Archive for November, 2011

Can You Make Money On The Internet? Slicing The Internet Money Pie Part 1

Written by Natasha Goncharova on . Posted in Advertising, Blog, Google, Sales & Marketing

This is the first in a series of posts about making money online in which we will discuss the major online industries and their leaders. In our next post, we will provide examples of niche sites that have had success selling online and outline their business models. 

I received a question from a professional acquaintance of mine about the best way to help a professional service client add the internet as a channel for delivering service.

My first instinct was to answer that there is A LOT OF FREE information online. Unless you are offering something that can not be found for free your chances of selling your product are bleak. As a small business or individual, potentially developing and offering some digital products, it can be difficult to both compete with the wealth of information and learning material freely available online and distinguish yourself and your product from the competition.

So the real question is: what market are you competing in? E-commerce, advertising, Software as Service, digital goods?

In 2010, Americans spent $165.4 billion online.  Perhaps the first monolithic online industry that comes to mind is eCommerce — selling both physical and digital goods online. While giants like Amazon.com (with its online properties at Diapers.com and Zappos.com and many, many affiliates) and  eBay certainly dominate the lion’s share of the market, smaller sites have been able to benefit from the industry’s long tail. Sites like Etsy offer handmade and unique items while specialty sites like Cabela’s cater to interest-specific shoppers.

The second major industry of the digital world is advertising ~ $26 billion in 2010.  Making money by selling advertising online requires significant traffic and, often, a niche site for advertiser to be willing to spend their advertising budgets on your site or blog. Google is the dominant advertising force, offering targeted ads based on search results and collecting the advertising budgets of so many small businesses through AdSense. Facebook is a prime example with > 750 million users and a high number of page views such that their low click-through rate  doesn’t adversely affect ad sales. Per Mashable, in 2010, Facebook  had 0.051%, or about one click-through (CTR) for every 2,000 ad impressions with the industry standard CTR is 0.1 percent, or one click-through for every 1,000 impressions. As with eCommerce, niche interest-oriented sites can also generate significant advertising revenue fron banner advertising by offering information and a point of view not available elsewhere. Examples of sites of this type are TechCrunch.com (a tech blog), TeamLiquid.net (a popular gaming community site), and GorillavsBear.net (a music blog).

There is the increasingly successful SaaS (Software as a Service) industry ~ $12 billion in 2010. SaaS is attractive because it makes itself available “on-demand” and exists completely within the confines of the internet which means customers are not required to have hard disk space, CD-ROMs, or a personal computer, just a credit card or a few :). Furthermore, as a relatively new industry North American SaaS revenue is predicted to experience an 18.7% increase between 2010 and 2011 alone.

Finally, the digital goods market (the goods that do not exist in real life) has been growing.  In the US, it is expected to reach $2.1 billion, up from $1.6 billion in 2010.  This includes offerings from the social gaming companies like Zynga.com

Jumping into ponds with such big fish (Amazon, Google, Facebook) shouldn’t necessarily be a deterrent to your internet sales venture, but in our next post we will outline how individuals and small businesses have had success selling online by targeting smaller niche markets.

Image credit: http://www.getelastic.com/profiting-from-the-digital-goods-boom/

Integrate & Automate Social Sharing: WordPress to Twitter to Facebook

Written by Michael Tauscher on . Posted in Blog, Google, Productivity, Sales & Marketing, Thumbs up, WordPress, Workflow


This post will outline how to integrate your Twitter account to automatically update your business’ Facebook page and for WordPress users, how to integrate Twitter with your Dashboard to directly share your latest blog posts.

The first step is to create Twitter and Facebook accounts for your business. Business pages on Facebook are treated differenly from personal profiles so you’ll want to head over to facebook.com/pages to create yours. It’s advisable to sign up for both accounts with the same email address since they’ll be linked later on anyway.

