The audacity of charging from day one.


“We will start charging in version 2.” As the entrepreneur wishfully daydreamed he tacked on “Perhaps not till version 3. Or maybe 4”. I asked the entrepreneur if his product was buggy, and he said “No, it just doesn’t have all the features we have planned yet”.

His answer baffled me. They had a stable, secure product that did a few things very well. Their app didn’t have feature X,Y, and Z (like their competition did), but they had a superior workflow that saved small business owners a lot of time.

After further prodding I discovered they had a user base of over 1,000 business, many of their customers were practically begging to pay for premium access, and yet the startup was running out of money. “Charge for it”, I replied. “Your customers obviously like what you’re doing and you’ve clearly demonstrated value”. His face conjured an expression equally split between disgust and contempt. He felt that by charging for his product he would be a “sell-out” in the startup community.

Why is there apprehension about making money in startup land?

Is it possible that quite a few entrepreneurs simply aren’t interested in making money? Perhaps they are more intoxicated with the process of building a startup then ringing the cash register. Entrepreneurship is about more then just money, but money is a necessary to keep the lights on.

Don’t be ashamed to charge money for a product or service that has value. If your community tries to shame you for this, ignore them.

Old is the New new

Earlier today I asked, “Has anyone successfully bootstrapped their company by charging from day one?” I received several responses, and my favorite reply came via email from Peldi Guilizzoni (Founder of Balsamiq) “Ehm, because that’s how the world has worked since the invention of commerce? I give you something of value, you give me money in exchange. Why is that audacious?”

Go build something of value and charge for it. If you need some inspiration, checkout The Startup Death Clock.

For more startup news, please follow us on Twitter @startupfoundry.

Polishing your pitch: Don’t try to be everything to everyone.

Last week I met an entrepreneur who asked if he could talk to me about his startup. I said “yes,” and he began his pitch. He had an interesting concept, fantastic tech, and he was already funded. As I pulled out my iPhone to jot down some notes, I asked him a simple marketing question, “Who did you build this for?”

I saw panic race across his face and beads of sweat began to form on his forehead. His answers were all over the spectrum. Answers ranged from soccer moms, to kids doing homework, to professional videographers in Hollywood. Essentially he gave me a shotgun pitch when I was looking for a laser.

Upon reflecting on his pitch, I believe he was trying to prove that there was a market for his startup. All of his additional use-case scenarios just added noise to his pitch and watered down the impact of his presentation.

The most important thing when you’re pitching your startup, is to build a clean, concise narrative. Focus on one demographic and demonstrate your startup’s immense value to that user group. Work on getting traction with one market before you try to expand.

It’s impossible to be everything to everyone and it distracts from the important parts of your pitch.

For more startup news, follow us on Twitter @startupfoundry.

How FeeFighters saved startups $50 million a year in credit card fees


I had the chance to chat with Sheel Mohnot (from FeeFighters) to talk about how one startup helped other founders and small business owners save $50 million in the course of one year. Be sure to checkout the end of the article for a gift (worth $49) that FeeFighters is generously giving away to TSF readers!

What is FeeFighters?

Sheel Mohnot: FeeFighters helps small businesses shop for credit card processing, making it as easy as shopping for a plane ticket on Kayak.com. In minutes, business owners can choose the best deal on credit card processing with a reverse auction marketplace that saves the average business owner 40 percent on credit card processing.

Who is your target market?

Sheel: Our target market is anyone that takes credit cards. About 2/3rds of our customers take payments online (mix of startups and established companies, we have lots of e-retailers and SaaS businesses). The other 1/3rd are offline customers, like pizza shops, restaurant chains, and retailers.

We find that a lot of startups often go with PayPal or use their bank for payment processing early on, and then once they get to a certain size, they realize that they can save a significant amount of money by switching to a new provider. We help them make the process as easy as possible.

What is FeeFighter’s backstory?

Sheel: Sean (FeeFighter’s CEO) ran a company called TSS radio. In his first year of operations, he was really frustrated because he overpaid his credit card processing fees by $40,000, which was more than the total profits he took in. He wanted to do something about it- so he started a blog called the Informed Merchant. informed-merchant.com was getting a lot of love from small businesses, so he decided that he could do more to help them actually save money. The idea was born that if processors compete down for merchant’s business, prices would come down significantly. We wrote the contracts to eliminate the opportunity for processors to deceive our customers – we’ve instituted interchange plus pricing, which was previously only available to large merchants like Best Buy and Wal-Mart. All of our customers combined add up to a lot of market power and processors love getting their business.

 

I’ve noticed that your blogging style is very similar to how Mint communicated in the early days. Can you tell us why blogging is important to FeeFighters?

