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Today I spoke with a diverse group of new entrepreneurs as part of my ongoing Online Strategy Roundtables . Together, this group illustrates how a business depends on how sharply the target market is defined. One entrepreneur is well on her way and another needs to focus more on his strongest market segment. Like many entrepreneurs, the other two are clearly accomplished people, but don't come from a business background. For such entrepreneurs it is often worth looking for a cofounder who can fill in with expertise in areas where gaps exist. Sponsor Guest author Sramana Mitra is a technology entrepreneur and strategy consultant in Silicon Valley. She has founded three companies and writes a business blog, Sramana Mitra on Strategy . She has a masters degree in electrical engineering and computer science from the Massachusetts Institute of Technology. Her three books, Entrepreneur Journeys , Bootstrapping, Weapon Of Mass Reconstruction , and Positioning: How To Test, Validate, and Bring Your Idea To Market are all available from Amazon. Her new book Vision India 2020 was recently released. Mitra is also a columnist for Forbes and runs the 1M/1M initiative. Julie Goldman did a nice presentation of her company The Original Runners . In 2003, she was the first to offer non-slip, high-quality fabric aisle runners for weddings and special events. Through her website she offers gorgeous hand-painted runners wholesale, and business has been growing to a revenue of $700,000 last year. I really like how tightly focused this business is. Niched wholesale businesses are great! Her main concern is that two dozen lower-quality copy-cat competitors have popped up over the years. To stay ahead of her competition, whom she describes as mom & pop at-home operations, I suggested she work with bloggers who are influencers with wedding planners (her main customers) to help specifically articulate why her product is superior. She has already relocated the business from New York City to New Jersey to reduce costs. To further counter the pricing pressure she is feeling from her competitors I suggested she look at relocating somewhere where it will be even less expensive for her to operate, like Vermont perhaps. She plans to launch a new brand as an accessory line and we discussed how it is only when she markets this new brand to her list of existing runner customers will mentioning "from The Original Runners company" hold any weight. New customers will not recognize the name and its association with quality products. We also spoke about SEO and search engine marketing, on tightly focusing pay-per-click campaigns on higher-end markets rather than going broad with a worldwide campaign. So far Julie's is a great case study of a growing niche business. Next up was Sonali Roychoudhury presenting for Pursue Natural . Sonali is a scientist who is working with a team that is conducting research to find and bring natural medicinal plants to market that are not in the mainstream. Like many entrepreneurs who do not have a business background, Sonali is risk averse, unwilling to make assumptions, and uncertain as to what the next steps should be. We discussed the natural breath freshener that they have produced. It seems like the cost of entry into this small niche market is too high for this to make sense. She then explained how a small but loyal customer base has grown for this product through their process of testing the marketplace. By just setting up a direct Web sales business targeting their existing fans and the extremely high end natural product boutiques, I believe she could build a very nice small business selling small quantities month-to-month. As long as it is profitable, a small business is more than worth building. Lorenz Lannens and his company Online Design Bureau started as a consulting business that grew into to a Web solution for small and medium sized companies that helps them to develop their Web marketing strategies. His product and service enables clients to set up their Web marketing system, and he has metrics from early customers showing the system works. As we discussed his current customers, it became clear that his service is not really for startups, but more for businesses that are not Web savvy. I believe if he goes after companies that are not doing Web marketing as his segment and targets the verticals that his current clients fall in (like architecture firms), his list of customers will grow. I liked this presentation and clearly there is a need for this service. Many entrepreneurs who have pitched at these roundtables could probably use Lorenz's help. In fact I suggested that both Sonali and Felice tap into his expertise. Lastly, Felice Gerwitz presented Scholar Square , a beta site targeting the homeschool community. She is an educator and author who specializes in homeschooling and hopes to sell a wide range of presentations and seminar classes through this site. As Felice explained her ideas, it became apparent that she is trying to do too many things for too many people, the classic "spray and pray." I may have been