Embracing Chaos: Random Participation and the Web

This is a guest post by Jason Lorimer. Jason is an entrepreneur @CulturaHQ, advocating on behalf of those with the ambition to do more than just entertain ideas.

It’s been more than a year since the video chat site Chat Roulette took the world by storm. The mainstream media jumping at the chance to expose the site to the public while many of the sites early users were much more interested in exposing themselves. The hype around the site has died down and the traffic has flattened out. It seems the young founder was not prepared to leverage the phenomenon he created with this platform for random interaction. None of us would have been I suspect.
I very much view the overwhelming public interest in this simple chat site as an early indicator of peoples willingness to participate in random interactions as a way to increase the return on their experiences. There are plenty of less well known examples of this like that of Japans’ Ogori Cafe where you get what the person in front of you ordered for lunch or the application I use as a screen saver in Map Crunch. It takes random Google Street View images and rotates them randomly at your behest or on your behalf. Most of what exists to date would be widely considered novelty but that is about to change.

In the post-internet economy, people have access to whatever they want, wherever they are.
Their ability to participate passively in exchanges where they can add their own value to things they buy and services they use will be essential. Experience based commerce will become the standard practice across industries. Companies competing to create and package compelling experiences in a world where the lowest price is accessed easily from our cell phones and the concept of scarcity is abolished by platform marketplaces where people can buy and sell from each other directly, all but eliminating the ability for brands to control the perception of one or more of their products being rare and thereby valuable.

Take Etsy for example. I am a big fan of this platform filled with handmade products from
around the world and as such, often post ideas for their site. In this case, a simple function focused around a prominently placed button would randomly populate an artisans profile, complete with their available products. This fun and productive interface would expose
vendors to additional prospects and customers to interesting products they might have not otherwise have had occasion to search for. All this in a mostly passive way, taking the existing behavior of window shopping and leveraging it to increase sales.

I am extremely surprised that social networks have not embraced randomness to any notable degree as of yet. Think of randomly populating a fellow student from your high school on Classmates.com or an available member of the opposite sex in your area on Match.com

Think about mobile commerce melding with social in a random and ultimately profitable way.
One example would be taking the the much talked about Groupon Now application which while pin pointing your exact location, asks you simply: Are you Hungry or Are You Bored, then populates deeply discounted deals for businesses on the platform by distance on your phone.
The same basic application could be used to match people interested in the same categories, currently in the same vicinity. So, essentially you could click a button and be matched with a person or people and a deal. You could mutually choose to accept the occasion or pass right from the phone. Something randomly fun to do and someone to do it with, all in a few clicks.

How would you work randomness in to your model to improve your customers experience?


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Calculating your customers lifetime value (with code)

This is a guest post written by Auston Bunsen. Auston is the organizer behind SuperConf, an awesome conference for web entrepreneurs which I had the privilege to attend in February. If you’re in the South Florida area, make sure you go next year!

I watched a Mixergy interview with Jason Fried [link] and at one point he talked about how they (37Signals) hired a data guy to generate metrics, more specifically Customer LTV.  Andrew asked how LTV  is calculated & if there was software available to help figure it out.

This is my answer to that question. It’s how I’ve done Customer LTV calculations & segmenting at companies I’ve worked with/at. Hope it’s useful!

Disclaimer: Code may not be 100% working & some of this stuff is very lego-like. Take this with a grain of salt, it’s just how I do my LTV stuff.

The Customer Lifetime Value Formula

For a SaaS startup today, the formula in it’s simplest form is as follows.

Customer LTV  = Revenue Per Month * Number of Months being a customer

Getting The Necessary Data

If you’re lucky, you will have a record (in a table or datastore) of all payments (& hopefully declines) that a given customer has made.

If you don’t have this you may be able to get it from your payment gateway via their API. If you can, do yourself a favor & do a retroactive import of this data & store it on your servers. It’s important!

Once you have this data, you can just create a script to run through all customers & generate an average LTV. Here is an example in SQL:

Segmenting Your LTV

For more meaningful metrics, you’ll need more data than just your LTV.  You need to be able to properly separate customers with High LTV’s from customers with Low LTV’s. To do this, simply add a “group by” & “order by” to the above SQL statement:

That covers how to get a granular look at your customers & their lifetime value. But now that you’ve got that, you’re probably going to want to see where the bad customers came from. Conversely, you might have some intuition that certain traffic has a lower or higher LTV than others. Basically, you’ll want to go deeper.

