Startup for dummies

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Startup for dummies

  1. 1. Startups for Dummies by Damien Brzoska in 2011 Startups for DUMMIES - 1/36 -
  2. 2. Startups for Dummies by Damien Brzoska in 2011Table of ContentsPreface 4Introduction 5Why to build a startup? 5 Because you want to make a lot of money 5 Because you want to be famous 6 Because you know how to solve an actual issue 6 A company who solve an issue: TaskRabbit. 6 Because you have an idea 7 Google and Google Wave. 7 Identified, a new startup in San Francisco. 8 Because you don’t want a job by default 8 What is a better example than myself ? 8 Because you have great co-founder 9 Dropbox is a great example of having good co-founder. 9 Because you have a passion of a product 10 Let’s talk about a French startup called Smartdate. 10How to build a startup 11 The brilliant idea ? or not. 11 It is about people 12 - 2/36 -
  3. 3. Startups for Dummies by Damien Brzoska in 2011 The customers 14 The funding 15 Borrow money from friends and family 16 Who are those angels? 16 Seed funding firms 17 Venture capital firms 17 Raising money 18 The process 18 Example 19 Saving money 20Why startups might fail? 21The How-To: step-by-step 22Case study: BeThereDeals 23 The company 23 Paul Gassée, co-founder and CEO 23 Jeff Schram, co-founder and VP Product Development 23 Jeff Spurgat, co-founder and CTO 24 The advisors 24 The original idea 25 The problem BeThere Deals is trying to solve 26 The solution BeThere Deals would like to provide 27 The market study 28 Merchant cost comparison 28 The strategy 29 - 3/36 -
  4. 4. Startups for Dummies by Damien Brzoska in 2011 Why BeThere almost failed 31 How BeThere adapt and evolve 33 Personal analysis 35Conclusion: Should you ? 35Sources 35PrefaceYou have probably already thought about creating your own business.This is a question that most of people already ask themselves.Of course motivations are different for each person. It could be to make alot of money by launching the next Groupon1. Someone else wouldprobably want to do it for recognition and being treat differently - you haveprobably heard about Mark Zuckerberg2. No, don’t worry, I won’t expandon “The Social Network 3”.A few of you wouldn’t do it for those reasons, but because that is whatthey want to do. We call them “Serial Entrepreneurs”.Through this book, I will try to show you all the steps that a serialentrepreneur has to go through to start a startup and make money with it.1 Company which offer a “Deal per day per city” (Angel:co: http://angel.co/groupon)2 CEO of Facebook (Angel.co: http://angel.co/zuck/)3 Movie about the social network Facebook and lawsuits between Mark Zuckerberg and the twins Winklevoss - 4/36 -
  5. 5. Startups for Dummies by Damien Brzoska in 2011I just want to mention that’s is not a 100% success recipe. I hope it willgive more motivation and confidence to create your own business andmaybe open your eyes to all the possibilities of business out there.IntroductionWhy to build a startup?In this part, we will go through different elements which might encourageyou to start your own startup. As it is mentioned in the preface, there is alot of different reasons. Here, we won’t list all of them - it is way too longand a lot of those reasons are related to each person. I picked the oneswhich seems to be the more important and relevant for you.For most of reasons, I will come with an example with a real startup. Someof them won’t because I don’t think the reason worth a case study orsimply because I don’t have any example of this case.Because you want to make a lot of moneyThis reason is probably the easier one to find. Everyone want to make alot of money. There is probably around half of people creating their own - 5/36 -
  6. 6. Startups for Dummies by Damien Brzoska in 2011business who are doing it just for money. The other half is not doing it onlyfor money but for sure it is always a part of the final goal. Creating astartup just to make money and without any other reasons is probably notthe best way to go. You will be facing difficulties to make your startupsuccess without other ambitions.Because you want to be famousWho did not dream to be the future Steve Jobs4 ? I will confide in you: idid dream it. Some will be just to be recognize in the street, other to havea skill recognition. Any way, this really should not be the reason of creatingyou startup. It does not make any sense to have as only motivation to befamous. We are not actor and trying to be famous people. If that is whatyou want, you definitely should change courses.Because you know how to solve an actual issueHa... We finally arrive in interesting reasons. Of course, you usually don’tsolve a problem to everyone because we all don’t have the same problem.Solving few people issue with a good idea that you can turn into abusiness is really great. That’s - for me - one of the top three of goodreason of building a startup.A company who solve an issue: TaskRabbit.Leah Busque - founder and chief executive officer at TaskRabbit.com -never had enough time to get food for her dog Kobe. Shop are open whenyou are at work and close after six in the afternoon. She decided to createa website where you can get in touch with friends or friends of friends or4 Apple co-founder and CEO until 2011 - 6/36 -