Sheel: Blogging is really important to us, and we figured we could learn from the best. Mint is really good at getting useful content out via their blog, which gets syndicated out throughout the web. We want our blog to accomplish 2 main things

1) Inform merchants about the intricacies of payment processing (obviously hoping to convert them as customers)

2) Generate buzz. We do this via infographics, fun articles completely unrelated to payments (including a workout video that got several thousand hits), and general business articles

For pagerank purposes, it’s important that these be linked to from outside sources, so there is certainly some link-bait in the mix as well.

 

How are you gaining traction? How did you get your foot in the door in this industry? Can you share a few tips for other startups that are still in the hustle phase?

Sheel: We’re gaining traction the old fashioned way. We provide a needed service that our customers love. They spread the word about us. The problem is, it isn’t happening fast enough… So we spend money on some paid search, we do a lot of buzz/PR stuff, and we are trying to build out our partnerships. We want to be anywhere that small businesses are, and we offer something compelling to our partners – the opportunity to save your customers a lot of money.

 

We got our foot in the door in the industry by learning more than anyone else about it. Sean read a lot. He became an expert on payment processing, so much so that he’s one of the experts in this field. He’s written about it, spoken at conferences, and ultimately started a company in the industry. It’s always a hustle – raising money, getting early customers, getting processors to agree to our crazy merchant-friendly contracts, etc. The hustle phase is really important… I don’t think we’ll be out for that phase for a long time. Tips: NEVER STOP HUSTLING. If things are getting comfortable, you aren’t hustling enough and someone that out-hustles you will eat your lunch. In our business, it is important to be everywhere at once. We work hard to do that.

 

What’s next for FeeFighters?

Sheel: Lots of exciting things! We’re launching an awesome UI change to the site in the next week or so, which will give our customers Kayak-style ability to do instant searches. Also, we’re launching in Canada! Our neighbors to the north can save a lot of money on payment processing too, and we decided that we should try to reach them.

We already have fantastic customers like StackExchange and OkCupid, but we’re always looking to grow our user base.

 

Is there anything else TSF readers should know about FeeFighters?

Sheel: We decided to run a special for TSF readers – We’re going to give a free statement analysis $49 value.  Send an email to sheel@feefighters.com with TSF in the subject line and your statement attached.

For more startup news, follow us on Twitter @startupfoundry

“I pitched 200 VCs in 10 months before I closed the round”

I had the pleasure of meeting Sanjay Parekh a month or so ago, and I knew I had to share his story on The Startup Foundry. In this interview, Sanjay talks about how he pitched 200 Venture Capitalists in 10 months to secure funding for his startup. This 7 minute video is chalked full of great advice for startups raising money. Sanjay talks about the “highs” and the “lows” of entrepreneurship and lessons he has learned along the way. If you’re unable to view the video, I’ve included text highlights below.

1. Slides changed dramatically after 10-15 pitches. The first several pitches helped Sanjay truly understand what he was pitching.

2. Pay attention to the questions VCs are asking to learn what you need to improve on. If the same questions are brought up over and over again, you must improve that part of your pitch.

3. Raising money can take a while. If you’re going to commit, be in it for the long haul.

4. Understand why they said “no”, and learn from it.

5. A VC had to pull out because they didn’t have the cash. Sometimes crappy things happen to you that are out of your control. Keep pushing forward.

6. Raising money is hard work. Raising $41 million before you have any customers is the exception, not the rule.

7. There is really bad times, and really high times. Entrepreneurship is a bipolar existence.

8. You have a responsibility to your employees to keep pushing (even when you’re discouraged).

For more startup news, follow us on Twitter @startupfoundry.

3 lessons startups can learn from the infamous Gizmodo redesign

Gizmodo shipped their boldly redesigned home page February 7 amidst a sea of controversy. The redesign was almost universally panned by it’s readers and traffic dropped significantly. I decided to dissect Gizmodo’s redesign and distill three lessons entrepreneurs could learn from their mistakes.

1. Communicate clearly to your users

To understand how you were suppose to use the new site, Gizmodo put up a tutorial. If you must explain how to use a news website, you’ve probably blown it. The infamous Gizmodo redesign happened when designers and coders became more interested in HTML then communication.

When you’re building the UI and UX of your app, make it as simple as possible.

2. Multiple small frequent iterations are better then one massive change

Gawker Media (Gizmodo’s parent company) shipped their CMS with glaring bugs. Many users reported that pages weren’t loading, the scrollbars weren’t scrolling, and the site was completely useless without javascript. They could have very easily broken up the redesign into several minor improvements and rolled them out one by one.

It’s better to have fewer features that are ultra-polished then a big bag of crap.

3. Treat your users with respect

I stopped reading Gizmodo when they started to cover up their main stories with slide-down dynamic ads. You had to wait 5-10 seconds to even read the title of the first story to see if you were interested in reading it.

As Paul Graham said “Users are hovering over the back button [of their browsers]”. Don’t give your users a reason to leave your site immediately by disrespecting them with obnoxious advertisements.