Deeper Segmentation

If you’d like to segment your customers by traffic source/medium/campaign, you need to get that data somehow & analytics like Google/Clicky don’t have granular data export (each visitors ip/browser/os) in their API. So, you will need to collect that data & somehow pin it to customers record at the time of signup. You might have to update your database/store to accomplish this. It’s actually really simple to do, just grab the url params & pass them through to the sign up page. Here are a couple of examples…

in Python (django):

in PHP:

Once you do that, things get fun; you can:

1. Mash up data from google analytics with your own data by using their API [link].
2. Segment your customers by sex, age group, education, marital status, etc using the Rapleaf API [link]
3. See if customers in certain cities or states have higher LTV (using SQL)

Tons of fun with data

With the above information, you can create dashboards for realtime campaign tracking (or just dashboard widgets, like one for geckoboard [link]), daily emails with metrics, create upsells to your customers based on LTV (in order to raise low LTV or increase revenue in high LTV customers), re-focus your marketing/pr efforts where they will make the most impact based on historic data & if you’re really nerdy (& smart) run ML/Pattern recognition on your data to find patterns that may be interesting.

If you’ve enjoyed reading this, you can follow the author on Twitter @Bunsen.

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

How Jared Tame bootstrapped his startup by writing “Startups Open Sourced”

As Jared Tame was finishing up school, he decided to build a startup. He didn’t want to raise money (at least in the early stages) so he did what any “Grade-A” hustler would have done. Jared wrote a fantastic book on popular startups, Startups Open Sourced, and invested the profits into his idea.

In this interview Jared talks about where inspiration came from, measuring advertising efforts, and why Twitter isn’t an effective medium for advertising. This interview is worth investing 15 minutes into.

Final Thoughts:

Jared’s story reminds me of a previous post, You’re not entitled to anything. Hustle for everything you’re worth. Jared perfectly embodies this attitude.

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How a solo, non-technical founder hustled her way to launching a startup

Lindsey Harper is a solo founder who doesn’t code. In all essence she is the antithesis of Valley culture. Yet this hasn’t stopped her from building a startup, Swayable, that’s gaining teen users hand over fist. I had the chance to catch up with Lindsey via email to talk about the challenges that she’s faced and how she overcame them.

What is Swayable?

Swayable helps you get opinions online quickly. For example:

As a solo founder, what’s been the biggest challenge you’ve had to overcome?

In a nutshell, you don’t know what you don’t know. You have to be more of a generalist as a sole founder vs. being able to really deep dive into any one expertise. So there is always a bit of unknown with regard to making sure you’ve covered everything. The best way to work around this is to meet with experts and mentors in areas you don’t know a lot about and ask them to grill you with questions about what your doing in that area of expertise. For me that meant meeting with several engineers, asking about development, database structure, hosting, security, coding etc. and finding out how to ask the right questions when finding an outsource firm. Whenever I get stuck now, I continue to reach out to my mentors and experts to ask for quick feedback or to ask the simple question, “What am I missing here?”

Tell us about your experience outsourcing development.

In the past I’ve had great luck outsourcing to sites like: Elance, Odesk, RentaCoder (now vWorker.com) etc., for coding projects. All of those projects, however, were very simple, non-complex type of development projects and outsourcing to these resources worked great. When it came to Swayable, I’d built a massive spec document, did a viability survey on Amazon’s Mechanical Turk and got to my minimum viable product spec so I was ready to go. I initially used Odesk and interviewed 5 firms as I wanted a company vs. an individual so I had a larger support team for the project as it grows. I found a firm that seemed to be able to complete the project but after a month past the first deadline, milestone 1 wasn’t met. I paid them for the work they did complete and ended the relationship. I then decided I needed a U.S. Based firm with U.S. Based accountability and then development could be done oversees. I hired Beyondsoft Consulting and they have been phenomenal! They’ve built both my iPhone and Web app as well as provided not only support, but they do a great job of questioning the direction at times and offering up better ways to execute if there are more efficient ways than what I’ve suggested. I couldn’t be happier with an outsource firm and will continue working with them for the foreseeable future. Lesson learned from this is really just jump in, try things out and don’t be afraid to move on to a better fit, after all it’s your product and money.

If you could do it all over again, what would you have done differently?