  7. 7. Startups for Dummies by Damien Brzoska in 2011any reliable people who can help you doing anything you need to be done.Her solution was simple: you create the task you need to be done on thewebsite, someone picks the task and do it for you. Of course, you pay the“runner” (name given to people who are doing task for you). She now fullysuccess in her business and that, because she helps people in everyday’slife.Because you have an ideaMost of business start because someone has an idea. They always thinkthis is THE idea which is good, because that give them motivation andcommitment to their project. Generally only few of those great ideassucceed - we will see why in a further section. Even if those ideas couldbe great you still need to imagine how it can help people, how it will beuse by the population. Of course, the idea without that won’t go too far inthe startup up process. I will present you two examples, one which failedand one which is actually succeeded in San Francisco.Google and Google Wave.Have you heard about Wave ? If you are working in the IT industry theanswer will be yes in 95% of the case. To make it simple to everyone,Google Australia came with this idea of changing the way how emailswork. No more emails, only waves. You can share them in real time withhow you want, people can edit old waves and comment them. Thepurpose of Wave was to create a new collaborative platform where peoplecan exchange waves instead of email - emails are the worse thing ever tocommunicate within a team.The idea was great - I personally use Google Wave a lot - but the issuewas that people were not ready yet to leave the emails behind. That is whythe idea is the best start as long as you know you might help people and, - 7/36 -
  8. 8. Startups for Dummies by Damien Brzoska in 2011what I mean by “helping people” is giving user a solution to one of theiractual problem so they will use your product.Identified, a new startup in San Francisco.I don’t think you already heard about this startup. It’s an early stagestartup who, thanks to their website, trying to make the professionalconnections easier via professional graph. Those datas come straightfrom Facebook but also from the user who can update his account. Thiswebsite is simple, easy to use, and it give you a lot of useful informationabout your professional network and your ‘connections’ network as well.You can easily find which companies are popular, which positions areappreciated by employees, etc... This is a great tool for people who arelooking for a job - i.e. when they are not creating their own business.Because you don’t want a job by defaultHaving a job is the default solution. Everyone knows that they will have towork one day - it’s a matter of life and death. We need to work - ok somepeople are good not to or pretend to but it’s not the topic here. Workingfor a company is the default option. That’s what you are doing when youdon’t know what to do. What i mean is, you working for someone whenyou don’t know which business to start.What is a better example than myself ?Since 2005, I’ve been working for several company in various domain indifferent countries. From Brisbane to San Francisco, from startups to bigfirm, from internet to transport, from intern to software engineer, I’ve beenaround a bit. Sometimes I hated my job, sometimes I loved it but every-times I knew it wasn’t for good. Since a long time, I know that I want to - 8/36 -
  9. 9. Startups for Dummies by Damien Brzoska in 2011create my own business and I’m sure I will - nothing is better that workingfor yourself and for something that you put your heart into. You might askme why I haven’t done it yet? This is simple, I don’t think I have an ideathat I would have enough commitment to and I don’t have great co-founder. Yes, the co-founder are really important. Let’s see whyBecause you have great co-founderAs I started to mention before, your co-founder are really important. DONOT START A BUSINESS ALONE. That’s a rule that no one should break.Why that?If you don’t have a co-founder, it might mean that you can’t talk to peopleabout what you are doing, even the closest one.If you don’t have a co-founder, how do you brainstorm and talk? Talkingfor a startup is like programming for a developer, it is vital. It is how thefounders will make things happen.If you don’t have a co-founder, how do you cheer up when somethinggoes wrong?All successful startup or company had more than one founder - even if alot of people think that Oracle has only been founded only by LarryEllisson, in fact it was not. He founded it with Bob Miner and Ed Oates5.Dropbox is a great example of having good co-founder.Drew Houston and Arash Ferdowsi are university mates. They workedtogether at the MIT and they both know how the other one works. Theyare a perfect match to each other and as we can see for Dropbox, it ispretty successful for the company as well.5 Oracle Corporation story: http://en.wikipedia.org/wiki/Oracle_Database - 9/36 -
  10. 10. Startups for Dummies by Damien Brzoska in 2011Because you have a passion of a productEveryone has at least a passion. It could be a sport, a game, traveling orthe movies. When you start a startup, if you have the passion of theproduct and of the space as well, that is one of the keys of success.Let’s talk about a French startup called Smartdate.The company has been founded in 2010 by Fabrice Le Parc. I know youwill tell me that he founded it alone - yes and no. He is listed as the onlyfounder but he has been assisted by Stefan Surzycki, the right hand manwho was CTO until Septembre 2011. Alright, let’s go back to the passionof the product. Fabrice, after taking part in different “love” TV show6, heworked in the dating space for years. As a fan of dating and of the “love”industry, Fabrice decided to build his own dating website. The company isnow going well and even if it was hard to launch a new dating website in acrowded space, Fabrice has done it thanks to his passion for his productand for the dating space.6 Fabrice played in the French show “Operation Séduction” and the American show “Bachelorette” - 10/36 -
