It’s worth noting that Steve Jobs wasn’t the one who screwed up Apple. Jobs co-founded Apple in 1976. He was pushed out in in May 1985 when the company was valued at about $2.2B. He returned in 1996 when Apple was worth $3B. Today it is worth $187B.

Interview with Andy Smith of Gyminee

We are pleased to feature Andy Smith, the co-founder of Gyminee:

nPost:  I’m here with Andy Smith, of Gyminee. Andy, would you mind giving us an introduction to your startup?

Andy Smith:  Gyminee is a web based health and fitness tracking application, combined with a fitness specific social network. So basically, the idea is, with Gyminee, you can track anything that you’re interested about, like your fitness, your exercise, nutrition, and diet. 

And we combine those with social features to make it more motivating to exercise. Things like an online accountability partner that we call “gym buddies,” and fitness challenges, where you can host your own “Biggest Loser” competition, challenge your friends to a running or biking challenge, that kind of thing.

nPost:  How did you come up with the idea?

Andy:  We started Gyminee because we couldn’t find a good way to track our workouts, weight training, online. We found that they’re either too clinical or they were too surface level. So, when we started, on the sites out there you could basically say, “Oh, I feel pretty good about my workout.” Very limited in what you could do. We wanted a nice, clean, easy user interface to track your workouts.

 It’s actually quite interesting. We’ve grown from there quite a bit based on our user demands. So, right now, our most popular feature on the site is nutrition tracking, and we weren’t even planning on building that in. Now, we’re more of a exercise and nutrition site, with community, as opposed to just a weight lifting site.

nPost:  How did that transition, or that need, come to your attention? Was it user feedback, or you just noticed that your users kept going to whatever area was available on the site?

Andy:  It was basically user feedback. We spent a lot of time, early on, making it very easy for users to submit their feedback to us on new features, what they see missing, and that kind of thing. We paid a lot of attention to that. We still do, actually. We have a pretty active forum community, where a lot of people contribute those requests.

 A lot of what we build out next is dependent on that user feedback. We’re finding lots of people saying, “we want a site where we can track both our exercise and nutrition. We don’t want to track our exercise here, and our nutrition somewhere else. We want a one-stop place for this.” So, that’s why that was built.

nPost:  And what would you say is your target market?

Andy:  Our general audience is people who are interested in total fitness and health, not necessarily hardcore bodybuilders. I think there are other sites that would cater to them more. We’re really interested in young to middle aged adults, 18 to 45, who are either in a gym or are very active, or are interested in being active.

 We actually cater to people who are just getting started, who need some help. We also work well with people who are already active and want to get more serious about tracking. It’s more of a general fitness market.

nPost:  As you are looking your grow your site?

Andy:  That’s a great question. We are interested in both the consumer and the business. One of the reasons we came out to TechStar for the summer was to investigate additional channels, besides just the consumer.

 We’re looking into partnering with gyms. We actually have a couple of partners already, that we’ll be rolling out with soon. We’re looking at partnering with companies, corporate wellness programs and, potentially, health care providers. We believe that there is a lot of opportunity to work with these kind of organizations too.

 On the gym side of things  which I’m the most familiar with because that’s what we’re up to  I feel like there’s an opportunity to build a community in the gym that comes outside of the gym. Not just when they’re in the gym, but actually when they are away from the gym. And provide the gym with a lot of additional features that we can’t really talk about quite yet.

nPost:  Will gyms direct members to Gyminee or will you be private labeling the service?

Andy:  That’s another good question. We’re exploring both options. The gym white label option is appealing to us, but I think, at first, we’re going to try to do more of a co-branding option. I think the Gyminee name is starting to grow in popularity. We don’t want to necessarily just go into the shadows.

 We’re still trying to build the overall community outside the gym as well. So that’s still up in the open. We’re exploring both options.

nPost:  What impact does having a strong social networking aspect to your service have on individuals reaching their goals?

Andy:  Concrete data we wouldn’t share, but I will say that there are people on our site who are interested in both. We have people who don’t really care to have the community, but the fitness tracking tools that we provide are very superior and they like those. So, they just want to do it on their own. But, more and more, we find the support and the community, the forums and that kind of thing, really encouraging to people.

 In addition, with the new “Gyminee Challenges” feature that we released last week… I think that’s really going to be key into getting other people motivating and challenging each other towards a certain goal. For example, we have a weight loss challenge on right now where, for the next month, we’ll see who can lose the most weight. To encourage people to get in there and record what they’re doing, and communicate.

 We have message walls just about that challenge, to encourage them to either motivate each other or talk trash. Whatever they, the challenge members, are into. I think that will make a big difference.

nPost:  What would you say is the most important aspect of your involvement with TechStars? Is it the capital investment or the network they provide?

Andy:  Well, the capital is obviously the smallest benefit. I mean it was great, I’m not going to give it back.  That’s not why we came out, because actually we’re a little bit farther along then some of the other TechStar companies, being in that we’ve been around for a little bit longer.

 The best thing about TechStars so far has been the mentorship, the regular meetings with the main mentors, David Cowen, Brad Feld, but also the ability to interact with the teams here. We’ve got 10 teams of very strong entrepreneurs.

 Basically we interact all the time, share ideas, collaborate, and then the external members that they bring in weekly. We meet with them 30 minutes to an hour each, and really get to pick their brains of some of the top entrepreneurs in the country. I would say that is the highest euphoria for us.

nPost:  You are from Huntsville, Alabama; you’re currently residing in Boulder, Colorado. What are the pros and cons to each location in starting a company in either place, either location?

Andy:  Well, there’s a lot of differences in the cities. We were actually involved in a technology incubator in Huntsville before we came out here.

 I think one of the biggest changes here that we’ve noticed are that the entrepreneurs in Huntsville are very good at government contracting, very good at the types of businesses that are in Huntsville. Huntsville is a military town basically; NASA, the rest are arsenal, that kind of thing, very good in that kind of business.

 Whereas, here there’s a lot more innovation in web based startups, that’s a big difference in the mentors that we have access to. So the mentors that are great in Huntsville are very good but specialize in different areas, where here they specialize in the web, and that kind of area.

 Now another thing that’s actually here, are business pitch actually changes a lot more, because Denver in Colorado is the most healthiest state in the country, whereas Alabama is one of the not so healthy states in the country. I think they alternate with Mississippi and Louisiana being the worst.

 So in Huntsville the big theme is, “We want to help people overcome the obesity problem.” Where here where there’s Olympic athletes, everybody’s healthy. We’re really trying to communicate with people saying, “Here’s how you can even be more elite in your fitness.”

nPost:  Will your market be split geographically, and if so where?

Andy:  So, my guess is initially we will find them in the bigger areas of the country of people who have more money or more interest in their health. Our iPhone component is a big thing, so those areas where the iPhone is more popular. 

We also have a high percentage of Mac users, so those areas. Silicon Valley are going to be our power users so far. I will say that we’re interested in helping people maintain and get healthier, so ultimately our goal will be to penetrate the areas where people need it the most. 

So in regards to location for us as a company, right now we’re distributed. I think that works great for us, and actually our Chief Marketing Officer is the Silicon Valley area. I’ve been in Huntsville, seen him in Denver. 

I don’t think there’s any need for us to be in any specific place, but as far as the target of our initial efforts would definitely be in some of the key cities.

nPost:  How do you plan to generate revenue?

Andy:  That’s really slow. Right now we generate revenue through Gyminee Pro, which is a subscription, we do the freemium model. Our idea is to build a large base of free users, because we think having a large community of fitness enthusiasts will make us desirable for acquisition in and of itself.

 In the meantime we have Gyminee Pro, which unlocks thorough dance teachers, meal planners, workout programs, guide with professional trainers, advance tracking stats, that kind of thing. We’re getting a good feedback on that service.

 We have a higher than average percent conversion from active to our pro subscription, so we feel that model is pretty good. Advertising is something we will look for in the future, so we’re still looking to put some condos at.

 So, I mean there’s a lot of other ways of monetizing with gyms, supplement companies; there’s lots of ways that we can go.

nPost:  Do you plan to raise another round of investments in order to get the company to scale and to revenue?

Andy:  We are looking for investment, part of the tail tech started at the end view in front of a lot of investors. So far we’ve raised 50k from friends and family to date, that’s got us to where we are now. 

I do believe we will probably need a small Series A investment, and then I think we can get your profits building on that.

Interview w/ Villette Nolon, CEO of HomeSavvi

Villette Nolon, the co-founder and CEO of HomeSavvi is attempting to create a social network for the home remodel industry.

Interview conducted by Nathan C. Kaiser on Friday, August 22, 2008 in Seattle, WA.

I’m here today with Villette Nolon of HomeSavvi. Villette, would you mind giving us an introduction to your startup?