a bit hard on Felice when she told me she did not go through the Clarify Your Story questionnaire as she was asked to on the roundtable registration page, but I think it needed to be said. There are no shortcuts when you are an entrepreneur. You need to do your homework. Felice needs to focus on the segment of the home school market that she tackles the best and is passionate about, and let the other ideas go. This should help her site find its center of gravity and its customers. These roundtables are the cornerstone programming of a global initiative that I have started called One Million by One Million ( 1M/1M ). Its mission is to help a million entrepreneurs globally to reach $1 million in revenue and beyond, build $1 trillion in sustainable global GDP, and create 10 million jobs. In 1M/1M, I teach the EJ Methodology which is based on my Entrepreneur Journeys research, and emphasize bootstrapping, idea validation, and crisp positioning as some of the core principles of building strong fundamentals in early stage ventures. If you are an entrepreneur working on an idea or an early stage business, I am also very interested in hearing what you are looking for from 1M/1M. Please weigh in here . We are crowdsourcing the design of 1M/1M, and requests that have come up include Receivables Financing as a way to bridge to a validated business without giving up precious equity, I would love to hear your thoughts. You can find the recording of this roundtable session here . Recordings of previous roundtables are all available here . You can register for the next roundtable here . Photo by Nick Cowie . Discuss
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Startup Strategy Roundtable: Well-Defined Niches Work Best
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Who knew the Peace Corps were web developers? Certain African farmers did anyway. Now, with their AfricaRuralConnect project the recipient of an Interactive Media Council Outstanding Achievement Award , a lot more people know it too. ARC is a product of the National Peace Corps Association and provides a platform for Africans in the business of agriculture and those interested in African agricultural issues to present, hear and remix each others' ideas. Sponsor The site is built on Wegora , "a collaborative writing platform with an integrated semantic analytics engine." The site solicits ideas, community members remix them, improving them, commenting or questioning them, endorsing them. These remixes are portable and follow both the original idea and the remixer's profile through the site. The conversations that ensue resemble nothing so much as a bunch of entrepreneurs networking and workshopping their ideas. Those who suggest the ideas that win a given round, based on the number of endorsements they get, receive prizes. The grand prize is $12,000. This year's ARC contest goes through the month of November. "Prizes will be awarded to ideas considered the most original, creative, practical, scalable, and likely to succeed and offer the greatest improvements in the lives of small-scale farmers in Sub-Saharan Africa," said Molly Mattessich, manager of online initiatives for the NPCA, a group and herself a former Peace Corps Volunteer in Mali. "We hope this recognition will draw even more people to the site to submit their ideas and engage in a discussion on how to help rural Africa." Current ideas include "Fusing Sports (Football) with Rabbit and Bee Commercial Farming for Youth Development and Wealth Creation in Murang'a South," "Using Biogas to Change Rural Lives" and "Fuel Energy from Agricultural Waste." Discuss
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Peace Corps Devs Win Web Award for Remix Site
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Link blogs, light blogs, blogs on the side; found treasures and half-formed thoughts - it turns out that many members of the ReadWriteWeb team are also publishing on Posterous , Tumblr and other casual blogging platforms. These are the places you can learn about the people behind the news and analysis here at ReadWriteWeb. Where you can find cool little videos and images that we want to share but that don't cross the thresh-hold for full-scale RWW blogging. Publishing and reading on these platforms is a lot of fun. We've listed some of the fun blogs published by members of our team below. We'd love for our readers to share links to your sites like this if you have them. Sponsor Richard MacManus , our Founder and Editor, writes about his travels outside his home in New Zealand, music, books and art using the Soup.io platform at VelvetsFan.com . I, Marshall Kirkpatrick , maintain a Posterous blog at Marshallk.posterous.com . I post a lot from my phone there, I post images and random thoughts about life in Portland, Oregon, my chickens and the tech news industry. Morning writer in Florida Sarah Perez uses Tumblr at sarahintampa.tumblr.com to post "random pictures, videos and infographics I come across on the web," she says. Portland based morning news writer Frederic Lardinois scored the cool domain DishWasherOnMars and uses it to post "stuff I don't get