  11. 11. Startups for Dummies by Damien Brzoska in 2011How to build a startupNow, as you read the why to build a startup, you are probably interestingin how to do it. This is not a step by step recipe to build a successfulstartup, it is more to open you eyes on the startups world and maybemake you feel more confident to start your own.In the next pages, we will go through different things which are reallyimportant in the process of creating one.Only three things are mandatory to create a successful startup: the goodteam, solving one of your customers issues and not spending muchmoney. I will present you more than three topic but those three are themost important.The brilliant idea ? or not.If you ask anyone why he doesn’t create his own business, 90% willanswer: “I don’t have THE good idea”. - 11/36 -
  12. 12. Startups for Dummies by Damien Brzoska in 2011After reading this you will be able to answer “You don’t necessarily need abrilliant idea”.What you need is to make the difference by changing what people have atthe moment. Just think about what people around you are using daily.Most of the time, all those tools suck. What I mean is you don’t need tofind the brightest idea but solving and fixing the current problems will be agreat start. Your idea will change and evolve during the creation of thestartup.For example, the online dating is something working very well online evenif all the dating website suck. Even if they are all different, they are allsimilar as well, they cannot reproduce the real life dating online.Google is a great example to present that make better something thatalready exists. Search engine existed before google but when that startthe business, they wanted to make it better: indexing more the web, usingthe page’s links to rank the results and make it simple for the end user.They succeeded pretty well redoing something which was already there.As mentioned previously the idea is not the most important and you knowwhy?“Good people can fix bad ideas, but good ideas can’t save bad people.”It is about peoplePicking the right people with who to start your business is like picking theright people for your start your personal life. You need the good people. Toknow who to hire for your startup, you need to know the person. It’s notlike in a big company, you should not have to make candidate passing - 12/36 -
  13. 13. Startups for Dummies by Damien Brzoska in 2011interview. A “new” friend that you know out of the working environment isoften a good starting point to potential founder.The quality you are looking for in potential co-founder is the serious. Youwant some who is keen to spend a ridiculous amount of time working tomake something working. If it is a developer, you want him to still beawake a sunday night at 3:00AM trying to find why the program does notcompile or if you are looking for a designer, if he is “upset” when a pictureis few pixels on the left, he could be your guy.You need to find humble people. If they don’t know something, theyshould not try to find a fake answer, it would be better if they let you knowthat they don’t have the right answer and you can work together to figureit out.Most of startups start with a group of friend. Where is the best place tomeet friends? Most of startups start around universities, that is not for noreason. College is the place where smart people meet.A little advice for people who are still at university: work on your ownproject and if you can, work with other so you will meet new people andmaybe your future co-founder. Do not force things tho, let’s them happen.There is no perfect number of co-founder but the ideal would be betweentwo and four founders. If you are more than that, it is an opening toarguments and not having unanimous decision.Any skill requirement ? You might think that a technology startup - whichmost are - need to include technical and business people. The importantpoint is you definitely need technical skills to create your product. Thebusiness part is not really important as long as you are ready to spendtime just trying to convince people to pay for your stuff. At the beginning,there is no much “business” stuff to do and the complicated stuff like tax, - 13/36 -
  14. 14. Startups for Dummies by Damien Brzoska in 2011you will have someone to do it for you. You can easily learn businessbasics on the go, but you won’t learn the technics as easily. A good proofas the technical people are more important in the startup is the Forbes500: there is only 5 MBAs in the top 50. Most of them have a technicalbackground. What you need to know is to understand customers and theyneeds.The customersAll kind of businesses has to worry about customers. It is not only thestartups.Most of companies which fail is often due to a non satisfaction of thecustomers expectation. For example, a pub which would serve youdisgusting beverages would stay open for long. Customers would not goback there even if the service and the music is great. A pub with goodbeers and cocktails, even if they don’t have great music and service, isstill going to have a lots of customers because it pleases its clients.It works kind of the same way in a technology startup. There is heaps ofdifferent reasons why startups fail - we will talk about it in the next chapter- but most of the time it is because the company does not match theconsumers needs. Would you imagine a company with a very popularproduct would failed? Most of failing startups or project, it is because thecustomer did not really want the product, they did not really like theproduct.What you need to do is to make the customer loving you (by you, I meanyour startup). If you offer to your clients what they need and what is goingto make their daily life easier, they will love you product. If they love what - 14/36 -
