Bill Solominsky

I’m in the process of forming a partnership for one of the businesses that I am involved in, and it struck me while discussing this how easy small business partnerships are to form. When I was younger, I always pictured business agreements involving lawyers and tons of paperwork, not to mention a lengthy, time consuming negotiation process. This is probably the case of multi-million dollar deals (of which I haven’t been a part of yet), but for small businesses, common sense and trust is basically all you need.

The easiest deals are ones where no money changes hands; you and your partner work together to cross promote your items. One of my first experiences with this was working with cleaning companies. For my event rental site, I contacted local cleaning companies and asked if they’d be willing to offer my customers a discount. Most of them were very receptive of this, being a win-win situation. I got a different marketing strategy and an item that could boost my product without costing me more. The cleaning companies got advertising on my site and additional customers.

You can consider early adopters of your product as forming a partnership with your customers, but it becomes tricky once you ask that customer to pay for your product. If you let some beta testers try your product for free, both sides win. The company gets valuable feedback and more extensive testing, the user gets to try neat new technology or services. However, if you ask that same person to pay, they probably will re-evaluate their end of the deal, and think twice about the value that they get from this product. The customer wants to ensure that their money is being well spent, and now you are competing for their dollar, not just their time.

Obviously the goal with any partnership is to make a profit eventually, but profit does not have to take the form of cash from the start. My experience has been to be as creative as possible, and it may be easier and more valuable to work with partners when dollars are not discussed.

I am watching the Capital Factory Demo Day via Ustream this morning. Congrats and good luck to the 5 inaugural companies. Below I listed the company, a brief description of what they do based on their presentation and my best guess, and my thoughts.

Cubit Planning

Cubit Planning creates software to automate data finding processes for engineers. Their first product is for NEPA documents for city planners, and helps save between 4 and 40 hours of engineering work. The software pulls data from environmental studies and automatically fills out the standard NEPA form in the necessary format.

I think this company can make a big splash in the B2B market, but because they are not consumer oriented, many people will not hear of them. They have targeted the first bowling pin in their market, and perfecting that will lead to more adjacent market sales.

There was a comment regarding targeting the cities to buy the software instead of the engineers. If I were with this company, I would study the government contract bidding process closely in each city, and find out all minute details of the contracts that have been won. Government bidding gets tricky, with cost-plus, no-compete, and other types of contracts, to where the advantages and the buyer of the software might be on different sides of the table in different industries.

FamiGo

FamiGo is focused on providing simple, family oriented games with the hopes of bringing families closer together. Two test games, Dots and Hot Potato, were tested on the Iphone. There were issues of whether they were intending to be a game developer or a platform for distribution.

I don’t think the idea that in selling to a family they’ll automatically sell 3-5 games at a time; families would want a packaged deal available to all their platforms. Also, the barriers to entry are not huge, if they even exist. The founder mentioned that the Iphone app store has over 100,000 developers. If FamiGo gets noticed, there are lots of other competitors. I agree with the commenter that said they’ll need to have one big hit, and that is going to have to be an original game, not an updated game we played as kids.

PetsMD

The WebMD for pets. PetsMD is the go to place for information on pets, with a symptom tracker, medical advice, veterinarian information and appointments, and pharmacy store. Simple idea, not much more to explain.

The comments centered on the idea that the site is not focused. They need to target one customer and revenue stream. I disagree. In the early stage, I’d throw every possible revenue idea out there and see what sticks. The rub is that it all has to be done well, but not necessarily perfect. Once the high revenue sources are discovered, then focus on those. If only one revenue stream is tried, it could be the wrong one, wasting a lot of energy and resources.

Hourville

Hourville is an online marketplace for service providers that charge by the hour. If you provide an hourly service, you can list, manage your calendar, and take payments through Hourville. They have widgets that you can put on sites such as Craigslist that will point customers back to the Hourville site.

This company has been in the Rice business competition, SXSW accelorator, and now Capital Factory. At the SXSW presentation, the panel of judges were not too kind with Hourville, mostly harping on their marketing strategy. They didn’t see a clear goal of breadth vs depth. The final 2 panelists addressed this issue today, but it still is not clear how they plan to attract and retain service providers. I would take the geographic approach, starting in Austin and looking at all types of services. Being in Austin, there is an eclectic mix of services, so the company would get depth and more importantly, learn what it takes to attract each of these different services. That info can scale to other cities, and they could then take on more cities faster. If they just throw their company out there all over the country, they won’t know what it takes to market to bagpipe teachers or belly dance teachers in each city.

Sparefoot (audience choice award winner)

Sparefoot provides a site that allows for search, comparison, and booking of storage space. They have integrated with self storage management software to allow owners to quickly integrate their inventory into Sparefoot’s site. This is vastly different from their original plan of peer-to-peer storage (but they still have this as part of their business model).

I have never searched for storage, but I can imagine the frustration if you can’t quickly comparison shop on price and location. The engine for this will be good, but I do agree with the panelists in that competitors can quickly come into this market and offer the same service. Building a tangible defense is key.

Overall, its interesting to note that potentially 4 out of the 5 companies are building a marketplace, not just creating a product to sell to end users (I don’t include FamiGo because they are not settled on their model yet). When you look at this crop of companies, and other funded start-ups, it seems the shift is moving from, “I can create a cool product that I can sell,” to, “I’m going to be the middle man and make a market more efficient.” It seems as if business has spent many years trying to eliminate the middle man, but in the past few years web 2.0 companies are bringing it back. If they truly do offer efficiencies, then they can work. Companies that use these services will still have to stand out on these platforms, which in time will bring new companies and services (think SEO and SEM for Google rankings).

I first saw this video in the summer of 2008 and was blown away at how much sense David made. This is an excellent, inspirational talk that puts businesses in perspective. He covers eyeballs vs revenue, million dollar vs billion dollar businesses, and how the level of happiness doesn’t change once your reach a certain amount of wealth.

Although this is a great talk for start-ups, it is relevant for any size business. For example, if you are part of a large company working on a product, focusing on gaining 2000 customers for a product niche and gaining $1,000,000 additional revenue for your company will never be frowned upon.

A interview posted on CNN.com today with the writer of “Creating Success from the Inside Out”, Ephren Taylor, discussing his start up experience at such a young age. The basic premise is to start a business when you’re young since youth is typically more risky and has less responsibilities. He lists 5 tips for young entrepreneurs:

1. Turn your disadvantage into your advantage
2. Persistence pays
3. Read
4. Don’t over analyze the opportunity
5. Recession = opportunity (if he’s a computer programmer, shouldn’t this be “==”)

This is good advice, but I worry that people reading this won’t take a step back and see the big picture and weigh the negative as well. You can only be persistent for so long. At what point do you realize that you do not have a good idea, or that your product will not sell? If you wait too long, especially right out of college, you could miss an opportunity to gain valuable experience. Its a huge gamble and leads to a paradox, because if your company is a success, you instantly become a credible expert on your industry but likely don’t need to look for work again. However, if your company is not a success, you could be labeled as lacking experience which hinders your job search, which is now necessary to keep up with responsibilities.

People like Mr. Taylor, who are widely successful at such a young age, tend to be over-optimistic about risk and attempt to lead people down their path. I believe people that were successful later in life, and have gone through failure before obtaining wealth, can offer much better advice since they tend to see both sides of risk.