HomeSavvi is a company that provides a complete guide to remodeling for homeowners. As part of that guidance, we help them with the process, with the budget, and finding the actual resources of materials, products and service providers that they need.
Where did the idea for HomeSavvi originate?
I had actually been remodeling my own home during 2004-2005. And, because I’ve been the CEO at a software company prior to HomeSavvi, I was pretty Internet proficient and was doing a lot of my research on the Internet. I found that there was really a big, gaping hole in the marketplace for real solutions for homeowners. So, I decided to start a company and solve that problem.
Are you focused on the homeowner that is remodeling for personal use or for the individual who will be flipping the home or renting it?
We’re primarily focused on homeowners that are remodeling for their own personal needs, and are really looking for a more upscale, personalized experience. However, a lot of the lessons learned there for homeowners are applicable for people who are doing either a vacation home, a second home or investment property. The level of materials for investment properties may not be at the same level of customization or quality as a home that the homeowner is going to live in, but the process and the budgeting procedures are basically the same.
What impact has the credit crunch had on the remodeling business?

There has been a huge issue in the marketplace regarding the credit crunch, not necessarily for HomeSavvi, but certainly in the home improvement industry as a whole. Retailers are feeling the pinch. New home builders have really been affected the most. And, remodelers have been affected, but not to the same degree that new homebuilders have been.

To answer the question, there is a decrease in the market that is expected to be temporary. The reason for the temporary nature of the slowdown is that there have been a number of homes built in the last 25 years, and improvements to those properties continue to need to be done. So, while people may no longer choose to buy and sell homes as frequently as they have in the last five years, they still need to make improvements. When you look at the market, the home improvement market has increased at a dramatic pace.

All of the predictions are that there is a slowdown this year and probably in 2009 as well. But, the long term 15 to 20 year outlook is extremely strong for remodeling, and actually stays stronger than new home building.

How it affects us directly is pretty interesting. In the last five years, many people who were professional service providers in the marketplace found business came very easily to them. Now, homeowners and service professionals alike are looking for more solutions and to be wiser with their dollars. And, on the service professional side, they want to make sure that they’re really getting their word out and their name out to very qualified buyers, which would be the homeowners that we serve.

You’re also going after a higher level remodeling projects.
Yes, we are and the reason for that is pretty simple. There are a lot of companies out there that are able to provide a solution for either a very budget conscious homeowner, or somebody who is not going to be putting a lot of customized touches into their home. For instance, Home Depot really does a pretty good job of offering you everything from appliances to finished products, and even offers service providers for homeowners that may have a minor job to get done. But, if you’ve got a half million dollar home or more in value, and you have very specific things that you want to put into that home and some of them may be custom, often you won’t be able to buy your materials at a store like Lowe’s or Home Depot. You find yourself really working with the specialty retailers and providers of other kinds of material goods, as well as custom home builders and custom home remodelers.
How are the majority of these projects being paid for?
Great question. I’ve only had this told to me anecdotally, and I can’t prove it in anyway. But, I did have someone say to me that no one takes money out of their savings account for a home remodel. They generally will get money from a home equity loan. I was an exception to that. I saved my money and I tend to pay for things in cash. And so, that’s how I handled it, but I’m just one person. I do think the tendency in the last few years has certainly been to dip into a home equity line of credit, or some other similar kind of instrument. It would be very difficult and foolish for me, personally, to try to predict how people will finance home remodeling in the next few years.
Is your predicated on launching in specific areas or do you plan to launch nationally at one time?
Well, the beauty of the way our model works is that we’ve identified that many of the problems that we’re solving for homeowners can be solved one time for many people, so they’re national issues. A good example is the installation of windows. That’s going to happen the same way whether you’re in Florida, Seattle or Nebraska. However, finding a service provider is something that’s unique to the local area that you live in because most people won’t be able to find a contractor that’s going to travel any more than 20 miles to come to the job site on a daily basis. So, our strategy is to take all the items that are nationally major and make those available as quickly as possible and drive national site traffic to our company.

On the local level, we will be focusing on the areas of the country where remodeling is still healthy, and areas that have overbuilt and experienced a really serious problem due to the bubble will probably be put lowest down on our list. We do know that there are 35 major metropolitan areas that drive about 50% of remodeling end, so we do have to focus on those top 35. And we can pretty much change the order of those in a very efficient manner without it really affecting our bottom line at all.

What is your plan for building the database of local service providers?
We’ve got several strategies, and some of them I really can’t talk about right now, simply because they are part of our secret sauce.

I can tell you that our strategy does include a variety of methods of getting the content in that database built.

 The most important thing for us to ensure is that the service providers that we do list on our website are the ones of highest quality, that they’re held in high regard by their local business community, and that they’ve got really strong reputations.

 So, we have developed a very efficient and scalable way to develop that database that is surprisingly easier than it would appear on the surface. We really found great success in doing that very quickly. 

There’s a combination of methodology, partners, and technology that we use to do that. So, it is, as I said before, our secret sauce. But I won’t say that it’s an easy process because if it was easy, everybody would have done it already. It’s something we pay a lot of attention to.

How do you plan to generate revenue based upon this type of model?
We have a financial model that has already started to realize revenue streams in a variety of ways. If you think about the process that a homeowner goes through in remodeling a home, we’ve identified different phases. They start with the dreaming phase, then get into the planning phase, the remodeling phase, the finishing phase, and then the actual enjoyment stage. There are different things that a homeowner needs to do in each one of those phases. Our business and its model really reflect every single one of those stages, if you will.

To give you the broad strokes, when we’re looking at retailers, product manufacturers, and other companies that are similar to that, what we would expect to get from them is either sponsorship, advertising dollars, or affiliate marketing fees. When you get to the actual service provider, we could either choose a referral fee or a percentage of the job, or a flat monthly subscription fee for placement. We are free to the consumer. That’s the most important thing that we think people should know. We believe that the consumer ultimately should not have to pay for this information. We’re just organizing it in a way that makes it much easier for them to make good decisions, and it’s the industry that is trying to educate and get in front of that homeowner that will really ultimately pay the freight. So, there isn’t any one specific thing that I can say, like, “We’re charging referral fees to contractors.” That’s only one element of our business, and we’ve got ways to make money all along the stack.

Along the lines of charging for placement or listing services, you are providing a recommendation for the best service provider for a given customer’s need. If they’re paying for placement, is there a conflict of interest?

We really know that our target customer is the homeowner, and so a paper plate kind of placement is against the values of the company. Now that being said, there are going to be some companies that either have a larger budget or are willing or want to really get themselves in front of homeowners. So, certainly we have multiple opportunities for a particular company to get itself in front of customers in a variety of ways. And if a particular organization chooses to do so, it can certainly take advantage of all of those. But when we come to, for instance, direct recommending companies in a certain category, at HomeSavvi, we know that we would destroy the trust of the homeowner if we were to always really try to push or shill one company ahead of others. So, we’ve got a slightly different way of looking at it in that we want to be able to provide enough information in this case, it would be the service provider as an example.

We want to be able to provide a robust enough list of interior designers for a homeowner to look at and make a decision about, but we don’t want to provide so many that the homeowner says “this is really no use to me because I’m still now looking at a list of 25 people and I’ve got no way to make a decision amongst them. So, there are several different criteria that we use to give the homeowner a way to filter which of these service providers is going to be the best for them. And in some form. And some elements of this, especially when it comes to the service provider, really come down to chemistry. You may meet three different contracting firms who are all equally well equipped to service the needs, they’re all very well referenced, and they’ve all got great ratings from their existing customers. But, if your communication level is just better with one than with another, that’s the one to choose. It’s almost like finding a spouse.

There are some elements of this that we can’t control ourselves. But, we know the fundamental question that you asked about, conflict of interest around advertisers versus the needs of the homeowner. We know who our customer is and if we’re doing something to destroy their trust in us, that’s something we believe, we really can’t do or it destroys our brand.

As a serial entrepreneur, what would you say are some of the key lessons you’ve learned from one experience to the next?

Nathan, I think, the main thing that is most important for any business is to be providing value for its customers. This is not something new. There are many, many entrepreneurs and many experienced businesspeople that may not be entrepreneurs but managers of large corporations that are always balancing the needs of employees versus investors versus shareholders versus customers versus suppliers. At the end of the day, if you’re not taking care of the primary customer first, at least in my opinion then all the other stakeholders eventually will suffer and then the whole business will fail. Most of my experience has been in the B2B world. HomeSavvi is really the first time I’ve done something in the B2C world. So, I’ve certainly learned a lot of new things, and some of them have been painful lessons. But, the one that is the most near and dear to my heart is customer experience and having that customer experience be a hugely rewarding one. And I believe strongly if you focus on that, everything else starts to fall in place.