  15. 15. Startups for Dummies by Damien Brzoska in 2011your startup doing, they will love the startup. That will make you thefounder of a successful startup.You might ask me what do customers need then? As I said before, you donot have to innovate, you can just make a better product of what theycurrently have. In the IT industry, it is really easy because most of peopleare “scared” of computers because they seems, for them, verycomplicated to use. What you might do is to go to a small or mediumcompany and stay there for few weeks and analyze how people react andwork with their computer. You will, for sure, find some difficulties theyfaced. What you would like to do after finding your ‘idea’, is to create aquick prototype. Of course, it will be buggy and way not perfect but thecustomer wants to see something quickly and be able to give you theirfeedback. You can then update if and make if fitting their needs and thiswould be a great start in the process of making the consumers loving you.Prototyping is one of the key. You do not want to spend a lot of time tofind the good software engineers and creating a first version on a productand in the same time spending thousands of dollars for something that theclient probably won’t like because you based it on what you think theyneed and not on their feedback. Doing that will make you failed 95% ofthe time.In tech startups, it is always good to start “low”. Creating a softwaresimple and cheap - as prototype - is always helping for future because itwill be more simple to try to sell it and then easier to capture the rest ofthe market and approach angels7 and venture capitals.The funding7 Individual rich people - 15/36 -
  16. 16. Startups for Dummies by Damien Brzoska in 2011As Paul Graham8 said” Venture funding works like gears. A typical startupgoes through several rounds of funding, and at each round you want to takejust enough money to reach the speed where you can shift into the nextgear”.When you are starting you business, you will, for sure, at one stage, haveto raise money. Here I will present you different sources of funding andthen explain you the raising process.Borrow money from friends and familyThe easiest way to find money is usually your friends and family. That iswhy a lot of startups’ first funding is the founders’ close circles. Generallywhen you will borrow money from you’re friends and family, it will be smallamounts of money - $50,000 or less. With this money you can do whateveryou want, there is no real expectations from your friends and family, theyprobably just want their money back.The biggest disadvantage of borrowing money from friends and family isthat they are not “accredited investors” (by the SEC9 ). Later on, if yourstartup doing an IPO10, having funding from non accredited investorsmight slow the IPO process or even kill it.The other issues is raising money through your close circles will keep you“away” from accredited investors like angels.Who are those angels?8 Co-founder of Y Combinator9 Security and Exchange Commission - http://en.wikipedia.org/wiki/United_States_Securities_and_Exchange_Commission10 Initial Public Offering - http://en.wikipedia.org/wiki/Initial_public_offering - 16/36 -
  17. 17. Startups for Dummies by Damien Brzoska in 2011Angels investors are individual rich people. In the technology space, thoseperson are usually rich people who succeed with at least one tech startupand now invested into other people ideas.They are not just individual investors, they usually understand yousituation and can be a great source of advices, because of theirbackground. Their contacts and advices could worth more than the actualmoney they would invest.Unlike friends and family, angels are expecting you to have, what we callan exit strategy. This could be either to sell the company or to go public -with an IPO. They want their capital back and of course their interests.It could be hard to find angels sometimes. Calling an angel syndicatecould work but they generally pay more attention to people who havebeen recommended by someone they know.Seed funding firmsSeed funding firms are a kind of mix between angels and venture capitalfund. Like angels, they invest on the early stage startup, even if it’s only anidea. They will probably invest as much money as angels do, $50,000 orless. They are “more” organized than occasional angels, they act more asventure capital firms.Seed funding firms are very often called “incubators”. Incubators arestructure that help developing companies to grow faster and are at thecompanies founders disposal for different kind of services and help:business basics, business connections, lawyer, ...Those incubators will teach you how to approach venture capital firms.Venture capital firms - 17/36 -
