Tag Archives: SeedHive

An Exit Strategy is NOT a Business Strategy

17 Aug

Business Model GraphicBuilding on the comments I posted earlier today about the acquisition of Where I’ve Been, and partially motivated through comments on that post, I realize it is important to add two additional thoughts.

First, “Where I’ve Been” has managed to avoid one of the most challenging elements of business creation, which is to actually build a business model and strategy. That Ulliott was able to get $3 million for a business that had neither is surprising, impressive, and more than a little bit disturbing. Attempting to replicate his success in planning for an exit would be wise, but emulating Ulliott’s dismissal of the question of a business model would be foolish. He has passed on the question of how to monetize his application to a new owner, but the question will still have to be answered.  (Though TripAdvisor seems well positioned to answer it)

Second, in response to Tony and Jackson’s comments on the possibilities for SeedHive, this does, indeed, seem to be an area of possible unmet need. Could SeedHive help bridge the gap between developers with the skill to “build things” and the business folk with the ability to “sell things”? [Which is how I interpret Tony’s “build great teams to do great things”] It’s an interesting proposal and one to noodle on. At the most basic level, it would require that the site was able to attract both sides of that puzzle by being relevant to both. It would also need to do this better than the likes of PartnerUp, which I believe it could do through the integration of social networking and idea collaboration.

“Where I’ve Been” and the Need for an Exit Strategy

17 Aug

Where I’ve BeenThe management consultant in me wants to tell you that in developing any new business, particularly a web 2.0 software application, social network, or web-enabled service, it is critical that an entrepreneur think about the “exit.” The questions are “Will I sell this? To whom? Why would they buy it?” It is the answer to these questions which should shape your strategy and business. Nevertheless, not ALL big success stories follow this logical path, and another just emerged yesterday.

It was announced yesterday that “Where I’ve Been,” a Facebook application developed by Craig Ulliott of Philadelphia, was acquired by TripAdvisor for $3 million. The application currently boasts around 2.3 million users, and has been in existence since June of this year.

Yes. JUNE.

What is phenomenal about this story is how quickly this all came to pass, and yet how little of it appears to have been down to planning and the development of a prudent exit strategy up front. Just about two months ago, Ulliott complained “I have 250,000 users, now what?”.

Well my application has become incredibly popular, and I’m very excited about it, don’t get me wrong!

But I’m a freelance developer, not a company, and its put a powerful 4GB $450 a month dedicated server on 3 backbones at maximum load and is pushing 2000GB a month in traffic. It doesn’t make me any money and I’m getting hundreds of comments and emails daily about it.

How can i support it and maintain it? What do i do with it now? its growing at a few users a second, so should i get another server each month?

It is amazing that a young guy can create a piece of software which fits a need he sees, and sell it to cash in big time. Just two months ago, Ulliott had no idea what to do with this idea. Today, he is $3 million richer. It’s a compelling “carpe diem” type story about just doing something you love.

Facebook App developers beware, however, the current landgrab will not last forever, and your chances of making it big are much better if you have a plan.  If you can tailor your software to better match the needs of a potential suitor, while still catering to the needs of your users, do it.

One final thought on this news is how it hooks into the SeedHive concept.  When I originally read about Ulliott’s post two months ago, I thought “this is exactly why SeedHive needs to exist.” It is exactly the kind of question that SeedHive users would enjoy batting around for an hour or two. It would also be the kind of place where people would ask up front what your exit strategy is, and if one doesn’t exist, encourage you to develop one.  Because we ALL can’t be this lucky.

Beyond the Launch: SeedHive and the Stages of Entrepreneurship

12 Aug

RapLeaf

Businesses face different challenges at different stages in their development. An individual entrepreneur, batting around a business idea, faces fundamentally different questions and challenges than one who already has a prototype, one who has raised angel funding, and one who is looking for an exit through IPO or acquisition. It’s a simple concept, but one which I had failed to consider in my initial thinking on SeedHive, a business concept for an entrepreneur’s social network.

This modest but important revelation is courtesy Manish Shah, the co-founder and CEO of RapLeaf, a business which helps you manage your reputation online. I contacted Manish in order to get his reaction to the SeedHive concept as someone who fits squarely into my target user profile: he’s young, smart, web connected, and running a small business. His thoughts were valuable, and gave me pause.

Staying relevant to entrepreneurs of all stages

Businesses face different obstacles as they mature. As Manish said in our conversation, “It’s not always ‘early days.'” An entrepreneur may start with question about the basics, like how to find a good business partner, or how to legally incorporate. With time, however, those questions will shift to things like “How do I hire people?” “How much should I pay them, and how (equity, cash, etc)?”

In order for SeedHive to succeed, it would need to be both helpful for the newbies, and for those with experience. In essence, its success would hinge on the site’s ability to follow their journey.

Manish predicted that entrepreneurs would likely use the site in bursts. They might be extremely active and engaged in the community for a week or two at a time, as they tackle a new challenge, but then will “put their heads down” and get to work. Only if the site had proven truly useful in that initial period would they return when the next obstacle presented itself.

How he got started

Manish became an entrepreneur straight out of university, networking his way into a partnership with an experienced entrepreneur. In many ways, his partner’s knowledge of entrepreneurship, experience, and networks, eliminated the need for Manish to seek help to the basic questions of how to start a business, thus reducing the likelihood that he would have sought out the forums of SeedHive for advice.