Where is it that some startups go wrong by losing their focus on the customer?
I think, there are a lot of things that entrepreneurs can get distracted with. I’ll be the first to admit that I’ve had my moments of distraction as well. That can come in a variety of forms. What I hear most often from fellow entrepreneurs is concern around investors. There were two parts to your question, and they relate to each other. When you’re in a startup, which is unlike many other kinds of environments, you’re often starving for cash. Your resources are strapped, and you’re doing anything you can to get enough money from some source to keep the company alive. If you’re lucky and you have a good product or service that takes off right away, or a very tangible product or service, you can start making money in revenue almost immediately. And that can carry you a long way towards expanding and growing the company. If you need outside investment, on the other hand, often investors will tell you they would only invest in your company if it were doing something slightly different.

It’s very easy, as an entrepreneur, to take those messages and start to really flip your business model around and try to make it look a certain way in order to be more attractive to investors. I’ve even at times felt myself like saying, “I don’t care what the customer wants! As long as they’ll pay for something, I’m happy to deliver it.” And then when I calm down and really allow myself to think things through, I realize that that’s not really the right answer. So, unfortunately, I think, people who are in the startup world often get pushed willy nilly mostly because they’re looking really desperately for a way to grow their company in a solid fashion. And as a result, they may get pushed around. I know for myself and I’ve heard other people say this, so I’ve taken their wisdom to heart you reach a point where you get feedback from many, many, many people and then you have to come back to your gut or your knowledge base of what is important and decide what direction you’re going to take. And you have to feel comfortable that if it fails, at least you made the right decisions and maybe it failed for other reasons. But, if you allow yourself to get pushed from hither to thither, then you’re really never going to get anywhere.

In transitioning from a B2B marketplace or startup to a B2C, what would you say was the key things that you had to learn or relearn about running a startup?

That’s a great question. It wasn’t the actual running of the startup, because that’s very similar. The functions are the same. The biggest difference is in some of the specific things that needed to be done. I’ll give you an example that still smarts, even now. I did not have a really great background in consumer goods, or consumer facing businesses I’ll put that way, because consumer package goods is down the world. But, on the web, I have run a web-based company once before. I’ve been involved in a web-based company many times. But, from a consumer perspective, there’s really an element of user experience and information architecture that’s really critical. And it’s not quite as critical in the business-to-business world.

Business users are really more forgiving than consumers are, because if they have a business chain and you’ve developed a software product that involves chain, even if the user interface isn’t perfect, business users will have the patience and the fortitude to work through the problems and continue to use the software. In the consumer world, it’s very, very different. There are a lot of choices, and a consumer can come on to a website, start to use it, and if they find it to be an unsatisfactory experience, they can leave within seconds and it’s very hard to get them back. So, the user interface and the user experience. The level of experience that’s needed there to really shine and be good is a particular skill set, and it doesn’t come easily. So, that was a tough one for me. We hired outside help. I knew I couldn’t do it in the first place, but I didn’t even know exactly what was needed for outside help. Learning that alone was about a five week process, and I thought I was going to tear my hair out!

Interview with Vikram Chalana, CEO of Winshuttle

Vikram Chalana is the co-founder and CEO of Winshuttle an enterprise software company he and Rajat Oberoi bootstrapped. Vikram talks about the process of building Winshuttle, the pros and cons of bootstrapping and his insights into the entrepreneurial process.

Interview conducted by Nathan C. Kaiser on Friday, August 15, 2008 in Bothel, WA.

I am here today with Vikram Chalana of Winshuttle. Vikram would you mind giving us an introduction to Winshuttle?

Winshuttle is an enterprise software company. We provide products in the data governance, data management space for enterprises. Typically, our target customers are $500 million or higher in revenue mid to large size companies. Currently our focus is on customers who have implemented SAP. What our entire value proposition is that we are giving software that enables business users to manage their own data, to optimize their business processes, to optimize their operations without relying on IT. So, our whole push is empowering information workers or empowering business users within companies that have implemented SAP. And our solutions right now are very simple data management solutions. They interface SAP enterprise applications with desktop applications, like Excel and Access, and take data from one side to the other.
What is the core value to the business user?
There are basically three different areas where we see applications. One is when somebody is implementing SAP from scratch or is migrating data from their legacy system. They have a large amount of data that they need to bring into SAP. So, what we find is that Excel or Access are great staging areas that people are familiar with and they can do global search interfaces and put rules around and remove duplicates and so on. So, that’s one area… data migration is one area where our customers use it. That is usually either when they are beginning an SAP implementation or often times we see in case of mergers and acquisitions, and new divisions or companies are started, they want to get the new division into SAP. So, that is one area.

The other area where we often see is business driven mass change, which is a very common scenario. For example, every year the HR departments are involved in this payroll update process. For every employee, a payroll record that sits in their existing system has to be changed. So, one common scenario that we have seen is that the current payroll information is downloaded into Excel spreadsheets for every department. And the department receives those spread sheets, makes the changes, adds bonuses and so on. And then, the new payroll is at the end loaded back into the SAP system. So, we have seen customers who can do that whole cycle without getting IT involved.

We make it very easy for them to do it. Another example like that is pricing changes that again happen every year for products that companies sell. Home Depot is one of customers. They sell tens of thousands of SKUs that often have to be updated in prices or have to be moved from one location to the other. So, that is another very valuable application. The third application that we find that a lot of our customers use our stuff for is where they receive data from external third parties from outside vendors. eBay, for example, is one of our customers. They receive invoices from a lot of their vendors as Excel spreadsheets. The vendors are not on EDI and they are not connected to their systems, yet. So, they send them Excel spreadsheets and eBay has set up a requirement that they have to send them Excel spreadsheets in this particular format. They just then take and load into their SAP system using our software. So, those are some kind of typical applications that our customers use our product for.

What is the split in terms of your business for each of these business services?
I want to say 80% of our customers use it for that second scenario, the data maintenance scenario, because that is such a common scenario. It does not happen every day, but it is a once a month, or once a quarter or once a year scenario. About 40% of our customers use it in this third scenario, which I call data synchronization from external sources. I want to say about 30% of our customers have used it for data migration scenarios. So, I mean, there is a lot of overlap. Some customers use it for all the three scenarios, others might use it for just for one, and so on.
How did you incorporate all three capabilities within your structure from a user perspective as well as from a pricing perspective?
Actually our product is generic. It works with any SAP module. The way our product works is very simple. You train the software to show it how one SAP transaction is done. For example, you would show it how one invoice is created in SAP. That is kind of the training part. Then you say, ‘OK, my Excel spreadsheet that I am going to get will look like this.’ There is a very simple mapping process where you map the training fields to the Excel fields. That constitutes an Excel template or a shuttle template that we call that a user can run over and over again. Now, this process is just so general that it can be used when you first create or implement SAP or when you are doing maintenance, or whether you are running these templates on a daily basis. We defined a very general process across the board for all of SAP.
When you were launching the business, why did you decide to focus on SAP and Windows applications?
I came out of the SAP world. The consultants who were helping me with this, they were in an SAP shop. They actually were talking to the business users and they build it. It actually started out as a project for a single customer. And they saw… The consultancy saw that this is a very… something that business users were looking for every day; because they were tired of going back to IT for every single request. The whole thought process that went into this was IT is a very valuable part of an organization. They have a lot of projects, a lot of strategic projects that they have to complete.

Anytime you have this data integration type applications, which may not affect the huge amount of users or every smart… except a large amount of data, anytime you have this middle tier projects, they get very low priority on the ITs’ service scale. What they were finding is that these users were not getting enough attention from IT, because IT was involved in more strategic things. And as a result, the users were doing things manually. They had a request, for example, to do payroll changes and this is in the pedigree department. It was being entered manually the payroll changes were being entered manually into the SAP system. It was wasting a lot of time for the departments, for the users, and you were creating all kinds of errors as you were typing things in manually. And particularly, the problem was that the data was already in digital format the data was already in Excel; and you haven’t to reenter that into SAPs. It was just…

We saw that huge waste of effort, and the fact that the users were not getting the attention of ITs because it was not a strategic enough project. They said, “this is a real need that we see in the user community that we should solve. We kind of stayed with that mission, that core mission, that we started out with serving the user community, serving the business users.

I would also assume that if this was a manual process and was prone to errors.
Absolutely. I’ll tell you story about one of our customers. They said that we create all these materials that they sell the SKUs that they sell. They make electrical parts like light switches and stuff that they ship to Home Depot and other retailers. So, they create about, maybe, several thousand SKUs every quarter; new parts that they are selling, or rules and regulations change and now they have to recreate these SKUs. They were creating these manually and each SKU required about 20 screens that you have to go through and about 150 fields that you would touch. And these are just any simple product finish script that you are creating for this result. SAP is a big system, and it’s pretty complex.