  18. 18. Startups for Dummies by Damien Brzoska in 2011Venture capital firms - called VC’s - are like the seed firms but muchbigger. Contrary to seed firms, VC’s invest other people’s money and insuch larger range - the investments are an average of millions of dollars.The raising from VC’s usually come later on because it is harder to get.The terms signed with VC’s come with more restriction. They can asked toget their money back first and it could be four or five times more than theyinvested and that before the founders get anything. They might asked thefounders to step down from controlling the business and they would putsomeone else as CEO of the startup.Raising moneyThe processMost startups take money from several sources. The first step would bego raise money during the seed round. This investment could be eitherdone by friends and family, or angels or seed firms. It could also beseveral of them, not only one investor.This investment usually covers the living expenses of the founders. Thisround is generally a small amount of money, less than $50,000. It wouldcover the first few months for the founders to work on the prototype. Assoon as they raised the first round, they need to divide the stocks inbetween the founders and the investors.They might need to already start looking for the next investment becauseit can take a bit of time to raise more money and they don’t want to runout of money. This second round is usually around few hundred thousanddollars.This investment allow them to work on the product for a longer period oftime and get a better product based on customers feedback. At this - 18/36 -
  19. 19. Startups for Dummies by Damien Brzoska in 2011stage, you still should not have to hire more people. Keep it small to makeit big. The next round is with VCs. It can take a long time so do not wait forthe series A round. (Each round with VCs has a letter, Series A, B, C, D...)The VC’s would probably invest several millions into a company so theytakes time to be sure to invest in the good one. You also need to get intouch with them, the best way is to find someone who couldrecommended you to one of the VC’s partners. This money can now beused to hire more people and into all kind of things the company needs asmarketing for example. The next step would be bought or going public.This is what the VC’s are expecting.ExampleThe mum and dad of the founder #1 invest $20,000 and the four foundersdecided to give then them 10% of the company. Each founder would get20% and they save 10% as option pool for future employees.The founders decide to start looking for a new source of investment. Theyfinally, through friends of friends get in touch with an angels. After a demoof their prototype they developed in the first few months, and thecompany is now valued for $1,000,000 dollars. The angel wants to invest$200,000, which is a sixth of the company. Then, they re-calculate theshared and come with this table: Shareholder Shares Percent Angel 200 16.7 Mum and Dad of founder #1 100 8.2 Each founder (4) 200 16.7 Option pool 100 8.2 Total 1200 100 - 19/36 -
  20. 20. Startups for Dummies by Damien Brzoska in 2011A VC want now two invest 2 millions into the startup. They estimate thecompany to 6 millions now and want to put $2,000,000 into it. They alsodecide to increase the number of shares. Shareholder Shares Percent VC 650 33.3 Angel 200 10.3 Mum and Dad of founder #1 100 5.1 Each founder (4) 200 10.3 Employee 50 2.5 Option pool 150 7.6 Total 1950 100Saving moneyNow we saw how to raise money from several sources. Next step is whatare we doing with this money? Should we start buying stuff ? Should werent the best loft in Soma11 ? Should we hire the top hackers ? Should wespent thousand in marketing to get lots on users within quickly ?None of those. What is need to be done is not spending it. The moreimportant cause of failure of startups is they running out of money in theearly stage.The first thing where startup can save money is the location. The best wayis to install the HQ in one of the founder place. If that is not technicallypossible, then the founders should find an small apartment to stay and nota real office. The point of setting a startup in a flat is people will be kind to11 Area in San Francisco where a lot of startups have been created - 20/36 -
  21. 21. Startups for Dummies by Damien Brzoska in 2011stay late and come back after dinner because it seems to be home andnot only the office.A startup can also save money by not hiring people in the early stage. Thisis not only a matter of saving money but also of improving everyone’sskills. By growing slowly, the founders will have to learn to do everythinginside the company. From writing line of code to talking to customers andgoing through sales, everyone should be able to talk to customers or sellthe product to investors - of course with more or less easiness. Allemployees then understand their business.Saving money also help to keep everything “cheap”. The cheapness is aquestion of saving money and not creating bad products. For example,the co-founder of Yahoo!, David Filo had a nickname which was “CheapYahoo!” instead of “Chief Yahoo!” because he was always trying to savemoney - sometimes just trying to save few gigs of disk space.An important point with the funding is even if an investors gave youcouple millions of dollars, you are still not rich. Your revenue is still null.You can assume that you are rich when the investors and you have a largerevenue. So despite this money in the bak from the VC’s, you are poor.Why startups might fail? - 21/36 -