Once you’ve got both accounts set up you’ll want to navigate to apps.facebook.com/twitter to allow your tweets to be shared as posts on your company’s wall. To accomplish this, hashtag #fb at the end of each tweet that you want to appear on the wall.

During the setup you should be led to your Twitter settings page (twitter.com/settings/profile) but in case you aren’t, you’ll want to scroll down to the Facebook settings and check the box that says ‘Allow Twitter to post to the wall of: my Facebook page: [Page Name]‘.

That takes care of sending your tweets to Facebook, but for WordPress users there’s a plugin that will allow you to tweet from within the dashboard, eliminating one more step and saving you a few clicks in the process.

Begin by downloading the Twitter Tools plugin and installing it. You’ll then have to register your site as an application on Twitter’s app registration page  which is as easy as copy-pasting a few serial keys. Once your WordPress and Twitter accounts are connected you’ll see that Twitter Tools offers a large number of configuation options under Settings in the Dashboard. I prefer the more ‘manual’ application of its functionality, however, so that’s what I’ll cover here.

Simply click ‘Tweet’ under Posts and you’ll be brought to a simple tweet platform within the dashboard. Here’s what I recommend from there:

1. Open your newly published article in a new tab and use the goo.gl URL shortener (or another if not using Chrome) to create a shortened version of your article’s URL.

2. Back on the tweet page, write the title of your article followed by the goo.gl URL and then the hashtag #fb (remember how we set up automatic integration earlier?)

Now you can easily share your posts via Twitter and Facebook without ever having to leave the WordPress backend UI. If you have a different setup that works for you let us know in the comments, convenience is king!

Creating and Managing Your Cap Table

Written by Natasha Goncharova on . Posted in Blog, Startups

This is the second post in a series about cap tables. To learn more about what cap tables are, see our first post.

Now that you’re ready to create and manage your cap table, there are a number of tools to help you through the process rather than drawing it up in Excel by hand:

1) A SaaS (Software as a Service) optionTruEquity ($20/m, 10 equity holders* included $1.99 per month for each additional equity holder). TruEquity is a relatively new service launched in February 2011.

2) A pre-built cap table template: http://templates.modelsheetsoft.com/modelsheettemplates/capitalization-table-templates.aspx ($69).

3) Our list of freely available cap table templates (also try Googling “cap table.xls”):
http://www.sumwise.com/templates/capitalization-tables/?model=cap-table-with-options

Company_Cap_Table.xls

sample-cap-table.xls

Cap_Table.xls

Cap Table Generator.xls

venture-hacks-series-a-cap-table.xls

Update: Since publishing this post we’ve had a lot more interaction with cap tables and have discovered a nice SaaS solution for cap table management called CapMX offered by Silicon Valley Bank

Have Capital, Need Cap Table

Written by Michael Tauscher on . Posted in Blog, Startups

You’re about to raise funding for your company by bringing on advisers and investors and receiving their advice/investment in exchange for equity. If you haven’t already, you’ll soon learn what cap tables are and impact they will have on your future investment rounds and liquidity events (an acquisition or an IPO). Here is an overview of what cap tables are, why they exist, and the ways to manage them.

Before you pitch your company to potential investors, you usually will have done a pre-money valuation. This essentially provides a way for investors to, “determine how much equity to demand in return for their cash injection.”

As soon as your company has more than one investor (the first being you, of course), it is time to create a cap table to “list who owns what in a startup. [The cap table] lists the company’s shareholders and their shares.” [http://venturehacks.com/articles/cap-table]

There are a number of possible pitfalls along the way, however, mostly arising from the fact that you’re determining how shares will be distributed well into the future. Keep in mind, “Founders should expect their percent owned to decrease over time, but the number of shares will not change, and the value of these shares (measured in price per share) should increase as the company increases in value.”
[http://www.practical-entrepreneurship.com/resources/entrepreneurship/105_capitalization_tables.pdf]

In response to this question on Quora asking what his greatest lessons learned are, Max Levchin suggests that, “Having a large and complicated cap table is rarely a good idea. Few committed angels is better than $5k from everyone and their brother.”