I mean, it has to be that way because there are so many things that are tied to each other your finance has to be defined, the cost center has to be defined, the price has to be defined, the shipping conditions have to be defined, the material description, and the gross weight and the net weight, and all those fields have to be defined. What they were finding was that, for a whole bunch of materials, there was one field that was being entered incorrectly. Because of some manual data entry error, the trucks were waiting on the loading dock there is a field called loading dock. So, there were trucks waiting on the loading dock with no product ready to go, because somebody had manually entered a wrong loading dock for that part, when they were creating this material. This kind of problems, data errors, can cause huge issues in a business. There was a study that said, ‘Data quality affects 15 percent of the bottom line in the profitability for many companies.’

When you were transitioning from being a director of R&D to being the CEO of Winshuttle, what were the key experiences that you brought with you, and also, what were the key traits or skills that you didn’t have that you now have.
Right. So, being an engineer, I found a lot of things coming into play. It was very useful having an engineering background because the analytical skill that you develop as an engineer… and I was also doing… I got a PhD in bioengineering and that was kind of a mixed project between bioengineering, electrical engineering, statistics and computer science. I got exposed to lot of areas there, but it’s the analytics that I really thought that actually helped me a lot as we were building the business plan, as we were developing the different marketing methods that we are going to use and how we’re going to attract these methods and how we’re going to bring things out and… There is a lot of analysis that went on, and a lot of calculations. We were tracking numbers in a very detailed level and that’s where the engineering background really helped.

The skill that I didn’t have… that I’ve learned over the years is a lot of sales and marketing background. So, I didn’t come into it with the sales and marketing background, but over the years, I ran the marketing program here and I’ve really learned what’s required in the marketing. And I think, I’ve brought a lot of unique perspective into our marketing program, and sales, and presenting to customers. And the whole sales process in the Enterprise Solutions selling process is something that I’ve learned over the years. It’s been a great experience.

What is the best way to do that, to shorten the learning curve? How do you get that skill set quickly, especially if you’re the CEO and founder of a company?

So, there’s the thing whether you have money or not. Because what we did was, we really quickly brought on salespeople from the outside who had the experience to do that stuff. But, either way, I think, the quickest way to ramp up is to get a set of advisors who have the experience and can really help you in learning and making a path for the expertise that you don’t have.
It’s about identifying the people who have the skill set out there currently, who have potentially a track record as well, and to bring them on to advise and mentor the company in whatever capacity.
Absolutely. That has been key for us so far.
When you are scaling the business and bringing on the people to help you do that, what are the key characteristics that you look for in new hires?
Actually, I’ll take a little digression here because our company is a little bit different from some of the other companies that you profile on your website, for example. Our company didn’t get any outside investors. We are completely bootstrapped. My business partner and I put in our own money and we brought the company this far we’re going to be doing about $10 million in business this year with no outside investors. We had to be very cost conscious throughout. And that’s one trait, if you will, that I really look for in key managers that we hire. Any spending that they do, they almost think that it’s their own money that they’re spending. But other than that, the other thing that we’re looking for is someone who has the experience; they need to work in a smaller company. Because, again, that trait of working with limited resources is something that you only get when you’ve worked at smaller companies, startup companies, and so on. So, that’s another thing that we’ve looked for people who have that small company experience and experience in working with limited resources. We’ve just tried to hire very smart people. And then, that’s a hard one to define. But, it’s just trying to get someone who can ramp up very quickly; someone who has the right experience, but can also learn and do new things very quickly.
When you were first starting the business with your cofounder, why did you decide to bootstrap it completely and not seek any funding?

Our funding requirement was not that much to begin with, and we wanted to really keep everything within our control as to how we wanted to grow the company, and where we wanted to take it, and the kinds of values we wanted to put into place, and so on. So, it’s really because we wanted to have complete control over the company going forward. We took some big risks. We put our houses on second and third mortgages, and used that money to really bootstrap the company. And then, we figured that one of the values that we had was that we could really do it by keeping the costs really low, and just living within our means all the time. And we were able to do that. We immediately outsource our development to India. We started with really low cost marketing approaches, like Google AdWords, and so on. And both of those things still work out really well for us.

Was there a trade-off associated with bootstrapping the business versus seeking outside investment?
Yes. I think, we would have scaled up sooner. We definitely would have scaled up sooner. The nice thing, though, being in the market we’re in. The Enterprise software market and being tied up to SAP allow some stability in that the market changes are not that dramatic. For example, if a company has installed SAP, they’re going to have it for 10 years or more, and they’re not going to probably change versions in five years. We had a little bit of time to scale up the business in a sense, and we didn’t have huge competitive pressures at that time. So, we had the luxury of time to some degree. But, yes, absolutely if we had taken capital early on we would have scaled much faster.

Interview with Anil Pereira, CEO of SecondSpace

Anil Pereira of SecondSpace is creating a marketing place around second homes and properties.

Interview conducted by Nathan C. Kaiser on Monday, August 11, 2008 in Seattle, WA.

I’m here with Anil, the CEO and Founder of SecondSpace. Anil, would you mind giving us an introduction to SecondSpace?

SecondSpace is a web services company that runs marketplaces for buyers and owners of land and second homes. We connect folks looking for their dream location with a broad range of real estate professionals and service providers that can help them make the most out of the second home lifestyle.
This is a growing market correct?
Number one, it’s much larger than it ever has been; and number two, it’s much larger than everyone realizes. For example, according to the National Association of Realtors, 40 percent of all annual home sales are second homes. Now, you add into that, land, land for recreation or land for building your dream retirement property or land for investment. You add in fractionals, time shares and all of the international activity that’s taking place. A million people in the U.S. own property in Mexico, 50,000 plus in Costa Rica, Nicaragua, Panama, etc. You add up all of that purchasing behavior and believe it or not, the second home market is bigger than the primary U.S. residential real estate market, just no one knows about it.
What percent are buying to speculate on the market and not as a second home?
It’s a combination of people looking at second homes or rural retreats purely for vacation or recreation, sometimes people have dual purpose. They’ll buy something and they’ll rent it out part time, or they’ll buy it and they’ll hold it for a future period. And then it also couples in things like pure investments, someone buys a property to solely rent out.

The thing that we’re most interested in offering is that whole lifestyle component. People really want to engage and experience a lifestyle, and some people take time to plan these things out. For example, there’s a segment of the population called the “splitter market.” People hit the age of around 45 and they start to think about retirement, or maybe “I’ll retire early at 55″ or “I’ll semi retire and then at 65 I’ll officially retire.” Well, they start looking for a change in their lifestyle. They move from the suburbs of the city, maybe they’ll buy an urban condo for half their time, and then they’ll buy another place in a sunshine state or location for the other part of their time.

How did you identify this as a market opportunity?
A couple of years ago, I had the good fortune of sitting at Ignition Partners which is here in the Seattle area, the largest venture capital company in Pacific Northwest, and I was there as an entrepreneur in residence. And I was looking at a number of things in largely the baby boomers space. I’m a 20 year direct marketing veteran and pretty much been chasing boomers my entire career. So, we were looking at the whole baby boomer segment and realizing that according to research, boomers spend more time online than any other segment, more money online that any other segment and consume content more deeply than any other segment. In fact, they’re the largest segment of online population except a lot of the newer web companies are chasing a younger crowd.

We looked at the whole baby boomer segment and looked at a number of things that they do and then we’re lucky that we were approached by a company that ended up becoming a strategic partner of ours. We don’t name them in the press, but they had some very interesting things going on in the baby boomer space. So, we formed the vision and the business plan for SecondSpace in early 2006. On the heels of that, we funded the company with a Series A Round in mid 2006 and we’re off to the races. So since then, we’ve created an amazing web services platform that powers a number of lifestyle oriented websites including LandWatch.com, which is the number one site for land and rural retreats and country living and ResortScape.com, which is all about the resort lifestyle, resort communities in the Americas.

Do you envision leveraging into other market niches?

That’s right. We don’t think that we will have thousands of domain names. We’re not really a traffic aggregator at all. We really want to have a few properties which enable consumers to experience a highly immersive online experience. So, when you come to the site, you really feel like it’s all about land and rural retreats or recreation to do with land. So, with ResortScape, it’s much more about resort communities, be that Whistler or Lake Chelan or Wenatchee or Crystal Mountain or Whitefish.

So, it may be Pebble Beach or it may be Semiahmoo, but for us it’s really about giving the consumer this deep experience which is our dream for the Internet. A lot of sites our there tend to be quite cold. If you want to think about colors, they have white backgrounds with primary color navigation because they have to cater to the mass market. So, what we’re doing here is segmenting the mass market into distinct audiences and that’s giving our business customers a tremendous advantage in generating highly qualified referrals and collecting market and business intelligence that helps them drive their business worth.