  22. 22. Startups for Dummies by Damien Brzoska in 2011The How-To: step-by-stepStep 1: Find your co-founderStep 2: Find your business ideaStep 3: Setup the companyStep 4a: Create a prototypeStep 4b: Find your seed roundStep 5: Create a first version of the productStep 6: Find your Series A roundStep 7:Step 9:Step 10:Step 11:Step 12:Step 13: - 22/36 -
  23. 23. Startups for Dummies by Damien Brzoska in 2011Case study: BeThereDealsIn the chapter, we will do an intensive analysis of a San Francisco basedstartup called BeThereDeals.We will go through a description of who is this company and the spacewhere they trying to develop their business. I’m going to present you theirfirst business strategy and how BeThereDeals worked but almost fail. Ofcourse, to stay alive, they had to change the business model. And finally,you will read my personal analysis from the inside of BeThereDeals.The companyFounded in Q4 2009, BeThere was the solution to help customers on-the-go. The founders - Paul and the Jeffs - didn’t think anyone was takingadvantage of the easy access to the information through phones toconnect local merchants and customers. That’s how they first decided tocreate the BeThere Deals application.BeThere’s team is young and dynamic. Founders are completing eachother with their specific skills. Let’s introduce them.Paul Gassée, co-founder and CEOHe had several experiences in founding startup (find more about Paul onhis linkedin: http://www.linkedin.com/in/paulgassee). When he’s not working ona new startup, he also works as independent web consultant or BusinessDeveloper. With all this experiences, he improves his skills in variousdomain.Jeff Schram, co-founder and VP Product Development - 23/36 -
  24. 24. Startups for Dummies by Damien Brzoska in 2011Jeff would be describe as a web entrepreneur. He is always involved in astartup or project process. He mostly worked on online marketing andbusiness development but has technical skills as well. He’s the man whofind simple idea and make money out of it. He developed several iPhoneand Facebook application (DailyBabe, Model Exchange or even Good vsEvil).Jeff Spurgat, co-founder and CTOJeff is a real guru in term on mobile development. His experience atMotorola Inc as Software Engineering Manager makes him a key of thefounding team. Jeff also found a company called Full Audio which beenacquired by AOL.As you can see, the three founders have specific skills but also a goodunderstanding of each other competences.BeThere has few advisors which are a part of the management team. I willjust list them with very few details because they are not the core team.The advisorsJean-Louis Gassée - (Angel.co: http://angel.co/jean-louis-gass-e)Founder and CEO of Be Inc. and General Partner at Allegis CapitalMark Schulze - (Angel.co: http://angel.co/mark-schulze)VP, Customer experience & Product marketing at IAC/Match.comRich DiStefanoVP Mobile at TicketMaster/LiveNationRo Choy - (Angel.co: http://angel.co/rogelio-choy)COO at Formspring and Formerly CRO RockYou - 24/36 -
  25. 25. Startups for Dummies by Damien Brzoska in 2011Marylene Delbourg-Delphis - (Angel.co: http://angel.co/marylene-delbourg-delphis)Serial Turnaround CEORyan Keating - (Angel.co: http://angel.co/ryan-keating)CEO at Keating Consulting GroupEven if they are not in the core team, they have a really important position.They always give BeThere a feedback on what’s the company is going todo. They are the ears of the company when the core team is not there(even if the core team has the BeThere - just a little joke for the readers).The other members of the company are software engineers and couplesof interns. Most of them are only working on our apps, either web ormobile and some others works closer to the core team and dealing withbusiness opportunities and merchants.The original ideaThe subtitle “The original idea” shouldn’t surprise you. All startups havean original idea and they just refocus and change their objectives. Forexample, Seesmic.com - founded by Loic Le Meur (Angel.co: http://angel.co/loic/) - started in 2008 being a video blogging website. A yearlater, Le Meur shut down the video service to relaunch Seesmic as a socialnetworking tool.Alright, let’s go back to BeThere.BeThere first idea was to make the interactivity between local merchantsand customers easy. The founders had this strong interest for the mobile - 25/36 -
  26. 26. Startups for Dummies by Damien Brzoska in 2011space and wanted to make it available to the consumers on-the-go. That’show Paul, Jeff and Jeff decided to create BeThere Deals.Let’s have a look at the problem and solution with basic draws.The problem BeThere Deals is trying to solveBefore BeThere Deals, bakeries in San Francisco threw away around$100M/year in baked goods (perishable inventory) - Study done by PaulGassee and Jeff Schram.The actual issues is that consumer don’t know where to go satisfied theircurrent needs. On the other side, the merchants don’t like to waste theirproduct and they don’t have the solution to generate more business andclear through inventory instantly. - 26/36 -