to blog about and that I want to share with my Twitter followers." Morning news writer Mike Melanson records his experiences as a hyper-mobile blogger in Austin, Texas on his Posterous blog . RWW's webmaster Jared Smith shares "(hopefully) useful tidbits about Web development, UX, and other geeky pursuits" on his Posterous from Charleston, South Carolina. Portland based Enterprise and ReadWriteCloud writer Alex Williams uses Tumblr at AlexHWilliams.com . "Hazard is my middle name," he says and he's not kidding, it really is. He calls it "my place to feed my personal interests." Production Editor Abraham Hyatt is in Portland, too and publishes "just your run-of-the-mill photo blog" on his Posterous . Eugene, Oregon based research team member and ReadWriteStart contributor Audrey Watters uses Posterous too. She says it's "where I post my ideas too long for twitter and too malformed for my blog." Portland-based Justin Houk , a member of the research team here as well, calls GeoPDX.net his "say anything, speak my mind, and voices in my head blog." How about you, dear readers? Where is the ReadWriteWeb community posting their found items, fleeting thoughts and other curated digital ephemera? We'd love to know, so share your link in comments below. We'd love to know what these services mean to you, too. Discuss
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Fun Blogs: Where We Post For the Love of It
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There is a reason why lawyers go through year of school and tests to get to the jobs that they get paid so much to do - law is a complicated beast that takes a special breed to understand all the ins and outs of it. When entrepreneurs and venture capitalists meet at the bartering table to talk over the terms of their agreement, there is often too much or too little negotiation that goes on, so here's some advice I came across that can help startup founders find the "sweet spot" for negotiations. Sponsor Matt Bartus , a Silicon Valley-based lawyer who mainly aids startups and VCs, wrote last week on his blog A View from the Valley warning entrepreneurs new to the negotiating table to not damage their relationship with their investors by over-negotiating . According to Bartus, a surplus of startup and legal advice from blogs has clogged the minds of new entrepreneurs who think they need to nit pick over every detail of a term sheet. "They sometimes feel the need to optimize every individual provision in the term sheet according to the guidelines found online," writes Bartus. "For example, a founder recently expressed his shock to me that a VC wanted an 8% non-cumulative dividend preference on the preferred stock given the historical lows of current interest rates. He didn't realize that dividends in fast growing companies are almost never paid, thus making this provision essentially irrelevant and just a relic of past practice." Bartus says that while over-negotiating and creating needless tension is a common misstep, it is just as bad to not push back enough and to accept the terms of the agreement without any discussion. When you roll over and take what they give you, you show them that you don't stand up for yourself, damaging both your credibility and the possibility of future investments. To avoid this, he provides a few suggestions for topics that are worth debating with VCs that won't necessarily damage your relationship. Of the dozens of issues that could arise between VCs and entrepreneurs, Bartus provides a list of six important issues that could be discussed during negotiations, of which three he suggests actually focusing on. These include valuation and dilution, liquidation preference, board of directors and voting provisions, founder vesting, antidilution protection, and finally, exclusivity. By knowing these important issues, you can boost your credibility with the VCs and you ensure that you can get the best results from the term sheets for you, the founder. This is exactly why hiring a lawyer with startup experience is key to doing things right. Yes, the job of the lawyer is to explain to terms to the entrepreneur so they know what they are signing up for, but mostly, that lawyer is there to take the burden of legal worries off their back. As with any position within your startup, lawyers should be chosen on merit, not based on their reputation to the founders. He recalls an issue he had when representing a VC who was dealing with a lawyer who was the father of the founder with no startup experience and who slowed the whole process down, damaging the relationship between the two parties. Just remember the real important part of a VC/entrepreneur relationship: building and growing a great product. Hire a great lawyer with startup experience and let them do the grunt legal work so as to not divert your energy and focus from your ideas and your business. For more legal resources geared at startups, check out our list compiled earlier this year . Discuss
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Avoid Legal Tussles When Negotiating With VCs