What is the business model associated with this type of service?
Our broad vision is to connect people with everything they need to enjoy the second home lifestyle. So, the value proposition for consumers is quite simple. It’s free to consumers, it’s free to use the sites and free to register so you can get a number of features and benefits if you register. So, for consumers, it’s all about dream properties, it’s content around those special communities, it’s services and in fact over time where it will even become things like user communities around these resorts and rural areas.

So, for us, it’s that broad panoply of things for consumers, everything they need to have a great experience. So, that’s helping you find your dream location and property, it’s helping you connect with people that can service it; property managers, property maintenance, the people that can help you mow your lawn or over time help you find that ski tuning shop, etc. So it’s everything you need to have a great experience when you’re at one of these locations.

And then for businesses, the advantages…it’s the marketplace so we connect the consumers with businesses. So right now we connect them with real estate professionals; agents, brokers, developers, etcetera; so we’re 100 percent broker friendly, we don’t really let consumers list property on the site. It’s all about professionals and that’s where we make our money.

And then we have service providers, it might be as close into the real estate transaction as someone in financial services that you know can help a consumer finance that piece of land or that second home. Or other types of service providers that can help you clear some of your properties so that you can put a cabin or a home on it. Or someone that can actually help you maintain it, right it might be local amenities, entertainment, activities, anything to do with you enjoying that second home experience. So that’s the business in itself, it’s basically marketplaces that can connect consumers and the broadest range of service providers that can make the most of your second home.

With the launch of LandWatch and ResortScape, what were your initial goals and what did you have to do to meet them?

Well, that’s a great question. You know it’s a classic flywheel and many of us in the team have executed against this type of flywheels in our past lives. So that the first thing is really all about content and generating significant mass of content such that you can drive interested segments of traffic to that content.

So the first thing we did was amass the broadest range of land and resort listing that we could across the country and then in a few other countries that US, you know US visitors are interested in. So not a number of property listings, I think when we launched we had about 15,000 land listings, and let’s say probably 10,000 resort units that were listed in our network. And so that was the first step.

The second thing was also building some traffic and so we did an unusual thing. Most companies that are start ups generally tend to launch their company at the same time, they’re sort of getting their first piece of property. Well, what we did was we actually launched our site; LandWatch.com was the first one to launch. We put it out on the market almost a year before we actually came out of stealth mode. And then ResortScape was in beta a couple of months before it came out of stealth mode this past summer.

So we started generating an interest to those sites, we just didn’t link them to SecondSpace and so it’s actually a bit of company folklore, but we all had three business cards. We had a SecondSpace business card to connect with investors and prospective employees and business partners; a LandWatch card to go into different rural states to talk to brokers and other types of organizations, and I had the ResortScape’s card as I ventured into places like Florida and Colorado to talk to large developers and place makers and alike. So all that came together under the SecondSpace umbrella this past July when we efficiently launched the company.

You spent you your business card budget for the next two years.
I won’t say that, but we’re pretty frugal people and so I won’t say that. But it all came together then. SecondSpace to us is really this umbrella to federated brand that will carry through the brand in destination websites to operate. Also, we power a number of other sites out there, so we power mini sites for developers. If you go to WaterMark, which is the development team in Intercoastal Georgia or The Pines at Fisher River which is a development in Montana, we’re powering those mini sites on our platform.

One large property developer will build their next generation site on our platform, much like Amazon.com, powers Target.com or MarkSpencer.com. So it really is a very robust platform and we’re a technology company, so we just keep innovating on that platform. All of our customers, whether they’re consumers that visit our sites or businesses that actually put their entire Web presence on the platform, get to take advantage of it.

Where do you see the largest revenue potential?

It’s actually a bit easier than it sounds. So we really focus on two things for business customers. One is highly qualified referrals. If you can get someone looking at a listing on a site with contextual relevance. So for example, the demographics of the population looking at second homes and land are amazing. The average age is 47 years old, household income of $100,000 and above.

A tremendous number of international customers are moving in to the United State’s real estate market. Today, much of that money is coming in into the second home market. So the big international boom is going on. One out of five realtors in the US serves an international client today, the median price that foreigners pay for a property is 30 percent plus more than someone in the US.

So we look at all of that highly valued segmented user base, and we basically take that and package it up for businesses in two ways. One is as highly qualified referrals, so we basically are able to generate very high quality leads for our customers. The second thing is business intelligence. Now that we have a tremendous number of listings and traffic and data falling through our system, we’ve created a behavioral targeting engine that more the site experience for users as they come to LandWatch.com and ResortScape.com.

We also then package up that clickstream data and play it back to our business customers; and so, they can see market comps, price elasticity of demand for certain types of listings by region or by size of property or by category. So we are able to really mine the data on behalf of our business customers.

So at the end of the day, the business model is our quality leads and business intelligence, regardless of what size the customer is, a small business or a sole proprietor, agent or broker, it could be a mid sized developer or mid sized service provider or a large enterprise.

So, if someone puts their website on our platform, the reason they are doing it is because they believe and we believe that they will generate better leads, more leads and more qualified leads by putting their sign on our platform; and also, that we’ll be able to have the collective business intelligence of the data that runs both on their site as well as through our marketplaces that we can package for them.

How are you managing the associated channel issues?
Yes, and that really takes a page from the team’s past, and so one of the thrilling things about working here is that you know, we have a seasoned team that has done these types of things before. My background is prior to admission, I was at classmates.com for a while; before that I was an Executive at VeriSign down at Silicon Valley, and at VeriSign we built a huge channel network both domestically as well as in 45 countries overseas.

Satbir Khanuja, who is our VP of Marketing was at Amazon.com for seven years, first building up IMDB, the Internet movie database, and then for the last two years of his tenure there was VP of Worldwide Traffic, running the 200 person Traffic Team at Amazon including the Affiliate Program in aStores, which they launched for small businesses and individual users.

We understand how to embrace the channel, and so that’s exactly what we’re doing here. Our customers are what we call business partners. We are truly in partnership with them to help them succeed. And the next thing you’ll see us rolling out will be a true affiliate program where we’ll be able to take our customers’ listings and syndicate them into other affiliated sites in a great partnership model.

You’ve worked at Classmates, VeriSign, American Express and a number of other companies. What lead you then to jump to the startups?

You know what, I’ve had the good fortune back in the 90′s of getting classical direct marketing cleaning at American Express. You couldn’t ask for a better experience in terms of learning and understanding all the nuances of direct marketing. At Amex, I actually worked a lot with new product development and developed a number of new products, which was funny considering the company was 150 years old but really had no product development group.

In late ’96 I was working on a few things that touched on the Internet and started to really see that the Internet was getting ready to take off. At that time, I moved out to California and joined their site at a very early stage and got the chance to run corporate marketing there at their core business as a company as we really grew and became a trusted structure provider for the Internet. I’ve managed to have a great experience participating in the company’s ITO, dozen acquisitions, etc. It really helped me kind of feel that I was part of that early entrepreneurial team. I was there for six years and wanted to do it again.

I moved up to Seattle to join Classmates. Classmates was a bit further along at that time but was really looking to grow beyond the core of high school business. So I ran a new businesses group and we launched a new number of businesses at Classmates. The one on Provistov was Classmates International, where we actually acquired a number of companies in Europe and put them together with some business partnerships there. Then we launched Classmates in that market. It’s gone extremely well with that company with several million registered users now in a number of locations in Europe.

When Classmates was still with United Online, I left the company just a bit before that. I took some time off then was looking to get into my next gig. I realized that the one way to do it was to actually think about incubating something of my own. I wanted the chance to be around some people who had great experiences and also with context that could be a sounding board for a new venture. That’s when I talked to a number of venture capital firms. Ignition was an easy decision for me on a number front of great operating experiences. Their partnership there was really classy, they were great folks to work with, and they tend to have a great deal flow. A lot of people certainly in the northwest, as well as in the west coast, come to see Ignition, and so I had a great view into potential deals that were taking place.

That’s how I ended up at Ignition. It was just a matter of time. As with any entrepreneur residence, you eventually have to leave amidst. When we started working on SecondSpace I knew it was something that we really were just passionate about. Within five months, we put together the business plan, the financing, and the core team. And we actually eventually launched the company.

What can a large company do to regain an innovative culture and its competitive edge?

One of the books I did read a couple of years ago was a Jim Collins book, “Good to Great”. I found that there are some definite similarities and parallels in building a start up or helping to accelerate growth within a large company like American Express. I look at what Collins calls the “hedgehog modeler”.

The hedgehog approach has three things. Number one, what are you just deeply passionate about? Number two, what drives your economic engine? The third is what can you be the best in the world at? I think what really helped us jump start growth at American Express and I was a small part of that big company was we really focused on those things. What’s that company really passionate about? It was serving consumers and businesses in a real quality way. It was really all about service.