Given his own experience, Manish strongly advocated that someone seeking a route into the world of startups must start through networking. Since Silicon Valley operates very much through informal networks, the onus is upon the entrepreneur to get plugged in. In this regard, SeedHive might hold some promise, since it would allow entrepreneurs and VCs to find each other easily, and start relationships online which could be transferred into the real world.

Challenges for a business social network

“Social network fatigue” is an ailment affecting not only Manish but many of the friends whom I would classify as “early adopters.” While Facebook is a novelty to my friends here in London, social networks seem like yesterday’s news to those in the Bay Area. If that attitude is consistent with the venture capital audience (which it likely is) then SeedHive might struggle to raise funding.

Most importantly, however, if the very people I would hope to be reaching with SeedHive, young, “plugged in,” entrepreneurs, are tired of social networks, and less likely to join and give it a try, the site might never get off the ground.

VC Wisdom for SeedHive: A Conversation with Kurt Hawks

6 Aug

Monitor Ventures

In order to determine whether my business concept, SeedHive (a social network for entrepreneurs), really has the potential to be successful, I must start with the question “what does this site provide for each of [my] target audiences?” This was the simple, but sage advice of Kurt Hawks, a former colleague from Monitor Group, working at Monitor Ventures, and now VP of Operations at Greystripe.

About two weeks ago, Kurt generously agreed to speak with me about the SeedHive concept, providing critique and advice from the perspective of a venture capitalist. He was, in effect, the first of my three target audiences with whom I would need to test the idea: entrepreneurs, venture capitalists, and service providers offering goods and services tailored to these businesses.

From our conversation, I believe SeedHive would benefit venture capitalists in three significant ways:

  • Information: The aggregation of news, data, and trends which are today disparate and inconsistent, into an intelligent, reliable news source
  • Sourcing: Simplifying the identification of both new business ideas which might be attractive investments and entrepreneurs with whom they would like to do business
  • Networking: Facilitating the face-to-face networking that is the mainstay method of interaction within the world of entrepreneurship, and providing a viable (if ultimately less desirable) alternative

He validated each of these needs, and helped me better understand how VCs work and think.

Concerns:

Kurt did, however, bring up some concerns about SeedHive which reiterated critique I have received from other thought partners. Will people really be willing to share a significant amount of detail on the business plans they are developing? How will the site attract the critical first adopters who will begin to create content for the site?

One of the areas where Kurt helped push my thinking was related to the integration of a provider network into the site, particularly one which has users voting and rating each vendor’s quality. First off, he confirmed that the real need (which he has already experienced at Greystripe) is for entrepreneurs to be able to find pre-qualified vendors and providers they can trust without being able to call upon the long experience or deep pockets of larger firms. The more information potential buyers have about a vendor, the better.

Nevertheless, in order to get providers to engage with the site and pay to list their services and products in any sort of SeedHive marketplace, providers will need to be comfortable that the reviews they might receive would be honest and fair. Just like eBay, where a merchant score is crucial to winning business, providers will recognize that a few unfair reviews could seriously hurt their ability to do business. He pointed to LinkedIn as an example of a site which has attempted to balance vendor control with user ratings.

What Now?

Coming out of the conversation with Kurt, I felt both energized and appropriately hesitant. There are clearly a number of other organizations working in very similar, related areas, and in many cases, their business models are much clearer and more focused than that of SeedHive. PartnerUp, for instance, is an intelligent solution to the need for entrepreneurs to find potential business partners with appropriate skills and experience. The Go Big Network has created a showroom for investors to easy find businesses looking to raise capital.

The next steps will be to continue to investigate the other businesses and individuals who are playing in this same space, continue refining the business idea, and most importantly, creating a financial model. Kurt posed the question quite simply as “how many people do you need to generate a profit?” How many users? How many advertisers? Paying how much? They are simple questions, but ones which I must answer honestly before I move too far ahead with the idea.

SeedHive: An Entrepreneur’s Social Network

30 Jul

SeedHive Honeycomb

The Core of the Idea:

SeedHive would be an online community build around the collaboration of entrepreneurs on startup businesses and business ideas. It is a site not purely about networking and relationships, but also content.

A Community of Entrepreneurs

Individual members form the core of the community and are predominantly a mix of entrepreneurs, small business owners, and people with an interest in entrepreneurship. As a community, they have ideas, knowledge, and opinions about business and are eager to collaborate with their peers.

A Network of Providers

Service providers, freelancers, businesses, and consultants form another important part of the community, meeting the product and service needs of the core. They use SeedHive as a prospecting platform for finding new business and employment opportunities.

A Showcase for Venture Capitalists

Venture capitalists are not only an active part of the core community, but also form a special group of shoppers looking for promising ideas and individuals with whom they can develop relationships and make investments. SeedHive helps them find them.

How It Would Work:

SeedHive would build upon the successes of other virtual communities such as LinkedIn and Doostang, which have begun to help professionals build their networks by maintaining contacts and relationships, but extend the idea further: to content.

When I recently moved to London from San Francisco and found myself with suddenly no social life and a lot of time on my hands, I began to look for a website where new business ideas were shared, emerging trends in business and entrepreneurship were discussed. I wanted to be able to quickly immerse myself in a part of the business world that was new and unfamiliar. That was two months ago, and I have yet to find such a site.
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