I was a bit nervous up front to alienate any audience as Swayable can be used in such a variety of ways. So I built the site with more gender neutral in mind, had I done some more surveys about customer segments, I would have learned that women and teens are more of my audience and could have built the website a bit more targeted to them. Without knowing the direction your site will take up front, and who will adopt your product the most (not all products have this problem if it’s a clear niche) it’s tough to figure out the right design and UX components. So looking back, I would have likely done some different branding elements and more gender targeting with design. It’s something I can fix in the future, but am wanting to continue to see how Swayable is adopted before making any drastic changes.

How do you plan to monetize?

With Swayable’s website only 3 months old and the iPhone app a couple of weeks old, some of the monetization options depend on which direction the site goes with the user base. I do have 4 monetization options regardless of direction that I’m working on implementing at certain traffic milestones:
1 – Paid API: Currently when 3rd party sites embed a Swayable I am seeing on average 10%+ click through/engagement with the Swayables. So an API is a natural solution for websites and online businesses & retailers that want to increase user engagement through there site and products and allowing users to create & share Swayable’s directly from there product/service pages without going to Swayable.com
2 – Selling Swayable advertisement spots – Soon, advertisers can purchase Swayables to get a more integrated/interactive advertising campaigns where users actually interact with the brand by “Swaying” on a Swayable.
3 – Viglink.com – Affiliate program, already installed on the site.
4 – Banner Advertising – Traditional banner advertising on the site.

How have you gained traction

If you really target an audience and learn how to connect with them, you should see traction (this does not mean you have to spend money to do this). In my opinion, If you don’t start seeing the traction you want, then you should be questioning either your product or pivot your product to see where you get traction. With Swayable, I have 3 primary audiences I am targeting initially and one of those audiences is teens (13 to early Twenties is how I categorize this). I’ve targeted them via content that they consume regularly online i.e. Celebrities fan sites via Facebook fan pages, blogs and twitter content that target these celebrities. I create content the teens want to consume and use Swayable as the medium in which they consume the celebrity content. As the teens visit Swayable to vote on celebrity content, they get engaged by first creating yet another celebrity style Swayable. Once the start seeing others vote on their Swayable and the addictiveness of seeing feedback real time, they start to create content in other categories and topics, which is exactly what I was hoping for. So far in 3 months I am doubling in visitors each month, tripling in page views, and increasing time on site each month. Best of all, users that don’t care about celebrity content can just filter by topic to not have to see any celebrity Swayables. My users are engaged, creating content, and over 50% of my visitors are returning back to the site to create and consume more. I am also seeing quite a bit of traction with website owners who are embedding Swayable’s right on their site, they are seeing on average 10% click through on the Swayable’s, getting more user engagement and interactivity without sending visitors away. Once a website owner has embedded a Swayable and seen the engagement, they are coming back to create and embed more Swayable’s on there site.

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Inside LaunchRock- A behind the scenes look with co-founder Jameson Detweiler

Seemingly overnight, LaunchRock became a “startup darling”. LaunchRock is now the de-facto platform for pre-launch startups to start building some traction. I had the privilege to catch up with Jameson Detweiler (a LaunchRock co-founder) at Funded By Night in Detroit and we decided to bring him on TSF so he could share their story.

In this interview you will learn how LaunchRock hustled to gain some serious traction in the early days at SXSW, where they are going, and a few ways startups can increase their odds of going viral.

If you prefer audio only, download Inside LaunchRock.mp3

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The easiest sale you’ll ever make is to the customer you already have.

Acquiring new users is hard. To close on a sale, you must build enough rapport with your customer that they trust you with their money. This is not always an easy task. It’s especially hard for startups who primarily interact with customers via the web. Going from “strangers” to having a business relationship is one of the hardest things to do.

Paradoxically I see a lot of startups put all of their energy into acquiring new users because they view it as the easiest way to increase profits. This simply isn’t true.

I’ve discovered that the easiest way to increase profits is by focusing on the customers I already have a relationship with and learning how I can make their business even more effective. When the customer already trusts you, it’s very easy to make an honest up-sell that will improve their experience while increasing your profits.

What a good up-sell looks like

A good up-sell provides value to the consumer. I would even go so far as to say that it’s an educational experience. The customer might not even understand what they need and it’s your job to help them figure it out. Even if they don’t end up buying anything, this will establish you as an expert in your field and you will have gained their respect. If the time ever comes when they decide they need the up-sell, you’ll be their go to person.