  27. 27. Startups for Dummies by Damien Brzoska in 2011The solution BeThere Deals would like to provideWith BeThere Deals, bakeries now salvage a portion of (20$) of thatinventory. BeThere Deals enables liquidation of $22M in baked goods peryear.To solve this problem, BeThere Deals created three different platforms.A Business to Business (B2B) website: This is where everything begins.Business owners enter and publish local offers immediately to consumerson the go. Within few minutes, this offer is available to everyone on twodifferent platform: Mobile and Web.A Mobile application: To answer to consumers needs, BeThere Dealsneeded to provide a platform on mobile device, so they have access toinformation 24/7. The push notifications allow consumers to know if thereis any deals matching their preferences in their area. - 27/36 -
  28. 28. Startups for Dummies by Damien Brzoska in 2011A Destination website: The BeThere Deals website allow every users tobrowse the deals in a selected city. They can easily share and print dealsvoucher before going to their favorite local merchants.The market studyOf course there is a lot of potential competitors in the deals industry. Aspreviously mentioned, Groupon is the biggest one. Light listing of thedifference between Groupon and BeThere Deals: Groupon vs. BeThere Deals Groupon BeThere Deals Merchant waiting list Real-Time deal Publish Cost: 50% of the merchants revenue Cost: 2$/Customer 24h redemption delay Instant redemption No merchant control 24/7 Admin access One deal per city Several deals per city Citywide Offer Hyper local offers Sales Intensive Model Self-serve portal One daily redemption per user Multiple daily redemption Upfront purchase requested No purchase neededMerchant cost comparisonFor a local offer where a restaurant would serve a $40 dinner for only $20,Groupon would split the revenue between them and the merchant( i.e.:Groupon collects $10 and the merchant takes $10).With BeThere Deals, BTD collects $2 and the merchants takes $18. - 28/36 -
  29. 29. Startups for Dummies by Damien Brzoska in 2011For one hundred conversions, the merchant would makes $1,800 withBeThere and only $1,000 with Groupon - which is almost double theirrevenue.Even if Groupon is the main competitor, BeThere had a look to othercompetitors. BeThere vs. competitor BeThere Groupon Yelp Foursquare YowzaMultiple x x x xdeals/dayDesirable x x x xmerchantsHigh quality x xdealsHyper local x x x xoffersOffer x xsharingInstant x x x xredemptionImmediate xdeal publishThe strategyAs showed with the market study, BeThere deals is in a niche.It’s not a group buying company like Groupon, Living social or HomeRun. - 29/36 -
  30. 30. Startups for Dummies by Damien Brzoska in 2011It’s not a location-based social network like Foursquare, Whrrl or Loopt.It’s not a mobile couponing like Cellfire or Yowza.It’s not a user review website like Yelp or Citysearch.BeThere Deals is a bit of everything: Geo-location deals, Local discovery,Real-time marketing for merchants, True value delivered to endconsumers.We heard a lot of issues around the deals space with website offering ahigh conversion limit for businesses when they can only afford a low/medium number of conversion. Those merchants have to wait beforebeing able to make profit on perishable goods and when they can, it’susually only for a day.Consumers don’t have enough choice on deals in each city, if they arelucky enough to live in big city. They have to provide a credit cardinformation before redeeming a deal.BeThere offer real advantages to their users, both merchants andconsumers.All merchants have a full control on their deals. They can create, edit, turnon/off deals, at any time of the day, set a conversion limit. It’s costeffective: local business keep more margin. Real time deals publishing: noneed to schedule a deals weeks in advance. The brand is preservedwithout taking ridiculous discounts because they create their own.Consumers become real customers. They have a large choice of deals inmany cities. It’s hyper local, consumers will find deals next door or acrossthe street. They redeem the offers instantly. - 30/36 -
  31. 31. Startups for Dummies by Damien Brzoska in 2011Merchant and user acquisition is probably the hardest part in anybusiness. BeThere had a clear idea on how to get users.Getting merchants sign up to the platform is hard if you don’t already havethe future consumers. What BeThere have done is: they provide a easy-to-use self-serve portal. Merchants sign up, create deals, pay remotely andall that, 24/7 in any city in the world. There is no human interactionrequired from BeThere, so they are not spending money. BT have a reallyclose relation with a lot of merchant association and give them acommission-per-conversion. It’s a risk-free advertising solution formerchants: BT offers the first conversions free and then, only pay forresults. The social media visibility and buzz leverage competitive pressureamongst merchantsThe user acquisition is usually easier as long as you have content, in thiscase deals, to provide to them. A lot of features in BeThere Deals appwould increase the lifetime user incentives: attractive deals, off linerewards, money back program (with the new virtual currency - the“BeThere Buck”), unlock mystery deal, free deal for friends sign-up.Activity contests and giveaways will allow consumers to earn points forusing the service and increase the chance of winning random weeklydrawings. The viral aspect of social medias and mobile devices wouldattract more and more traffic. One of the Jeff Schram Facebook/iPhoneapplication called DailyBabe would provide free advertising to over 1.2Muser base. The College Campus initiative is an idea that the managementteam came with: providing deals around campuses - student are usuallybroke and are always looking for deals - and have a reward system whenthey convince a local merchants to sign up.As you can see, BeThere is setting up a new process for merchants andconsumers, the “Deal-as-you-go”.Why BeThere almost failed - 31/36 -