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Earlier this week, Juniper Research published a report which said the market for location-based services (think mobile check-in games like Foursquare, social networks like Loopt, location-enabled apps like Google Maps, etc.) will bring in revenues of more than $12.7 billion by 2014. Spurring this growth are a number of factors, including the increased number of App Stores, handset improvements, access to high-speed mobile Internet and improvements to positioning technology. While it's clear that location-based services are on the move, pinpointing a dollar amount to their market is a trickier subject. Has Juniper overestimated? U.K.-based consultancy Broadsight thinks so. "These numbers are way overstated," says firm co-founder Alan Patrick , who concludes that's it's far too early to tell the market's true size at this time. Sponsor An Argument Against LBS's $13 Billion Market Forecast Presenting at a local event for digitally-minded professionals, Patrick's talk offered a dose of realism to what has been, until now, a well-hyped - perhaps overly hyped - technology trend. He claims that location-based services ("LBS") is one of those cyclical hypes that comes around every ten years or so. "Like all overhyped areas, it comes complete with way overoptimistic market projections," notes Patrick on the company blog . Although he doesn't call out analyst firm Juniper by name, he says that "$13 billion are the sorts of numbers being thrown around." (Juniper predicts $12.7 billion). So how much does Patrick think the market's worth? It's too early to tell, he says. Instead of focusing on what has influenced the market to grow thus far, Patrick examines the two determining factors that will impact the actual revenues LBS is able to generate: penetration and Average Revenue per User. Penetration of the LBS market can vary widely including everything from smartphone users all the way to consumer devices like cars and even low-cost "Internet of Things" devices. The " Internet of Things " refers to real-world objects getting connected to the web. It can also include other web-connected devices like sensors or those incorporating RFID technology . The point Patrick was making is that the actual market value will be greatly influenced by how many devices end up web-connected and using LBS over the next few years. If, however, only smartphone users are taking advantage of LBS, then the market retains only niche value. The second determinant is the Average Revenue per User. This also can vary between "free" - as when location services are given away as a part of something else - and those that are "paid for" outright. Users could "pay for" services either via subscription payments, software downloads or ad funding, for example. Based on these determining factors, the actual market value for LBS, as you can see, may vary widely. Assigning it the $13 billion price tag is "of the 'Panglos' school of forecasting," he says. That is, "assuming the best of all possible outcomes in the best of all possible worlds." Privacy Issues: A Limiting Factor to LBS Growth? Patrick also brings up the privacy issues inherent in using the types of apps that broadcast your location, an issue we discussed ourselves just last week . At that time, the potential dangers in location broadcasting were brought to the forefront of our minds when the new site PleaseRobMe launched , displaying real-time updates from members of mobile social network Foursquare who broadcast their check-ins on Twitter. Although the site's goal was simply to raise awareness of the issue, the news quickly spread until even local TV anchors were discussing it on the nightly news. Even among tech bloggers such as ourselves, there is disagreement as to whether or not these services represent a true danger. A discussion in our writers' chat room the other day had one writer positioning the services as tools for stalking, saying these types of apps "make it a heck of a lot easier for people" to do so. Meanwhile, another writer argued "well, having a knife around makes it easier to cut yourself, too." (Names withheld to protect the innocent!) The truth is, mainstream users will likely not jump on the LBS social bandwagon right away - unless Facebook launches something, that is. However, there's a reason they haven't done this yet - outside of the tech bubble, a good bit of the population is fairly concerned with protecting their privacy. You can argue that their fears come from an inherent lack of understanding about the realities of how LBS is used, but that won't necessarily convince them. Just like anything, true growth and acceptance will take time. And fears like these aren't exactly the sort that will go away over the next four years. All that being said, while Patrick presents his ideas as "rational prognosis" regarding this industry, it's possible that he's being a little too down on the market's potential. Maybe it won't reach $13 billion, maybe it will...but like he said, it's too soon to know. Discuss
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Location-Based Services: Hype or Hit?
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