Babak Nivi of Venture Hacks agrees with Levchin’s observation in his discussion of the “Option Pool Shuffle”. In short, beyond allocating shares to the company’s founders, employees, and investors, “the so-called pre-money valuation always includes a large unallocated option pool for new employees…” Nivi’s point is an important one: “Don’t let your investors determine the size of the option pool for you. Use a hiring plan to justify a small option pool, increase your share price, and increase your effective valution.”

Your cap table should also provide an overview of how different phases of investment and dilution will occur. A investment broken into component phases might look something like this,

1. Start Phase: Stock splits occur and dividends in kind are paid at the start of each round.
2. New Sales Phase: Sell new securities (convertible notes, preferred stock, common stock warrants, options )
3. Post Sales Phase: Record investments and share units after sale of new securities.
4. Conversion Phase: Stakeholders can convert notes and preferred shares and can exercise warrants and options to obtain common stock.
5. End Phase: Record security holdings, prices and values at the end of the investment round

[http://templates.modelsheetsoft.com/modelsheettemplates/capitalization-table-templates-quick-start.aspx]

The resources referenced in this post should give you a good basic understanding of why cap tables exist and what influence they have over the beginning, middle, and later stages of a company’s financial profile. When you are ready to create and manage your cap table, see our second post in this series here.

Thinking of Creating a Startup Accelerator? A Comprehensive List of Resources to Learn From

Written by Natasha Goncharova on . Posted in Blog, Startup Accelerators, Startups

Recently I’ve been involved in a discussion about creating a startup accelerator and while I can’t share the details of the discussion I’m involved in, these are some of the resources that you might be interested in if you are thinking about creating an accelerator in your area or at your educational institution.

The current wave of startup accelerators or ‘startup factories’ as they’ve been referred to is not a new concept. Prior to the startup bubble in 2000 there was a wave of startup accelerators, most of which ceased to exist due to unsustainable economics. You can read more about the first wave of incubators in the report by Morton T. Hansen, Henry W. Chesbrough, Nitin Nohria, and Donald N. Sull of the Harvard Business School.

The second wave of startup accelerators, arguably originated by Y-Combinator in 2005, have more sustainable business plans and a better chance of remaining in the industry unless a Euro or Dollar crisis happens or unless some other “Black Swan” flies in.

Source: http://www.nesta.org.uk/library/documents/StartupFactories.pdf

As you conceptualize the idea of your startup, these are some great resources to learn from:

A comprehensive post by Ben Yoskovitz of Year One Labs, a Lean Startup accelerator: So You Want to Run a Startup Accelerator…10 Things to Think About When Starting a Startup Accelerator.

A comprehensive overview of existing startup factories: who, where, how much
http://www.nesta.org.uk/library/documents/StartupFactories.pdf.

A list of 102 startup accelerators:
http://blog.shedd.us/321987608/. 

Lessons learned:
http://www.instigatorblog.com/lessons-learned-lean-startup-accelerator/2011/06/06/

Are you thinking about a startup accelerator? Some Accelerator Resources:
http://la.startupfdn.org/2011/09/16/are-you-thinking-about-a-startup-accelerator/

“How to Build a Venture-Finance Ecosystem”, practical principles that the Babson Entrepreneurship Ecosystem Project have been identifying and developing for public leaders: http://goo.gl/fN4gh

The Facts About Startup Accelerators

Written by Natasha Goncharova on . Posted in Blog, Startup Accelerators, Startups

In the last 5+ years, startup accelerators (also dubbed ‘startup hubs’ and ‘startup factories’) have proven themselves to be effective in bringing startups from ideas to viable businesses. With the number of accelerators now rapidly increasing in North America and Europe, comparing and contrasting the methods and numbers of the most prominent firms is valuable in providing a picture of what the model for a successful accelerator might look like.

