Forget the Web, Valley Start-Ups Get Real | By PUI-WING TAM and JESSICA E. VASCELLARO

A long-shunned Silicon Valley technology sector – consumer-electronics start-ups – is showing some surprising signs of life. One San Francisco couple is making a $359 kitchen appliance dubbed Nomiku, which people can use to “sous-vide” food. Jessica Vascellaro has details on The News Hub. Photo: Alison Yin for The Wall Street Journal.

A long-shunned Silicon Valley technology sector—consumer-electronics start-ups—is showing some surprising signs of life.

Entrepreneurs in California have quietly launched dozens of small hardware companies, designing everything from smart wristwatches to digital thermostats. The typical business plan: raise enough money to create prototypes in the U.S. that can be manufactured in Asia and sold online.

These consumer-electronics makers are attracting new interest as some of the Internet frenzy abates following spotty performances by newly public Web companies like Facebook Inc. FB +5.04% and Zynga Inc. ZNGA -0.33%

One team taking advantage of the shift is husband-and-wife duo Abe Fetterman and Lisa Qiu, who in June set up a hardware company in their two-bedroom San Francisco apartment. The couple is making a $359 kitchen appliance dubbed Nomiku, which people can use to sous-vide food—that is, cook meats and vegetables in airtight plastic bags in a water bath.

The couple didn’t take a traditional venture-capital route to launching Nomiku. In March, they flew to Shenzhen, China, to participate in a three-month program at hardware accelerator Haxlr8r, where they learned how to make a product prototype. In June, they decided to raise money through crowdfunding websites Kickstarter and AngelList.

Now they have snagged more than $580,000 through Kickstarter and are aiming to close on seed funding in the next few months. “Most hardware start-ups are going the same route as us,” said Ms. Qiu, 24 years old.

[image]
Alison Yin for The Wall Street Journal

A prototype of the Nomiku cooking device, attached to a pot.

The rebirth of these tiny consumer-electronics start-ups—often through similarly scrappy means—goes against conventional wisdom.

For years, such companies were stigmatized as expensive to fund and operate, given the costs of manufacturing and retail distribution. The consumer-electronics market is also dominated by giant companies such as Apple Inc., AAPL +2.63% Sony Corp. 6758.TO +2.16% and Samsung Electronics Co. 005930.SE -0.93%

But the economics of starting a hardware company have changed. Prototyping costs have dropped with the advent of 3-D printers and incubators that provide machining tools. Third-party services have sprung up to help start-ups navigate the manufacturing process in countries like China. And some factories are willing to do smaller product runs, allowing start-ups to turn out just a few thousand units at a time.

Rob Coneybeer, a venture capitalist at Shasta Ventures who has invested in smart thermostat maker Nest Labs Inc., said the cost of making a consumer-electronics prototype has dropped to $500,000 to $1 million today. That’s down from $20 million to $25 million a decade ago, according to industry estimates.

Today’s hardware start-ups also can cut costs by outsourcing manufacturing to Asia and selling directly to consumers over the Internet.

And they can avoid holding inventory and warehouses, thanks to more efficient shipping routes from Asia and the ability to manage orders through a website instead of guessing how much product to give a traditional retailer ahead of time, said Liam Casey, chief executive of PCH International, which handles manufacturing and fulfillment for large and small tech companies.

Crowdfunding websites like Kickstarter and AngelList have also helped to even the playing field with financing. All of this is “democratizing entrepreneurship” for hardware makers, said Naval Ravikant, co-founder of AngelList, a website where young companies can apply to seek “seed” money.

Venture capital for consumer electronics remains scant compared with the plethora of cash available for Web companies, but investments into hardware start-ups are rising. Venture capitalists put $262.6 million into consumer-electronics companies last year—a fraction of the $5.2 billion that went into consumer Web firms—but that was up more than 50% from $130.4 million in 2010 and $108.8 million in 2009, according to VentureSource.

With the recent choppy performance by some Web companies, several investors said there’s more attention on consumer-electronics makers.

“With what’s happened to daily-deals companies and social companies, people are realizing that a barrier to entry [with hardware] is a good thing,” said Brian O’Malley, a venture capitalist at Battery Ventures who invested in headphone maker Skullcandy Inc. SKUL -5.58% “If there isn’t a lot of intellectual property in a business, others can be fast followers.”

Some Silicon Valley hardware makers have raised large rounds recently. Square Inc., the maker of a mobile credit-card reader, this month raised a new round of funding that valued it at $3.25 billion, people familiar with the matter have said. E la Carte Inc., a Palo Alto, Calif., company that makes tablets for restaurants, snagged $5 million last year, while camera maker Lytro Inc. raised more than $35 million last year.