What drives the economic engine? It was fairly simple. It was basically the number of people that carried your product; the share of their wallet that your product had and basically the number of merchants that actually accepted the product. Then we just focused on how to be the best in the world about those things. We pretty much did the same thing, which was we were deeply, deeply passionate about enabling people to use Internet with confidence. So we really focused in on making sure that the Internet was a trusted place. After that, we found what drove our economic engine, which was services that enable trust across the Internet. We were just best in the world at doing that and built a multibillion dollar company at scale.

So that’s the same thing that SecondSpace is. Here we’re very, very passionate about two things. One is helping people find their dream lifestyle. And the second thing is connecting businesses with those consumers that they wouldn’t otherwise reach. That’s what makes this model that we’re in very powerful, unlike the primary residential space. I live in the Bellevue, Washington area and I kind of know a bit about the community. If I want to look for a new home, it really is largely about commuting distance and schools and neighborhood quality and affordability. Those are the primary characteristics.

Well, when you’re looking at a second home, the pieces string is much broader and much longer and much more elastic. So if you put a pin on the Seattle area and then you take a big circle, you may get a second home in Maui or in San Juan or Whistler or Crystal Mountain or White Ridge, Montana or Lake Tahoe a number of places. When we connect to people with businesses, we’re really adding value because 70 percent of the leads we’re generating today for business customers are from out of state. That gets them very excited; they’re reaching an audience that they wouldn’t otherwise be able to reach through their own local advertising.

What are the key mistakes that entrepreneurs are making?

I’d say I love entrepreneurs and I love entrepreneurship because someone told me once, “You have to be made of bullets in order to be on.” Or, “You have to eat bullets for lunch,” I think they said, which is not an easy thing to do. You basically have to have the fortitude to execute to a plan, to execute to a vision.

I think for entrepreneurs it’s really all about painting a very broad vision but then tactically executing to a plan. So that’s, I think, the most important thing. If you try to actually build products that fulfill the ultimate vision of a company in a year, let’s say, obviously you’re vision is not big enough because your vision should push on beyond a year or you’re taking on too much. And so, the advice I give folks is basically paint a very broad vision but then make sure that you have a plan or road map, if you will, that gets you to year one, that gets you to a five year base camp, and then lets you continue beyond that.

What are the key criteria that you look for in someone that you bring onto your team?
I’d say a few things. I’ve had the fortune of working with a number of folks who have helped build billion dollar companies or billion dollars of market value for companies from scratch. And so, I’d say one is really understanding what it takes to go from small to big, or good to great, to quote Jim Collins.

The second is we look for people who know what it’s like to win. We have a winning culture, and winning is something that if you have experience at it, you can taste it and feel it; you know what it looks like. We may be small today, but we’re proud of the fact that in our first year in stealth mode we did well over a million dollars in revenue. This year we’re going to do substantially greater revenues and what not.

But you got to know that when we hire people, you have to know what it feels like to win in order to build a billion dollar company. You have to be able to deal with ambiguity. Things change very rapidly, and so we look for people that can actually work in an ambiguous environment because not only do you have to multitask, but as things evolve we want people to make sure they’re not locked into a singular approach.

And we look for people who have what we call multiprocessing. You have to be able to process on several fronts at a very high level of bandwidth. Sometimes we’ll meet people that come from bigger companies and they’re very good at one task, but they’re just not going to fit into our company where you have to be able to work on three things at once with excellence.

Interview with Andrew Filev, Founder of Wrike

Interview with Andrew Filev of Wrike. Wrike was funded by Andrew and his other co-founders. Learn how they are building a business without outside capital.

Interview conducted by Nathan C. Kaiser on Monday, August 4, 2008 in Los Angeles, CA.

I’m here today Andrew Filev of Wrike.com. Andrew, would you mind giving us an introduction to Wrike?

Wrike is a practical project management solution. It helps thousands of people to manage projects, teams, and businesses. It’s a collaborative web-based tool, it’s very easy to use and inexpensive.
What was the origin behind Wrike?
I was an entrepreneur for quite a while, and I was managing a business with pretty diverse operations and several offices. I clearly saw several problems existing with traditional project management tools like Microsoft Project. In my opinion, there are three big gaps that existed at that time, and that partially exist in the market right now.

First, the most widely used project management tool is email. At the same time, traditional project management tools ignored this fact. Project Managers had to copy information there and back. That created a lot of routine work, problems with adoption, and it was unproductive.

The second gap is between strategic plans for the company, quarterly plans, project plans, and data/agenda/event plans. Those documents exist in separate worlds. Again, there is duplication of work, there is a lot of manual work, and there are a lot of slipped schedules. Things that can basically be optimized with good software.

Last, there are a number of tools, like wikis. The main description of these tools are that they enable collaboration. Traditional project management tools lacked these tools. It was a great drawback of traditional tools. Collaboration eliminates a lot of duplicate work, it helps project managers to delegate more work to the team. It helps to successfully combines bottom-up and top-down planning, and makes companies more agile. It’s a critical piece.

I was trying to find project management software for our business. I wasn’t able to, so I got some interesting ideas and started prototyping. It took me a couple of years to develop. I showed the tool to my friends and to a few customers. It got some good reviews and a number of users and from there we decided to make a real business out of it.

What is your target market?
We have thousands of customers in different countries, and the customer base is growing. Every day, it changes, from churches to global companies. Right now, most of our customers are small to medium sized businesses. We’ve got a fairly big share of marketing departments and agencies using our product. But, again, we are not restricted. Over time, as the product matures, and as big corporations will become more open, I think we will get a better penetration in the enterprise market as well.
Essentially, it’s any team that could use your service.
That’s correct. I wouldn’t say that the tool is necessary in an environment of one to five people, especially if those people are sitting in one room. They can easily communicate and keep each other in the loop. A tool like Wrike becomes indispensable for distributed teams and in teams running multiple projects.

Wrike, for example, is very good in the cases when you want to run something integrated. When you have a development plan and marketing plan, and you want your developers to see their plan, and you want your marketers to see their plan, but you, yourself, want to see a complete picture and want to have an integrated plan so all of your activities are coordinated.

In those cases, Wrike is indispensable. It works even better than some of the enterprise tools. You would be amazed, but some of theirs are quite costly and they are complex tools. They fail in a multi-project environment, because they keep everything close to one project. There’s either no way, or it’s very hard to align plans, to share one part with one department, another part with another department, and still keep those things integrated. With Wrike it’s very simple.

In the medium business, it’s got a lot of potential. On the enterprise level, there are different concerns, and those companies are really huge. We still need to become more mature to cover the companies with several thousand employees simultaneously. I’m sure one day in the future we’ll come to that point, as well.

Would you say there is a key demographic, or a key target market to help establish Wrike as a leader in the project management space?

I believe that marketing departments, not marketing agencies, is a key segment. But, in the marketing departments, they face the same problems. They have complex projects; they have multiple projects running simultaneously. They need to get a better control.

Mostly they use email and Excel spreadsheets. That’s very painful, and that’s a lot of routine work. We want to help them, basically. That’s our target segment, however we plan expand to others.

I see great demand in professional services organizations, because they often have distributed teams and they often need to track their time to bill clients. They often need to keep pretty good project management, and they often have diverse, multiple projects running simultaneously. That is a second target segment that we think benefits greatly from Wrike.

There’s also a more generic market with churches-basically the companies, organizations, I would speak, rather than companies-organizations that have distributed teams that have people or offices in different locations running different things. In those kinds of cases, a web tool can really be helpful.

If it’s a small team of people sitting in one room, they can live perfectly without a web-based tool. But, once you get more diverse in terms of geography and in terms of your projects, you need to have something to help you keep control.

What is your plan for reaching these marketing departments around the world?
Right now we rely a lot on word of mouth. Be it word of mouth coming from media. Be it word of mouth coming from our customers. As we don’t do any direct sales at this point of time. As the company grows and as we become bigger, we will plan to start direct sales, as well.

Does your revenue model support that and how so?

That is a future question. Right now, we can only guess. We are not hiring. We are not trying to jump over several steps at once. We are approaching this process very methodically and will cross that bridge when we get to it.
What was the first company?
The first was a software outsourcing company. It started as software consulting and then grew into an outsourcing business, with about 100 engineers.
That’s pretty dramatic shift, in terms of an outsourcing services to creating and launching Wrike. What were some of the key lessons that you have learned in that transition that would help other entrepreneurs?
For me the path was quite natural, because we bootstrapped the first business and we had no business experience when we started. We had no serious money to invest. We basically got a business school degree in a real life.
Did you bootstrap Wrike as well?

We invested the money that we had from the first business that we built. So, we invested a lot, but we didn’t have any additional investors like VC companies. We will probably have to look for outside capital in the near future.

Once we come closer to ramping up direct sales campaigns, that will require some resources that we will probably like to raise from the outside capital.