In his recent post entitled ‘Why Startup Hubs Work’, Paul Graham of Y-Combinator gave a list of the qualitative reasons why startup hubs are useful, “I think there are two components to the antidote: being in a place where startups are the cool thing to do, and chance meetings with people who can help you. And what drives them both is the number of startup people around you.”

Notable US seed accelerator programmes by location showing total number of startups funded to 2010
Source:
  p.8, The Startup Factories The rise of accelerator programmes to support new technology ventures http://www.nesta.org.uk/library/documents/StartupFactories.pdf.

 

In May, Tech Cocktail released their ranking of the top 15 startup accelerators and incubators based on their participant companies’ rate of investment post-program, the overall success of the companies, and on the program characteristics of the accelerators themselves. The #1 spot was a close finish between Boulder, CO’s TechStars and San Francisco’s Y Combinator.

To provide a clear side-by-side comparison, we will take a look at both TechStars and Y Combinator as well as Massachusetts’ own MassChallenge in the categories of up-front investment, location, duration, equity, and application/acceptance rate.

TechStars
For profit
Investment: Up to $18,000
Optional Convertible Debt: $100,000
Location: Boston (MA), Boulder (CO), New York City (NY), and Seattle (WA)
Duration: 3 months
Equity: 6%
Acceptance: 10 companies at each location (total of 50)
http://techstars.com/funding/

Y Combinator
For profit
Investment: $11,000 + $3,000 per founder (e.g. $17,000 for two founders)
Optional Convertible Debt: $150,000
Location: San Francisco (CA)
Duration: 3 months
Equity: 2-10%, usually 6 or 7%
Acceptance:  60 companies in two sessions
http://ycombinator.com/faq.html

MassChallenge
Non-profit
Investment: Given in the form of prizes which fluctuate depending on the judges (~15-20 prizes of $50-100k)
Location: Boston, MA
Duration: 4 months
Equity: None
Acceptance: 125 companies accepted resulting in 26 finalists (in 2011)
http://masschallenge.org/accelerator/2011

500 Startups
For profit
Investment: $25,000-$100,000
Location: Mountain View, CA
Duration: 3-6 months
Equity: ~5%
Acceptance: 12 in February, 2011; 21 in June, 2011; 140 total investments
http://500.co/2011/02/10/boom-goes-the-dynamite/

A comprehensive overview of existing startup factories: who, where, how much
http://www.nesta.org.uk/library/documents/StartupFactories.pdf.

What is Wrong With Many Presentations Uploaded to SlideShare or How Seth Godin Changed Our Frame of Reference

Written by Natasha Goncharova on . Posted in Blog, Presentations

For quite some time, I have been perplexed why the PowerPoint presentations uploaded to SlideShare are so not informative. A sentence, a flashy image, next slide — repeat. Tonight, I think I’ve figured out why it is the case and what the problem with these presentations is…

It appears that by now most people (who create power point presentations) have read Seth Godin’s Really Bad PowerPoint and have started following his advice. The problem is that his advice was for the presentations you PRESENT, not upload. When you present, people see the image (form an emotion), listen to you talk, and, if you present well, later they will remember/associate your words with the image. This is not true for uploaded presentations! Your (spoken) words are not communicated there, so when I spend a minute on a presentation and see 20-30 (great) stock images, I often have no idea what you were trying to say, or I feel the whole thing could have been communicated with 2-3 images/slides. I believe those presentations that are uploaded to SlideShare should have more than one sentence per slide and should actually educate readers about the subject matter (and possibly form an emotion).

Uploaders missed this point: “Don’t hand out print-outs of your slides. They don’t work without you there.” They essentially print (read: upload) presentations, but the presentations suffer without their authors.

Yes, I get it — no one will be creating two versions of ppt for presenting AND for SlideShare. Too bad. As a result, many of the uploaded ones are useless, imho. :)

Paul G. Silva – thanks for the hint, even if you did not mean it. :)

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