Others are launching through Kickstarter and other means. Smart wristwatch maker Pebble Technology Corp. of Palo Alto raised $10.27 million from Kickstarter in May. Incident Technologies, a Santa Clara, Calif., company that is making a digital guitar, raised $350,000 on Kickstarter and $1 million on AngelList earlier this year.

Idan Beck, CEO of Incident Technologies, said as more small hardware companies have grabbed consumer interest through Kickstarter, they are proving there’s a market for newfangled devices.

“We used to have to spread a much wider net [to raise money] because of an aversion to funding hardware,” he said. “But now there’s a congregation of people interested in the product category.”

Not all of these start-ups will be able to scale up. The San Francisco-based maker of WakeMate, a smart wristband that helps people wake up, suffered production delays in 2010 and safety issues last year, and has since stopped making new products. Unplugged Instruments, a Silicon Valley start-up that was making a next-generation electronic guitar, also closed after failing to raise money this year.

For Ms. Qiu and Mr. Fetterman at Nomiku, the key is stretching out the cash they have raised. So far, the couple has spent $20,000 to make the prototype of their Nomiku machine. They plan to go into production in the next few months, while also seeking to other financing.

“We’ve thrown everything to the wind to commit to this,” said Ms. Qiu.

—Ian Sherr contributed to this article.

Write to Pui-Wing Tam at pui-wing.tam@wsj.com and Jessica E. Vascellaro at jessica.vascellaro@wsj.com

A version of this article appeared August 18, 2012, on page B1 in the U.S. edition of The Wall Street Journal, with the headline: Forget the Web, Start-Ups Get Real.

 

The 10 start-ups to watch | BRW.

In an effort to support and promote the efforts of the founders of start-up businesses, BRW has produced a list of the top start-ups of 2011. We hope their success stories will inspire and help others who are contemplating stepping away from the comfort of a salaried position and launching a business of their own.

Judging start-up businesses is a difficult task. For most of BRW’s lists, businesses are assessed based on historical revenue results or the size of their balance sheets. But start-up businesses don’t have track records.

Eligibility for the Top Start-Ups list was determined by qualitative assessments of soundness of the ideas behind each business, the founders’ commitment to the cause and their opportunity for growth.

Do you agree with our 10 best start-ups? Write and tell us your view.

Technology-related businesses feature prominently. It was not BRW’s intention to produce a list that was skewed towards tech companies but the weight of evidence made it unavoidable.

Top 10 start-ups

How Australia’s top ten start-ups are positioning themselves for the year ahead

The past two years have represented the biggest revival in technology sector investment since the dotcom bust in 2000. Fortunately for all involved, investors in start-up technology companies require much clearer evidence of the path to profitability than they did over a decade ago. The advent of smart phones has also significantly expanded the opportunities on offer to entrepreneurs.

No longer is it just tech-heads who are looking to the web. There is also a growing recognition that the web and mobile devices provide a fast and efficient way to start a business. Jonathan Barouch from Roamz, a location-based smart phone application, explains his preference for technology: “We are just using the best tools we have,” he says.

The internet is attracting those entrepreneurs who want quick results and can’t afford to invest heavily in physical assets before launching a business.

Several of the companies we feature in the following pages demonstrate the extent to which technology can accelerate the start-up process. Grabble is the standout example, having been established, proven and sold within a year. Developed as way for retailers to reduce the need for paper receipts, US retail giant Walmart was so fond of Grabble’s solution that it bought the business and employed its founders, who have since relocated from Wollongong to California’s Silicon Valley.

But for all the excitement about the technology sector, there are still many start-ups using more traditional methods to achieve great things. Fortunately for budding entrepreneurs, the best businesses often have the humblest of beginnings.

The idea for Lupe Wines, for example, developed out of its founder’s frustration at not being able to get a glass of wine at a music festival. Espressogrow was born when one of its founders came to realise that most of the old coffee grounds at his local coffee shop were simply being thrown away.

Each of the start-ups featured in the following pages show promise but the reality is that success is far from guaranteed. Many good ideas never turn into successful businesses. It may be bad timing, a lack of capital, emergence of a competitor or any number of factors that prevent a good concept becoming a well-established business.

A broad-based lack of confidence in the global economy also presents a threat to the current crop of start-up businesses.

Despite all the potential obstacles, many people are still prepared to identify an opportunity and develop a business around it. The importance of start-up businesses cannot be overstated and those entrepreneurs who are prepared to have a go should be commended.

Espressogrow

| Andrew Heathcote

Notable achievement: Turning one man’s trash into treasure.