  32. 32. Startups for Dummies by Damien Brzoska in 2011As you read in the market study section, there is a lot of competitor in thedeal space. There is not only the “big ones” but also all the country basedone. There is hundred of thousand potential competitors around the world.It was really hard to start, specially in the Silicon Valley. It’s supposed tobe the place to be to start a business but it was probably not the bestchoice for BeThrere.The business model they had wasn’t a proof of concept. There were a lotof work to do on the merchant side to make it start properly. The lack oftime of the core team was a bit of a problem. When they decided tolaunch the product, Paul and the Jeff’s still had a full-time job. It was reallyhard to launch a business only on your spare time (nights, weekends andholidays). On May 17th, the BeThere Deals iPhone app where released onthe iTunes AppStore. Within three days, the app was featured by Apple onthe iTunes home page in the section “New & Noteworthy”. In the next tendays, they reached 10,000 downloads on iTunes AppStore - without anypress release or advertising. On May 29th, the famous tech web magazineTechCrunch.com covered BeThere Deals.You would imagine that all that traction from medias would have beengood, but in fact, it give us a lot of potential consumers but not enoughmerchants. What happened after that is people had a bad first experiencewith the BeThere Deals app. In a short time after, BeThere technical teamreleased the destination website (basically a web version of the iPhoneapp) and a new version of the business to business website.For the next months, the Paul and Jeff Schram had a lots of meetings withinvestors and advisors where they mostly heard that the idea was good - 32/36 -
  33. 33. Startups for Dummies by Damien Brzoska in 2011but what was needed was to have merchants to sign up and having a lotof interaction between consumers and merchants.In summer 2010, after BeThere spent most of its time and resources intodeveloping new version and scaled app. It was still at the same point. Fewchanges in the technical team - some new interns arrived some other left.In the beginning of 2011, when BeThere was on the edge of a potentialcollapse, Paul decided to quit his full-time job to spent more time forBeThere and try to make it work as the entire team was expecting sincelate 2009...“Just wanted to drop you a quick note to let you know that I just resigned from*COMPANY NAME*, in order to focus more of my efforts on our venture. Mostof all, this move will afford me much more time and flexibility when it comes tomeeting with investors and getting ourselves truly off the ground.Lets take our company to the next level!”Paul Gassee, Feb 2011That was the trigger which help BeThere to start again and adopt a newbusiness model.How BeThere adapt and evolveSince Paul had more time to spend for the company, it really made thedifference.BeThere kept its three product but slightly change its business model.BeThere wants to “mobile-ise” the deal space.Opening an API on BeThere products would be a great idea and leteveryone received the best local deals on their favorite mobile apps. A lot - 33/36 -
  34. 34. Startups for Dummies by Damien Brzoska in 2011of smaller deal sites want to bridge the gap by offering real-time mobileoffers. BeThere “mobile-ises” daily deal sites by offering them its existingplatform.Daily deal site example: HomeRun.It works very easily. When HomeRun create a new deal on they website, itis automatically posted to BeThere Deals B2B Platform and then fewminutes later, everyone will see the deal on their mobile device.Basically, BeThere powers HomeRun and all daily website who subscribefor Mobile with a deal platform and a branded mobile app. Their deals areserves of mobile ad network (3rd party apps) without any requirementfrom them. BeThere manage everything and they project that HomeRunrevenue grows by 50%. - 34/36 -
  35. 35. Startups for Dummies by Damien Brzoska in 2011According to Yipit 12, in May 2011 there is about 571 daily deal sites only inUS. The lower tier sites have no development resources to “go mobile”but they all want to sell real-time mobile deal.BeThere offers in the “package” a SaaS management and reporting tools.Daily site merchants set deals, locations, times and targeting criteria inreal-time. All the campaign is then managed with the real-time dashboard.The new “Mobile-ising” the daily deal sites is simple:Daily deal sites post their offer onto BeThereBeThere serve the deal on: Branded App, BeThere Generic App, Mobileapps and/or Partner Ad Networks.On top of that, BeThere decided to implement an Android version of theapplication to offer its deals to a bigger range of users.Personal analysisConclusion: Should you ?Sourceshttp://startupgenome.cc/http://thephuse.com/business/so-you-want-to-start-a-startup/http://www.inc.com/guides/start_biz/20797.htmlhttp://en.wikipedia.org/wiki/File:Startup_financing_cycle.svghttp://www.paulgraham.com12 Daily deal aggregator (Angel.co: http://angel.co/yipit) - 35/36 -
  36. 36. Startups for Dummies by Damien Brzoska in 2011http://www.sec.gov/answers/accred.htm - 36/36 -

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