For more startup news, please follow us on Twitter @startupfoundry.

Everyone has problems. Your solutions make you special. – Bootstrapping Postmark


I recently had the chance to sit down with Alex Hillman and Natalie Nagele from Postmark to give TSF readers an inside peak at this great transactional email company. In this interview we talked about what Postmark does, how they bootstrapped, Amazon entering their market, and customer acquisition. After reading this interview, be sure to checkout their website at www.PostmarkApp.com.

In one sentence, what does Postmark do?
Postmark helps other developers send important emails reliably.

What would be an example of an “important email”?
Marketing emails are valuable if they convert, but transactional emails are more valuable because they’re for your actual customers, not just random strangers.

If a marketing email doesn’t show up, it sucks. If a transactional email like a software license, receipt, invoice or some other important documentation doesn’t show up, you’re in trouble. We specialize in transactional email and, in fact, that’s the only thing we do with Postmark.

Were you bootstrapped or funded?
We are 100% bootstrapped. Wildbit has been doing design and development consulting since 1999. We built a R&D bucket and funded Beanstalk. Beanstalk grew and became the first product that had full time team members working on it. Beanstalk has been growing strong since ’07 and it gave us some runway (along with our existing knowledge and experience) to fire up Postmark in early ’10.

Amazon recently entered the transactional email business. How did Postmark react?
That was kind of a funny week. They had just released Elastic Beanstalk, a service totally different from OUR beanstalk app, but it had very similar branding. Then, a week later when they released an email delivery service we were like, “SERIOUSLY!?!?” Even their branding looked similar. It was pretty wild. Anyway, once we got past the initial OMG, it actually felt really good for three reasons.

1. Amazon validated the market. Anyone who hadn’t been thinking about looking for an outsourced email delivery host was now considering it.

2. We were validated as their competition. This was rewarding. It would have sucked if they came out and nobody thought of us. When, however, Amazon came out with their service, a common question was; “are Postmark and Sendgrid doomed?” We were actually validated as top-tier competition. This was a huge morale win.

3. Amazon won the race to the bottom (in terms of price). It no longer made sense to compete to be the cheapest, as they’d win by a long shot. The team talked and we agreed that if we weren’t going to compete on price we’d compete on reliability, support, ease of use, and, of course, our flare for style.

Essentially, Amazon showed up and offered well whiskey. We want to be top shelf Bourbon. We do a TON of hands-on work with our customers monitoring and diagnosing delivery systems.

How has your acquisition strategy evolved?
These days customer acquisitions are a bit different than when we first started Postmark. When Postmark started not many people thought about using a service instead of their mail server. The issue wasn’t, “why do I need Postmark?.” They weren’t even generally aware that a service like ours existed.

In the last year that’s changed quite a bit. The competitive landscape has widened and Amazon showed up a few months back to kindly validate our market.

Do you have any advice for other entrepreneurs?

1. Focus on one thing:

Postmark is the only provider that is solely transactional email. We don’t allow bulk marketing email at all.

2. JFDI (Just F’ing Do It):
That’s not “do EVERYTHING”, mind you but at a certain point, you’re sure to be over thinking it. JFDI = no excuses. Your problems aren’t what make you special. Everyone has problems. Your solutions make you special.

For more startup news, follow us on Twitter @startupfoundry.

You’re not entitled to anything. Hustle for everything you’re worth

I’ve received some very angry emails from founders that are trying to get their startup featured on TSF. For example:

“I submitted our startup yesterday, and you still haven’t written about us yet on The Startup Foundry! What gives? Is you head so far up your ass you can’t see how great our app is? You guys are exactly like TechCrunch!”

Typically I delete the email and setup a filter to automatically avoid any future contact with the person, but this time I felt compelled to respond to the founder (Perhaps it was the TechCrunch barb that pushed me over the edge) in public. I’m not going to write about his startup but I do want to share some universal advice with him.

You’re not entitled to anything. You must hustle for everything you’re worth.

The best way to get your startup covered is to have an awesome narrative, not a sense of entitlement. Writers are salivating to spread great stories about awesome startups. After all, everyone loves to root for the underdog.

Airbnb has one of my favorite hustling stories ever from a team of relatively “unknowns”.


The Airbnb founders came out of the summer 2008 Y Combinator class. They came to see us right after pulling a great stunt at the Democratic Convention in Denver (in which Obama was nominated). They bought a bulk supply of generic cheerios and made up these cereal boxes. They sold these Obama Os for $4 a box and sold 8,000 of them, raising $32,000 to provide seed capital for their startup. I asked them if they’d leave a box of the cereal for us and it has been sitting in our conference room ever since. Whenever someone tells me that they can’t figure out how to raise the first $25,000 they need to get their company started I stand up, walk over to the cereal box, and tell this story. It is a story of pure unadulterated hustle. And I love it.