Mark Henderson was sitting in a coffee shop when he asked a barista what happened to the used coffee grounds. After being told they were put in the bin, he investigated further and discovered that at that shop alone about 10 kilograms of grounds were thrown out each day. “I went back to my office and thought there must be a better way,” he says.

He discussed it with a former colleague, Geoff Howell, and the pair then spent 10 weeks investigating the nutrient value of coffee grounds and the possibility of using them to produce fertiliser. They spoke to retailers, manufacturers and marketing experts before deciding to quit their high-paying positions as IT consultants and going into business together.

“Geoff and I were really hoping someone would tell us it was a stupid idea and that we should concentrate on our day jobs,” Henderson says.

Instead they set up Espressogrow, which is about to finalise its initial funding round. Espressogrow plans to pay coffee shops for their used grounds, then take them to a central manufacturing plant and turn them into organic fertiliser.

Henderson says there has been keen interest in Espressogrow from investors and large coffee chains. He says the production of the fertiliser is relatively straightforward and that once funding has been secured, they can begin making it quickly.

He says coffee grounds are high in nitrogen and can be used to produce a product that behaves similarly to slow-release fertiliser but without the bad smell.

Manufacturing plants are planned in Australia, Europe and the US. “The business is not hugely expensive,” Henderson says. “We have to move rapidly to take hold of the opportunity.”

Zookal

| Jessica Gardner

Notable achievement: Getting good advice from a global competitor.

Zookal was formed when five university friends pulled together some start-up funding from their parents and bought 300 textbooks in time for the start of first semester in 2011. They planned to rent the books to students and focused on their classmates in the business faculty at the University of Technology, Sydney.

In second semester, Zookal doubled its collection of books, using cash earned in the first half of the year but word had spread among its customers’ social circles and it started getting inquiries from students at other universities and interstate. “We realised that we were going to need a significant investment if we were to progress,” co-chief executive Tia Saunders says.

Saunders and her co-CEO Ahmed Haider had been talking to angel investors and the offers and terms they received suggested a company valuation of about $1.2 million.

In September 2011, they went to the United States and met the founders of Chegg, another student-founded company that had been renting textbooks since 2007 (and had revenue of $200 million in 2011).

Chegg founder Aayush Phumbhra took kindly to Saunders and Haider. “We went back to Australia and Chegg commenced a due diligence process,” Haider says.

An investment offer from Chegg was attractive but would take too long to meet Zookal’s needs. Instead the two CEOs finalised an undisclosed funding round with the local office of venture capital fund Artesian Capital Management, which had expressed interest previously. The investment values Zookal at $5 million, they say.

Meeting Chegg didn’t just pump up their valuation, it also taught the young entrepreneurs to think big. “When I said we needed $4 million to go nationwide,” Haider says, “Chegg’s CEO Dan Rosensweig said, ‘Think bigger, think Asia – where could you get to if we gave you $25 million?’ This was almost the opposite of what we’d been told by local investors.”

Grabble

| Jessica Gardner

Notable achievement: Being bought out by an industry giant soon after being set up.

Two mates from Wollongong, NSW, began tinkering with smartphone applications to “make shopping smarter” in December 2010. Stuart Argue and Anthony Marcar got their first win when their company Grabble was accepted to incubator Startmate’s inaugural class and then into 500 Startups in the US, both in the first half of 2011.

In November 2011, the start-up was acquired by the research and development arm of US shopping giant Walmart. Details of the deal, which was announced by a message on a holding page on their company website, are scant. The two founders have since relocated to Silicon Valley as employees of WalmartLabs and aren’t able to say too much about what’s happening next with their company or their idea – which is loosely based around getting rid of paper receipts and sending digital versions to customers’ phones instead.

By email, Marcar tells BRW the duo is working in WalmartLab’s mobile team – in a “fantastic environment”. The workforce is mostly made up of the founders of other US digital start-ups that have also been acquired by the company, he says.

One of Grabble’s mentors, US-based Australian serial entrepreneur Ryan Junee, can think of only one other example of a local start-up being acquired by a US firm so early in its life: the purchase of Where2 by Google in 2004, which went on to become Google Maps and spurred the establishment of Google’s Sydney office.

“This acquisition reflects the fact that Stuart and Anthony are thinking big,” Junee tells BRW by email. “Many Aussie start-ups focus (perhaps too much) on the short-term cash flow because that is what Aussie investors like to see. Grabble was either going to be a huge success or a spectacular flame-out but that kind of high-risk, high-reward is what excites people in the Valley.”

Roamz

| Andrew Heathcote

Notable achievement: Winning support of a big listed company in a hotly contested market.

Apps are everywhere. The smart phone has proven to be one of the most influential developments of recent decades and there is no shortage of entrepreneurs trying to capitalise on the business opportunities they create.