What a bad up-sell looks like

An up-sell shouldn’t be a removal of an arbitrary limitation. This is an abuse trust. People have strong BS radars and the worst thing you can do is abuse their trust. Never try to convince them to buy something that they don’t need.

Figure out how to properly monetize your current user-base before you try to grow rapidly. Otherwise you’ll be leaving a lot of money on the table.

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Matt Tanase (a founder of Slicehost) on Rackspace’s decision to kill Slicehost

Earlier this week Rackspace announced that they were discontinuing the Slicehost brand, and existing customers would have to migrate over to their new platform. Many customers were frustrated by this announcement and didn’t understand why they had to change. I had the opportunity to catch up with Matt Tanase, a co-founder of Slicehost, to talk about his thoughts on the announcement.

In this interview Matt gives us a brief history of Slicehost, his thoughts on how Slicehost and Rackspace could have avoided this problem, and what it felt like to hear the news. Towards the end of the interview we also cover Matt’s latest project, Devstructure. You don’t want to miss this interview.

This video is sponsored by:
This is a really great eBook that takes you behind the scenes of some very successful startups. Use discount code “foundryfive” for $5 off. Check it out!

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

Co-founder of Disqus explains why they raised a $10 million round.

At 1pm today, Disqus announced that they had closed a $10 million round with North Bridge and Union Square Ventures. Last night I had the opportunity to sit down with Daniel Ha (co-founder of Disqus) to talk about the news. In this interview we cover why Disqus decided to raise additional funds and the future of the platform. I also ask Daniel if Facebook entering the commenting world had any influence on their decision to raise money. Don’t miss this interview.

This video is sponsored by:
This is a really great eBook that takes you behind the scenes of some very successful startups. Use discount code “foundryfive” for $5 off. Check it out!

Details of the Disqus Deal:

Five hundred

With this latest financing, we will be expanding the team, our products, and on building our long-term business. In the last 12 months, Disqus grew at least 500% across all of our core metrics: traffic, users, and communities. In fact, just this past November we announced hitting 200 million uniques/month and we’re now already approaching 500M! We’ve taken our time to carefully build the foundations of our core platform, and it’s allowed us to handle — admittedly with plenty of challenges — the accelerating growth with a small team.

You can read the full press release on their blog.

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Weekly reader question: How can TSF serve the startup community better?

I cannot say enough how much I appreciate The Startup Foundry community. I started TSF three months ago as a side project and it’s morphed into a full time job (almost). This wouldn’t have been possible if it wasn’t for our vibrant startup community and I sincerely thank you for your support.

I’m dedicated to building TSF into a place where entrepreneurs can exchange ideas, learn, and most importantly, grow. I’ve outlined a few thoughts on how to make this happen below.

Future Plans:

1. Increase the amount of startups TSF covers.
2. Increase interviews with interesting people.
3. Instead of one post a day, try to make it closer to 2 or 3.
4. I would like to hire another person to help with startup coverage, but we’re not quite there financially. It’s important to me that TSF can sustain itself.

Please share your thoughts:

I’ve been mulling over these ideas for the last few days and I wanted to hear what the community thought. If you have better ideas please share them. Likewise if you have concerns with what I outlined above, let me know.

Again, thanks for all of your support. TSF has been a blast, and I can’t wait to get to know more of you over the years.

All the best,
Paul Hontz

If you go to a startup event to network, don’t play on your iPhone

If entrepreneurs go to startup events to network why do most people play on their iPhones the entire time?

One of the biggest mistakes I see entrepreneurs make at these events is that they expect something to happen just because they are physically at the event. Just being present won’t get you anywhere.

Entrepreneurs often mistake proximity for action.

If you’re not genuinely interested in meeting new people your time would be better spent building your business instead of pseudo-networking. In my interview with Gary Vaynerchuk, Gary reminds us that people have insanely high B.S. radars.

A lot of good can come from networking events if you are an active participant. Entrepreneurship is very much a “pay it forward” community. Most people want to see you succeed. However, it’s a two way street. If you’re not interested in someone else, why should they care about you and your company? Be polite and curious. It will take you a long way.

What else have you found to be helpful when attending conferences?

P.S. Live tweeting the conference (hash-tag) doesn’t make you an active participant.

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