Interview with Ben Keighran, CEO of Bluepulse

Ben Keighran, Founder of Bluepulse has created a mobile communication platform that is used by people in over 190 countries. He has aspirations of being the communication platform for hundreds of millions if not billions of users worldwide.

Interview conducted by Nathan C. Kaiser on Monday, July 28, 2008 in San Mateo, CA.

I’m here today with Ben from Bluepulse. Ben would you mind giving us an introduction to your start up?

Bluepulse is a mobile only messaging application and we refer to it as a social messenger that allows you to do group messaging and status updates from the one application on your mobile phone.

It was launched in 2006 and in the last fourteen months has attracted users in 198 countries, that send over 200 million messages per month.

People use the service via a web interface on their phone.
It is now a mobile web browser based application but there are also Java and simian versions of the app as well and that’s actually where it comes from. It originally was only a Java and simian application, but now it’s predominately a mobile web based application.
A web based app allows all web enabled phones to use the service, versus having to port it to all the different types of phones.
That is correct, but we actually also had that capability with the Java application as well. Bluepulse is based on a platform that I started working on in university quite a few years ago, and the goal for the project initially was just to build an app that would work on the huge range of Internet enabled phones that were out there.

It’s based on a really robust platform, that was working on a huge range of handsets and was allowing for, consumers to get access to the service directly on their phones, and not directly through the carrier.

The reason for the shift to the mobile web browser, is really based on the fact that even though we’ve got users in 198 countries, our target audience is here in the U.S. and that’s where our biggest user base is, and the type of the handsets that people are using to access the Internet, are mainly the smart phone devices which are the ones that have sort of the qwerty keypads, you know built into them such as the I Phones or Blackberry’s or Trios, and these sorts of devices.

Really the browsers that are being built into those phones are absolutely fantastic, and mean that we don’t have to have different custom and tweaked versions of a physical application based on the different handsets, we can build once and it works across all those different browsers that are built into those handsets.

That mitigates the cost and maintenance of having carrier or phone mode style specific application correct?
Though we are starting to see a shift in the carrier mindset. Personally, I believe this is driven by the success of the iPhone and the launch of Google’s android.

They are really encouraging handset manufacturers to build great browsers into their handsets. I believe that anyone building a mobile application should start thinking about leveraging that mobile browser, for all the reasons you just said. I think that that’s a great direction for people to move in.

That being said, though, what are the trade-offs associated with having a web-based approach, versus an application on the phone itself?
You get similar trade-offs to what you get with web-based messaging applications and applications that you would install on your actual computer.

So if you think about Outlook or Mac Mail or something like Gmail on your desktop computer, you get those similar sorts of trade-offs. So, if I’m on like an airplane or something, and I don’t have Internet connectivity, I can’t log in and access my client right then and there, because it’s web-based.

You miss out on a mobile of some of the functionality built into the handset of maybe being able to upload a picture or video, although there are a lot of browsers that now allow you to do that anyway, through them.

If you’re building games, or something along those lines, that’s pretty resource-intensive, and requires clients to actually load onto a handset or a platform of some sort for particular resources, that’s where you need Bluepulse. It’s the similar sort of trade-off between building a web-based app and a client app on a PC, that you have on a phone.

You provide the ability for someone who uses your platform, to, in a group message simply to send an email, to send an SMS, and others, all within one application.
That’s correct. There’s a toolbox that allows you to put an email address, a phone number, a friend’s name, a group name, or even, you can write the name ‘Paulsen’, and therefore update your status with all your friends. All in the one toolbox. What we’ve tried to do is create that universal way of sending out all messages from one interface on your phone, to one standard interface on your phone.
Are we going to a unified approach for messaging, where it doesn’t matter what type of mechanism you’re using to communicate, it will be sent out in the most appropriate form; email, vmail, Chat, twitter, etc.?
That’s a really good question. Look, I don’t think so, but I think that the notion of one application to check all of your different messages on, or to send all of the different types of outgoing messages you want to send, is there. I think that the concept of IM and email and social networking messaging and SMS, and all those different things, all serve different purposes, and the contact data also serve different purposes.

I think that in some cases you do need to have different addresses, to allow people to contact you only in certain ways, and certain mediums. For having that sort of one universal contact name, I think that, that limits the different types of messages that are being set free. You’ve got all the different messages from everybody you know, coming into that one central main and there’s no way to break it up, between your business or your personal life and those sorts of things.

Is there a fundamental difference in terms of what I say, via an SMS to a friend, versus what I say to them over the phone, or would I even try to communicate?
With an email I don’t expect you to get it immediately. I’d suspect you to get it some time soon, and therefore I will write you a much longer, richer message, whereas if I’m sending you a text message, then I know that you’re dying to get that pretty much immediately and it’s obviously a much shorter message and it might be just a quick 160 character note.

It’s great to have this one app to be able to receive all the different types of communication and to be able to send out to all the different places. I think that empowers the user to control how they’re going to send and receive their different types of messages.

Having that sort of one, sort of singular address that everybody contacts you on, that, I think creates a situation where, I don’t know whether I’m going to send you a text message, or an email, or whether I, the receiver, wants to give you the capabilities in sending me a text message or an email, because I just think that they’re two different mindsets for when you send somebody a message.

There’s also an immediacy, or a temporal association with a type of message as well. Being a text, I potential need immediate reply, an email, or even a voice mail, etc., has a longer term reply.
So I think that in that sense, those different types of platforms are good, like, for example, in our organization I know that there’s a portion of the team, that would only want to have their email address on their business card, because that is the way that they want to get contacted by business people.

Now, if they wanted to be able to send and receive messages instantly, from their phone using a special part of apps such as Bluepulse, then that’s sort of their own prerogative.

What has allowed you to achieve that amount of scale that you have with Bluepulse?
Originally, Bluepulse started as a hobby project for me where it was originally a widget platform and had sort of IM widgets, email widget, it had about news, horoscopes, a whole sort of widget. The vertical or the widgets that people were really coming to use on the platform were all the communication widgets that were there.

Bluepulse has evolved and was started as a business at the end of 2006 to build a communications app, a new communications application for your phone, was really driven by what users wanted to do, which is to have a better way of communicating.

That makes sense because the driving force behind Bluepulse is that it’s the app that allows you to stay connected with your friends, wherever you are in a much better way than any of the other communications apps on your phone do it. It makes communication really efficient between you and all the people you know.

It addresses the biggest, possible market on the phones. I think about the three billion phones that are around the world today, people would prefer to leave their wallet at home than their mobile phone, because they always want to be able to be connected, but with their friends it’s really, really important to them.

I think that when I think about what became sort of the starting point on the computer, it was search, because it makes browsing and exploring concept really efficient, and even though if you look at the billion PC’s users out there, with an Internet connection, people may use search only one percent of the time or some people might use it 50 percent of the time.

It’s the one thing that is made more efficient that addresses the biggest possible market size, and if you think about Bluepulse, the one thing that people want to do with their phone is to be able to always be connected, in a really efficient way with the people they care about and that’s exactly what Bluepulse does.

And, we basically got into the position we are, by just really listening to the user base and following what they want to do with their phone, which has allowed us to come up with this really unique and cool way of always staying connected with your friends is messaging application.

What are your plans then for driving revenue from this platform?
I think there’s some really interesting businesses today that have built businesses around communication.

It’s a combination of advertising and transactional revenue. I think that the value of a mobile user is significantly higher than a web based user, because you are a lot closer to doing a transaction and people are prepared to pay a premium for here and now.

You know, there have some data recently released by Matrix showing that mobile advertising is yielding high, quick troughs and people, are more susceptible to buying things on their mobile than any other medium to date that have recently come out.

Our business model is based, first of all, in advertising for sponsor deals and running banner ads and text ads, but in the future we want to be distributing digital goods through the servers, as well as a whole other range of premium and transactional services, transactional products on Bluepluse.

We want to connect users with what they need, wherever they are.

What would you say is the market opportunity for this type of service?
I would say every person with a mobile phone wants to have a killer messaging app for their phone, whether they know it or not.

They’re carrying around the phone to stay connected with their friends today, and if you can give them something that improves the way that they stay connected with those people, with the people they care about, then I think that the market opportunity for that is every person that owns a mobile phone which is almost three billion handsets.

In terms of then being able to bring interesting content, whether it’s in the form of digital goods, like, avatars or digital goods like gifting, and these sorts of things, or whether it’s simply telling you about things based on what they’re doing with friends, ongoing or concert, or they want to buy tickets to an event or, I simply just want to get information sent to my handset everyday from various services.

I really think that the mobile messaging space is really the next multi-billion dollar opportunity on the mobile phone.

Having grown up and gone to school in Australia and now being in Silicon Valley. Would you have liked to continued working with Bluepulse in Australia, or is Silicon Valley the place to be?
There’s three reasons why I moved from Australia to Silicon Valley: The first thing is, is that, having an engineering background and building a product, I get huge excitement from seeing someone use that product and get enjoyment out of using it.