Standing out in a crowded field of app developers is Jonathan Barouch. He is the founder and chief executive of Roamz, an app that draws together social media content to allow people to find local events and opportunities that interest them.

Roamz has had more than 50,000 downloads since its launch in October. Barouch began planning Roamz in 2010 after selling another business, fastflowers.com.au. He says running a florist made him realise how difficult it was to market products to people who are both nearby and fit a specific demographic profile.

“It’s the holy grail of marketing,” he says.

Roamz and its competitors are trying to meet this need. The use of geo-location software on smart phones has been a hot area for the past year.

Barouch’s standout achievement has been to win the backing of Australia’s biggest marketing and communications company, Salmat. (It took a 60 per cent stake for $3 million before the launch.)

Many app developers are more than happy to take the money of venture capitalists. Salmat says many people were interested in investing but he chose Salmat because the deal gives Roamz access to databases and networks normally out of the reach of a start-up.

Barouch says the opportunities are endless. “There are billions of dollars at stake,” he insists. “Whole communities in China will have their first taste of the internet on the mobile phone.”

Andrew Heathcote

One Big Switch

| Nassim Khadem

Notable achievement: Tapping into discontent with the banks.

When Kevin Rudd’s former spin doctor, Lachlan Harris, and Harvard University MBA graduate Paul Hunyor founded One Big Switch in July last year, they didn’t anticipate a war with the mortgage broking industry.

Their plan was to tap into consumer discontent with the banks by arranging a group buying scheme that offers cheaper rates on home loans. Consumers register their details online (when the business started with the support of consumer group Choice, 40,000 people registered in the first month alone).

Once there’s a large volume of people looking for a new home-loan provider, One Big Switch approaches financial institutions and requests bulk discounts on their behalf. One Big Switch receives a commission for introducing customers.

The mortgage broking industry has criticised the scheme, saying One Big Switch is not a registered broker. Harris says he is simply giving consumers more clout. “We just use people power to negotiate discounts,” he says.

The initial flood of interest suggests One Big Switch has a strong concept but the business still has a long way to go. Harris says several hundred people are in discussions with new lenders but at this stage they’re small players such as Resimac and FirstMac.

The start-up has also moved into group buying of electricity, while Harris was overseas last week wooing potential investors.

Harris says about 2000 people have already switched electricity providers and One Big Switch is looking to move into further areas such as insurance, plus possibly expand overseas. He expects to have more than 100,000 members by year’s end.

Nassim Khadem

Signrider

| Andrew Heathcote

Notable achievement: Creating a new segment in an established market

Sometimes, as Dave McGree has found, the simplest ideas can be the best ones.

McGree has co-founded a business that puts advertising on cars. The average car, he argues, is seen by 1.7 million people each year. His plan is to create a new segment in the $500 million outdoor advertising market.

His business, Signrider, is a low-cost operation that can be scaled up quickly. It works by having drivers fill in questionnaires on the Signrider website about their cars and driving patterns. Advertisers who want to reach a targeted location can do so by selecting a specific type of car and location from the database of registered drivers.

Advertisements are installed on the back and sides of selected cars and drivers are paid about $60 a week. McGree describes it as easy money for drivers as they are not required to alter their driving habits once selected.

The business started in July and 2000 drivers have registered to take part. “Drivers are signing up in droves,” he says.

Signrider makes its money by taking a monthly agency fee from the advertisers, so the big challenge will be getting enough advertisers on board. Just before Christmas, McGree began a push for advertisers and hired six sales consultants.

The rapid development in geo-location applications on smartphones demonstrates a growing preference for tailored marketing services and Signrider fits right into this niche. McGree plans to roll out the concept nationally. “We see massive potential if we can get this ingrained,” he says.

ImageBrief

| Jessica Gardner

Notable achievement: Providing a legitimate rival to an established duopoly.

Simon Moss had been running a niche stock library with his wife Meg for five years. All the photos had to be comprehensively tagged with keywords so clients could search through the archive. The problem is that a photo taken in 1950 would need to be tagged as 1950, 50s, 50’s and so on, Moss says. “It’s impossible to capture all of the different things people might be searching for.”

Then he came upon web-based crowdsourcing businesses such as 99designs, where users post graphic design briefs and freelancers pitch for the work. “We thought, ‘My God! This is insanely amazing. Wouldn’t it be great if we could do this with photography’,” he remembers.

The two industry leaders for stock image libraries are Getty and Corbis. “We saw a lot of photographers with a tonne of content that couldn’t be found and a lot of buyers that were struggling to search and navigate,” he says.