Fred Wilson on AirBnB

How could you even begin to doubt these guys determination? Sure the story is a little bit silly, but the Airbnb people are the type of people you can’t help but write about. I’ve also put together an article covering 5 ways to make your startup ridiculously easy to write about to get you started. I hope you check it out.

Build a great company, be kind, and hustle. These are the things you need to move forward.

I wish you the best,
Paul Hontz

For more startup news and advice, please follow us on Twitter @startupfoundry.

The difference between what you did, what you’re doing, and where you’re going

There are 3 things that are critically important to your startup.

You must balance all three of these things to be successful.

1. What you did (the past).
2. What you’re doing (the present).
3. Where you’re going (the future).

What you did:

When I asked a founder why he thought his new startup would succeed, he claimed it would happen because his previous ventures did. Your past is a part of you, but it doesn’t define you. Just because you were successful (or your venture failed) in the past, doesn’t mean the same outcome will happen in the future. You can extrapolate data from the past but don’t let it blind you to your current reality. Previous experiences are nothing more than blueprints for us to build the future with.

What you’re doing:

If you only get one thing right, make it this one. You can at least tread water if you’re successfully capitalizing on the present. Focusing on the present allows startups to focus on real world issues immediately and you can actually start selling your product. As Steve Jobs said, “Real artists ship”.

Where you’re going:

It’s important for startups to have a dream that they can barely see. A goal that you have to be crazy to believe you can reach (but you and your team try for it anyway because you believe in it so much). I would rather achieve 50% of the extraordinary, than 100% mediocracy. This line of thinking is huge for teambuilding as well. One of my favorite quotes is: “If you want to build a ship, don’t drum up the men to gather wood, divide the work and give orders. Instead, teach them to yearn for the vast and endless sea.”

What do you think?

Get in touch with us by leaving a comment or following us on Twitter at @startupfoundry.

From Freemium to Paid, to the cover of Hacker Monthly. The Bidsketch story.

I met Ruben Gamez in Miami at the SuperConf after-party. The day before the party, Ruben gave his 2 week notice at his “real job” so he could work full time on his startup, Bidsketch.

Bidsketch a web based proposal app for designers. Most designers write proposals using MS Word believe it or not. It’s completely old school and backwards. Bidsketch brings all this online and lets them do things that weren’t possible for them before. Rubin’s main vision is to change the way designers present and sell their services. So far, he’s happy with the results. Ruben agreed to an email interview and the transcript is below.

Paul Hontz: Ruben, talk to us about launching Bidsketch.

Ruben Gamez: I launched Bidsketch almost a year and a half ago. I had a day job so I worked nights and weekends to launch. It was a decent launch considering I was bootstrapping and had no connections or audience. I had a pre-launch to my mailing list and had over 20 paid accounts before it was officially live. In beta I also somehow managed to acquire (somehow, because I didn’t have money) my main and only competitor at the time (long story there and probably off topic). Editors Note: We’re going to bring you back and have you tell this story.


Paul: You initially launched as a freemium service. How did that work out for you?

Ruben:
After I launched I discovered that the freemium model was a major failure for me. After weeks of pulling my hair out and trying everything I could think of, I experimented my way out of the freemium model and have seen excellent growth since. I actually did a guest post on Rob Walling’s blog about that: Why Free Plans Don’t Work (It also made the cover of Hacker Monthly which was pretty exciting for me)

Anyways, over the next few months I got a fair amount of buzz (plus writeups) from the designer community and saw some nice growth. Funded competitors and teams came into the space which seems to have been a good thing because I’m growing faster since then and I outrank them in Google which brings in great traffic.

Paul: What strategies have you used for user acquisition?

Ruben: My strategy has been a combination of word of mouth, relevant writeups, SEO, and some content marketing (I don’t advertise).

At this point it’s become profitable enough to cover all my living expenses (which are pretty real expenses considering that I’m married and have a mortgage). A couple of weeks ago I quit the day job; So now I’m officially 100% full time on Bidsketch.

Paul: What’s next for Bidsketch? How are you doing on revenue?

Ruben: I’m very excited about what’s next. Aside from being able to devote some real time to working on what I love, in a month or so I’ll be releasing version 2 of Bidsketch which has some pretty neat stuff that’s going to knock the socks off designers.

Our monthly recurring revenue has more than doubled in the last four months.

Paul: Do you have any advice for solo-founders?

Ruben: Just giving an overview like this makes it seem like it’s been a walk in the park but the truth is that it’s been hard. It’s hard work consistently grinding it out after-hours for over a year as a single founder. Along with many of the highs there were definitely some rough times. Hard work but totally worth it — especially now that I’ve come through the other side.

To checkout Ruben’s company, check out Bidsketch.com. For up to the minute startup news, follow us on Twitter @startupfoundry.