After starting a project and getting 20-30,000 users around the worldwide, using this platform I was using, and thinking about taking the killer widget and turning it into what I thought was going to be the killer mobile application and hopefully have hundreds of millions if not a billion people.

I want them to wake up every morning and reach for their phone using an application that I’ve been involved in creating to stay connected with the people they care about. That was sort of the driving passion behind starting Bluepulse and that is the intensity, almost the fire in my belly, every single day while startup to work.

The second reason was I wanted to build a killer team and the sorts of people I thought needed to be on that team are people that had built phenomenal messaging products on the Internet.

And then the third reason I came over here is because I wanted to find investors that could help us build the firm. I wanted to find investors that had backed these sorts of businesses before that started off really small and became really big.

Australia has a much smaller population than the U.S. of about twenty-million people as opposed to three-hundred million people over here. Just by nature of the population, it’s a much smaller, entrepreneurial spirit in Australia than it is over here. But either way you look at it they are some the three big driving reasons why I came over here.

Interview with Dean Robinson of Hahlo

Dean Robinson, creator of Hahlo a popular Twitter client talks about building a business on top of Twitter and whether Twitter is really a platform.

Interview conducted by Nathan C. Kaiser on Tuesday, July 22, 2008 in Melbourne, Australia.

I’m here today with Dean Robinson, the creator of Hahlo. Dean, would you mind giving us an introduction to Hahlo?

Hahlo is designed to allow Twitter users to access and send messages via the iPhone. It uses the Twitter and Summize.com (recently purchased by Twitter) APIs. The main goal of Hahlo is to provide the most feature-rich Twitter client for the iPhone. Essentially that was the goal from the beginning… to try to provide as much of the functionality of the full web site but for the mobile environment.
Were you a heavy Twitter user when you created Hahlo?
I wouldn’t say I was a heavy user. I’ve probably become a heavier user since. I’d been using Twitter for about six months prior to it. I built the original prototype the night after last year’s keynote, when Steve Jobs announced that you could make web apps for the iPhone and my first thought was, “Oh, what can I make?” I thought Twitter was perfectly suited for use on the iPhone so, I started playing around and Hahlo was the result.
Who are your users and what mobile devices are they using to access Hahlo?
I’d say about probably 90 percent are using it on their iPhones or their iPod Touch. Of the remaining 10 percent the majority are using it in Safari. It works the best in Safari or Webkit. It also works great in Firefox. I use it myself in Firefox quite a lot. It helps because I have two accounts; and I use both Firefox and Safari simultaneously.

A popular thing that a lot of people are doing now is making use of an application called Fluid.app and running it. It’s a single-site browser and you end up running Hahlo like an application on your desktop.

Do you ever foresee this becoming a stand-alone business in its own right?
Probably not in its current form. Maybe if I were to develop it further and were to build things that none of the services that I’m piggybacking on had. But, in its current form, probably not. It’s probably going to remain where I’m relying on the APIs provided by Twitter and Summize and I’m also using the Google Maps API as well now.
What features could you add that would generate revenue for this type of application?
I’m always looking at ways that I can add features. Everyone’s always looking for a way to make a bit of money but it started out as a fun project. It’s still something I just do on the side. It’s not a full-time thing by any means. There’s definitely an opportunity in the future especially with the native apps and the Apple iPhone SDK that’s come out now.
Do you plan to port the application over to the actual iPhone so it would live as an application on the phone versus accessible via the web?

It’s not something I’ve ruled out. For the moment it won’t be, partly because I don’t have the coding background or knowledge to write the application itself. I’ve got some friends and I work with a couple of guys who would be able to assist me with that, but that’s something that’s a little bit further down the road yet. That was part of the reason I did the big 3.0 upgrade with all the new features was to try and combat and keep a lot of my users when the native apps came out.

Is Twitter a large enough platform to build a stand-alone business on at this point?
I don’t know. In some respects it probably is, they do have a lot of users. The question is how many of those users are using it heavily enough or consistently enough for you to be able to make money off their usage? I don’t know, I’m not sure on their numbers of users. I’ve heard things like three million total accounts.
The information I have suggests they have two million user accounts and have two hundred thousand active users, defined as they have posted within the last 30 days.
I think, since I’ve launched Hahlo, the new version, at the start of May I think, it was, I’ve had twenty thousand different Twitter users log in, which I was quite surprised at. I had about 10 thousand in the first week which was quite impressive. But, even that only represents a very small percentage of Twitter’s overall usage base.
Twitter does provide kind of a viral mechanism. When someone posts to Twitter via one app or another, that post states the app they are using, which is seen by everyone that follows that individual.
I get the impression a lot of people find it like that. They see that someone’s posted a tweet from Hahlo and they wonder what that is and click on it and that’s how they discover it. Also, there’s no extra sign-ups needed which makes it really easy for people to just jump in and try it out. Whether they stay or not doesn’t really matter because it hasn’t used up any of their time. They haven’t had to sign-up or fill out forms or anything.

What is the frequency or what percent of people who have logged in once continue to use the service for say a week or more?

Overall, I think, the last time I looked at my stats it’s probably around 75% is returning visitors. You have the occasional thing where a link will get posted on a web site and you get a whole bunch of hits from them and they all just view it once and that’s it. But, in general, a lot of the people who use it use it a lot, which is really nice to know. The number of hits over the last month has been fairly steady. It’s been around 10 thousand visits a day. Even though the number of new visits is going down, the number of actual visits is staying the same so the people who are coming and staying are using it more. Users are slowly dropping off as a percentage but overall the business numbers are staying the same.
What are your thoughts on Twitter becoming a communications platform?
The thing they need to focus on, and I’m pretty sure they are at the moment, is getting the structure and code in place in the back end to handle the extra users that a more mainstream system would bring. I’m sure you’ve noticed in the last couple of months they’ve had the occasional issue.

But, overall they’ve been pretty good to fix it up and tell people about it in various forms in their notation. I know that they’ve said they’re working on things so I’m guessing that that’s probably the sort of thing they’re looking at as well as improvements in scalability so that they can have 10,000,000 users, they can have 20,000,000, and it won’t affect it. But, I would say that until they’ve got the bigger capacity that it probably won’t grow much more than it is now. It grew really rapidly in a really short space of time, but I don’t know whether it’s still growing at that rate or not. I haven’t seen stats or anything on that.

Is scalability the only issue they face in going mainstream or do they need to add addition features and services to reach a large audience?

Yeah, I’ve had the experience of having to explain it to my parents, as to what it’s like, and the same as Twitter explains it it’s a group SMS. But, then if you’ve got parents like mine who don’t really use SMS, then it’s hard to sell it to them. I know my parents check it to see when I’m updating and what I’m posting, but they don’t have an account themselves. They just check my timeline.
What are people using Twitter for?
There are a lot of people who’ve used it who either don’t have the time or they don’t think they have enough content to write a traditional blog. So, they use something like Twitter and they can just post random thoughts here and there, and they don’t have to sit down and write a five hundred word essay on anything. They can just spit out 140 characters and they’ve got their post for the day if that’s all they want to do.
Is it really a position problem for Twitter to get that mainstream adoption?
We’ve come up with about three or four different things that it could be and it could be some sort of identity crisis. Nobody knows whether it’s an SMS service, a blogging service, an update service, just a general social network. Maybe it does need to be communicated better what it is. Maybe that is the thing that scares people off – they don’t know what it is.
The ability to create new services and features has never been easier and less expensive. The question is really, as we see more and more of these applications built and developed – not necessarily for Twitter but in other instances – do you think that there are ways to monetize that, or that these will become revenue generators as time progresses?

I’m sure they will but whether they can do it while they’re still building on top of other services, I don’t know how achievable that is. You can always go down the path that some clients have done where they insert ads in the hope that people click on them or that they’re paid for. But, that’s something I in particular steer clear of because viewing space on the platform is limited to begin with and I didn’t want to fill it with ads. I probably could be making some money there but my experience in the past with ads is that no everyone clicks on them anyway. I guess, it depends on the service.

I don’t know with Twitter because there’s such a wide range of clients. Twitter’s probably a really good example in that there are probably hundreds of different clients out there that people would use. I’ve got a fairly large user base, but I would imagine that something like Twitterific has an even larger one. And in the case of theirs you can buy a license which removes the ads, and I would imagine they made a lot of money out of that because people didn’t like the ads. And again with their iPhone out, if they decide to sell that for a price they’re going to make a lot of money as well.

But they’re all sort of one-off costs. Once you’ve bought it you’ve bought it, unless they charge an upgrade fee in the future. They can get all that money to start with, but whether they can continue to get the money further on… I’ve had a few donations through PayPal. It doesn’t cover the amount of work I’ve put into it but it’s nice to get.

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