Using ImageBrief, customers, who so far include publishers and advertising agencies, post a brief for the type of image they need and their deadline and budget. If photographers have images that fit the brief, they upload them to the website. “If a buyer finds an image they love, they can download it and pay by PayPal or credit card,” Moss says.

More than 4000 photographers have signed up to the website. ImageBrief raised $600,000 from a syndicate of unnamed angel investors, who have strong links to the media industry, after pitching at an Innovation Bay dinner in 2011. With the capital, Moss will open offices in New York and London in the next three months. (The amount of equity the $600,000 purchased is undisclosed.)

BugHerd

| Jessica Gardner

Notable achievement: Successfully raising three rounds of cash in its first year.

Alan Downie and Matt Milosavljevic have created software that aims to make communication between web developers and their clients, who are often not tech-savvy, simpler and more effective.

Their company, BugHerd, enrolled in the inaugural class at start-up incubator Startmate in early 2011. As part of Startmate’s standard terms, they received a $25,000 cash injection in return for 7.5 per cent of the company. However, Downie says Startmate is not about the money. “It was more about the mentors and the access to the network of people,” he says.

One of BugHerd’s key mentors at Startmate was Alan Jones, the founder of online strategy company Doing Words. Jones was the lead investor in an angel round that raised a further $240,000 for the company in return for 15 per cent.

When the company enrolled in Startmate, Downie says “we were probably undervalued but we were really keen to get into the program”.

Although BugHerd was still “pre-revenue” in July 2011 when the angel investment round closed, he reckons the six months of development work and enquiries from potential customers that had begun to flow in were two factors that contributed to the rise in the value of the company.

Finally, in January 2012, BugHerd announced a $500,000 investment from Australian venture capital fund Starfish Ventures. Downie would not disclose the total equity now held by investors but confirmed he and Milosavljevic still had a majority share.

“[BugHerd] is a brilliantly executed product that’s dead simple to use,” Startmate co-founder Niki Scevak says. “The initial customers are really happy and that’s enabled [Downie and Milosavljevic] to raise funding. They want to build a large company for the long term. It has the right ingredients.”

Jessica Gardner

Vaxxas

| By Kath Walters

Notable achievement: Raising $15 million, the most ever by a start-up biotechnology/medical devices company

Prevention is better than cure, and cheaper, which is why 1.6 billion doses of various vaccines were administered around the world last year – at a cost of $US21 billion.

However, the technology that delivers vaccines, the needle and syringe, is fraught with risks, complications and limitations. A new Australian company, Vaxxas, is leading the world in the next generation of vaccine delivery – it’s called the Nanopatch.

The needle is better than it was when it was first used in 1853 but no one really likes a jab. That pain is an impediment for adults and children and stops some returning for booster shots. Training is needed to give an injection safely and effectively.

And, as Mark Kendall, the pioneer of the Nanopatch, has established, vaccine injections deliver the treatment into muscles, which have few immune cells. The Nanopatch has thousands of small projections designed to deliver the vaccine to the abundant immune cells in the skin.

The race to develop a vaccine patch is intense, but past efforts have foundered at the manufacturing stage, according to Paul Kelly, an investment manager with OneVentures, the lead venture capital company backing Vaxxas.

“The problem is finding a way to manufacture the patches and coat them with vaccine in industrial quantities,” he says. “We believe we have a very strong intellectual property position for manufacturing at scale.”

OneVentures co-invested with Brandon Capital, the Medical Research Commercialisation Fund and HealthCare Ventures, an American company that has invested $US1.6 billion in more than 100 companies over 25-plus years.

The $15 million will take the Nanopatch into human trials. All investors have committed to contributing the same amount in a second round if necessary, putting the start-up on a good footing to negotiate with tough global pharmaceutical companies.

Kath Walters

Lupé Wines

| Andrew Heathcote

Notable achievement: Turning a problem into a solution.

The single-serve market for beer and pre-mixed drinks is well established but when wine drinkers want just one drink, they usually have to open a standard size bottle. Attempts so far to sell wine in smaller cans or glass bottles have been largely unsuccessful.

Georgia Beattie is confident she can change that and has started a company that makes recyclable wine glasses that can be used for pre-packaging and drinking wine.

Beattie says she had the inspiration for the business when she was unable to buy a single glass of wine at a music festival. She says there are many occasions, such as parties and outdoor events, when people could benefit from her product.

She began by designing her own glasses but wasn’t satisfied with the prototypes. So she visited the manufacturer of a similar but superior product in Britain and acquired the rights from him.

She now sells wine in her plastic glasses under the Lupé brand, which was launched in November last year. She says her main reason for selling wine herself was to prove the concept and her big plan is to offer her glasses to winemakers as an alternative distribution method.

“We’re a packaging company,” she says. “What we’re doing is creating a new market segment for wine.”

17 things to remember when starting your first business – Neil Patel

by Neil Patel

 Growing up I was surrounded by entrepreneurs. All of my uncles on my mom’s side of the family ran successful businesses, and I learned that working for yourself was a great way to improve your lifestyle.
No surprise then that I now own a few businesses of my own. But I made lots of mistakes getting started, mistakes I could’ve avoided if I’d known a few things.
Here are seventeen mistakes that you should avoid:

Sell Something Legal
Selling something legal may sound obvious to anyone in business, but trust me, when it comes to wanting to make money you will likely consider a lot of ideas… some legal, some illegal and some in between.
While still in high school I sold CDs and black boxes. I was only making a few dollars off of each CD, so I turned to the black boxes, which made me a little more money. Unfortunately at that time I wasn’t clear on exactly what was legal or not so I decided to get out of it.
You don’t want to make a lot of money and then lose it all because you are on the wrong side of the law.
Sell Something People Can Afford
I once took a job selling high-end vacuums. I enjoyed the challenge of trying to convince people that they needed the vacuums, and it helped that I would shampoo and clean their carpets during my sales presentation for free.
But these were $1,600 vacuums and most people couldn’t afford them. I did happen to sell one to an Indian couple, who are known to be frugal, but they returned it a week later!
Find out what people can pay for a product before you design it, and while you won’t get rich quick this way you’ll definitely find it easier to sell your product.
You Must Market Your Product to Succeed
I enjoyed working and finding new jobs because each time I was making a little bit more money. I liked making more money because I wanted to change my lifestyle and eventually help other people do the same.
But I realized it was going to take me forever unless I figured out how to create a $100 million dollar company.
Monster.com’s business model and the amount of money they made fascinated me, so I decided to build a competing model. I called it Advice Monkey.
I spent five grand building the product and watched Advice Monkey go nowhere. I needed to market it or it was going to sink.
I ended up hiring a total of three companies to help me market this business, but all three wasted my money without any kind of return! That’s why I decided to learn Internet marketing.
In time I grew the site to be pretty popular and even created some buzz in the media, but I ended up having another problem: it couldn’t do credit card transactions.
If people don’t know about your great product, then they can’t buy your great product. It’s that simple.
Make Payments Easy
The lesson I learned from Advice Monkey was that if you wanted to make money you needed to make it simple for people to pay you.
Of course you have to provide a valuable product, something people want or need, but if you don’t make it easy for them to pay you, you’re business will suffer and eventually fail.
I’ve learned that whether you are providing a service like consulting or a product like software, you should provide the simplest, most common and fastest way for people to pay.
If you make it hard then you are simply giving people an excuse to delay paying you or even giving them an excuse to go to your competitor who does make it easy. Don’t do that because it could be a million dollar mistake.
Solve Problems Customers Are Facing
My really first successful company was Crazy Egg. It was successful because my business partner and I realized that the best way to build a business was to find some problem people or companies have and try to solve that problem.
Besides, it makes it really easy to close sales when you can show a potential client what their problem is and how your product solves that problem. The best businesses are the ones that solve problems.
Do It in a Simple Way
Have you ever noticed how simple the best products are? You don’t need a degree in rocket science to understand how to use a bicycle, drill or personal computer, nor do you need one to understand how they can help you.
I’ve seen lots of products and ideas fail because they were too hard to understand. They might’ve solved your problem but it cost too much to do it or they took too many steps to do it.
Remember that people want their problems solved in the easiest way possible, so keep it simple.
Be Patient
My business partner and I thought we had struck it rich when we started Crazy Egg. Here was a product that was simple and solved people’s problem. The money should roll in, right?
Not exactly.
We watched the popularity and interest in the company grow, and knew it was just a matter of time before somebody offered us $10 million dollars for it.
It never happened and we eventually had to bootstrap it to keep it going. We didn’t understand why this was happening, but we loved Crazy Egg and so kept with it.
I’m glad we did because about three years after we started Crazy Egg it became profitable. The lesson I learned is you must be patient when it comes to software companies because it takes a few years for them to take off.
Charge More
I think the tendency when it comes to running a business is to keep your fees low so you attract a wider audience. The only problem with that is you will also attract more people who will complain.
Charging premium prices, especially when you are consulting, does a few things for you:
    •    You appear as someone who knows what he is talking about.
    •    You will hear fewer complaints. People and companies who have the money to afford you won’t usually make snarky comments about how much they are charging you.
    •    You can work harder for one person rather than work mediocre for a lot more people.
    •    Your reputation will grow as your provide excellent customer service.
Know what your competitors are charging so you can price yourself right. You may be surprised at what people are willing to pay.
Go After the Big Guys
One thing I like to tell people is to offer to do the work for a small paying client for free if they can make an introduction for you to a large paying company.
Does doing work for free scare you? Think about it this way, if that small company is paying you $5,000 a month, but that large company can pay you $100,000, you will make $95,000 more.
That’s a huge increase in income, so think big and go after the big guys!
Conserve Cash
I understand I am young, but I have experienced a lot of bad times in the business world, and the number one thing that I learned is cash is king.
If you don’t have cash coming in, you will not survive. And if cash is coming in, especially a lot of it, you need to learn how to save, both for the business and for yourself.
Because the economy is like a rollercoaster you could enjoy a few years of making a lot of money. But trust me when I say there will come a time when you will not make very much money.
Resist the urge to pay yourself handsomely and buy expensive office furniture. Your business will weather any financial storm and your employees will thank you!
Never Stop Closing
One of the most important things to remember when you are building a business is that you must always be looking for clients and ways to get them to work with you.
Never get comfortable because you have a handful of clients locked down or you have momentum with your software product.
It’s so important to constantly network, look for business and sell people on working with you. And if you get in a situation where you can’t handle the extra workload, hire temporary help to handle it until you can justify bringing in more people.
Focus
Boy, was I all over the place during the time I was learning all of these lessons about business. And I think that hurt me because I was spreading myself too thin.
One of the reasons Steve Jobs and Apple were so successful was they focused. They didn’t have a bunch of products, even though you might think they did. They had only a handful.
That allowed them to do several things very well:
    •    They could listen closely to what their customers were saying.
    •    They could create the products to meet the needs and desires of those customers.
    •    They could make those products the best in their category.
If you are not focused you will not be able to do a good job on your business. Find the things in your business that make you the most money and focus on them. Eliminate everything else!
Always Find Your Passion
When I was doing Internet marketing for companies I was making a lot of money. I was very grateful for that and I was very grateful to the people who helped me build that company.
But it wasn’t very much fun. It felt like a job, and I knew that if I was going to be successful long-term I needed to find what I really enjoyed doing.
Why is this important?
I work 70 hours a week on my businesses, and I’m sure most entrepreneurs work that hard. Some may put in more hours, some may put in a few less.
But I don’t really think of it as work because I enjoy what I do. I really have a passion for it. If you’re not passionate about what you do, stop right now and think about what you really want to do.
Learn, Learn and Learn Some More
Even when I was in high school and working on my own business, I was taking classes at the community college. My uncles had taught me that entrepreneurs never stopped learning.
I loved learning so I kept doing it.
Learning is hard work and I can’t say that I’ve always enjoyed working so hard to learn. And sometimes I even felt like I knew everything about a certain business or topic, so didn’t need to learn anything.
How wrong I was!
I encourage you to keep the mindset that you can learn from anybody no matter who they are, and that in the end you don’t know everything. If you do this I’m certain you will grow wise in the ways of business.
Good Help Costs Money
When I was starting out I didn’t pay much attention to who I hired. Sometimes I’d hire people I knew or I’d hire someone based upon a recommendation from a friend.
I learned that was not the right approach to hiring people. Some times people are just looking for a job and need a paycheck, and soon they take you for granted they don’t work as hard as when they first joined.
Spend time finding good help and don’t be afraid to pay them good money. Think of it as an investment, where you need to figure out your ROI on that person. And then measure their success.
Do this and I’m pretty sure they’ll turn out to be a great benefit to you.
Emotions Rule
It would’ve been really great to know that people buy things based upon emotion when starting out. What I mean by that is the purpose most people buy a product is because of a feeling they have, like fear or pride.
For example, people buy car insurance because they are afraid of losing all their money if they get in a wreck. Parents send their children to Ivy League schools because they want to brag to their friends.
What you have to do is figure out what emotions will resonate with your customers when it comes to your product.
And don’t let people who say they don’t make emotional decisions about money fool you. Even the most analytical accountants or engineers make decisions with emotions.
Listen to Your Friends and Family
Starting a business can suck up all of your time and energy. It becomes your life and that will not end well if you don’t listen to advice.
I have the best family and friends not because they are fun to be around, but because they also care about me and want to help me when I’m making a mistake.
Unfortunately because I was so busy I would ignore them, only to have my problems come back around and bite me. If I would’ve listened to them in the first place I would’ve never had that problem to begin with!
If you don’t like what they have to say, that’s fine. But at least give them the benefit of the doubt and hear them out.
Conclusion
I hope that by sharing these experiences with you that you’ll be able to avoid some of the mistakes that I made. I can’t promise you that you won’t make some of your own mistakes, but if you do, I encourage you to learn from them.
What lessons do you wish you would’ve learned before you started your first company?
Neil Patel is the co-founder of KISSmetrics, an analytics provider that helps companies make better business decisions.
via geekwire.com

Thanks for sharing DJ

20 Innovative Startups

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Kaggle is a network of 17,000 PhD-level people that help each other solve impossible problems

Very few startups have the potential to become big businesses. There are also very few with innovative ideas.  We compiled a list of our favorite tech startups and asked investors and entrepreneurs to do the same. Some of the companies we selected are more established than others. We sided with younger, more obscure startups with big-time potential. Some were too stealth to be included. All of them have fresh concepts with the potential to become industry leaders.

via businessinsider.com

 

‘Startup School and the Instigation of Entrepreneurship’ by Mark Hendrickson | TechCrunch

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via techcrunch.com

If you’ve ever met Paul Graham and Jessica Livingston of Y Combinator (YC), you quickly realize that the incubator they run is like a family and they are its attentive parents. They have managed to put a very human face on venture capital, one that appeals to young engineers during their most insecure stage: when they have just begun, or are still deciding whether to begin, their lives as entrepreneurs.

Much of their success in establishing YC as the premier gateway for startups in Silicon Valley can be attributed to this characteristic and its manifestations. When these engineers think about venturing out on their own, they turn to YC as a sort of foster home, one that will shelter them during the first few rough months of startup life and prepare them for the scary world beyond. Because of this, YC has secured a nice deal flow for itself, one that allows it to evaluate a massive amount of raw talent before it transforms into validated companies commanding higher valuations and greater sums of money.

As the gateway to Silicon Valley – and truly, you’d be hard pressed to think of another singular starting point for this community’s entrepreneurs (there’s a reason Ron Conway calls it the “Harvard/Stanford of startups”) – YC has decided not only to open its doors to budding entrepreneurs but to actually encourage more undecided youth to become entrepreneurs. This is the raison d’être for Startup School, an annual event that YC holds at Stanford (and which took place again this past Saturday). A large crowd of fresh-faced engineers fills an auditorium for eight hours to collect pearls of wisdom from notable technologists like Mark Zuckerberg, Max Levchin and (not ironically) Ashton Kutcher. And they walk away feeling more confident about starting companies themselves, and not coincidentally, leaning towards opting for YC to do it.

Seen in a common light, this is a win-win for everyone involved. Entrepreneurs get to drink from a firehose of advice, manned by people who they already admire or soon will. YC gets an increased number of applicants and from that larger pool can invest in a greater number of promising startups. Later-stage investors consequently see more promising deal flow coming out of YC, and consumers benefit from the wonderful products that are created by companies that may otherwise not have been founded. All the while, the press and public at large gets to enjoy the appearance of more Silicon Valley success stories, which simultaneously satisfies and fuels their desire for role models of the American Dream.

Paul Graham himself echoed these sentiments mid-day by explaining how he believed the best startup ideas come from problems, not people looking for ideas. He implored the audience to start with a desire and then find an idea rather than compiling ideas from TechCrunch, as he sees many entrepreneurs doing in their applications to YC. He then went on, not coincidentally, to tear down the ideas of several entrepreneurs who presented to him on stage during a mock “office hours” session, as if to illustrate his preconception that many, if not most, entrepreneurs haven’t yet figured out a problem worth solving.

If this is the case, then, that we are experiencing a generation of entrepreneurs who prioritize the phenomenon of entrepreneurship over its justification, we ought to be concerning ourselves as a community with teaching folks not only how to get into the entrepreneurship game but how to find their purpose as well. This is a tricky proposition, and I don’t mean to suggest that people should hold out from starting a company before they have an “ah ha!” moment. Nor do I mean to suggest that a purpose will ever suddenly click into place for most or virtually any entrepreneurs; this is perhaps the most important lesson we’ve learned from the lean startup movement, that the discovery of problems and their solutions is often an iterative process.

But what I am suggesting is that, in addition to the commonly recited mantras intended to help entrepreneurs execute (such as fail fast, be persistent, focus on product above all else, prioritize engineering, surround yourself with “A” players, etc.), we should develop and promote a more deliberate practice of discovering passions worth pursuing and problems worth solving in a less haphazard way. This effort would certainly not be easy or clear from the onset, and it may require fundamental changes to our educational system in addition to our configuration as a community. But without it, institutions like YC and its Startup School will likely continue receiving and channeling ever-more entrepreneurs who may be well-versed in tactics but who lack anchoring values that drive their efforts. And that will be a shame not only for those individuals but the investors and customers who await the fruits of their labor, which otherwise could have amounted to so much more.

Thanks to KvJ for sharing!