Posts Tagged ‘startup’

04Apr

Easy Auto Sales

By David in Startups with 7 Comments

Easyautosales.com is a new startup in the world of buying and selling cars.

Wei, one of the three current owner originally discovered the issues of online auto sales after one of his friends tried to buy a car through Craigslist and received over 30 scam responses. He figured there had to be a better way. On the web there are already a number of great destinations for finding autos but there hasn’t been one that combined the technology of large classified sites with the free to sell models. While Craigslist is free, the technology really isn’t all that great for car buyers.

EasyAutoSales.com is a free, ad-supported autos service that helps private sellers and dealers sell cars online. They want to change the way cars are offered on the web vs. current methods. On top of allowing both private sellers and dealers to list all of their cars completely free on Easy Auto Sales and post unlimited pictures, they also wanted to help advertisers segment and reach their target audience within the online automotive crowd.

For example, it’s easy to say Person X went to an autos site therefore he’s interested in buying cars – let’s throw a bunch of car related ads at him and hope it sticks. It’s much more effective to segment Person X and figure out if he’s trying to buy cars under $5,000 or a new car and present the appropriate ads.

Wei is currently living off of tax refunds and money he received from selling his last startup. His personal runway is about 5 months long (which means he has about two months left before he has to make some tough decisions). Wei and his team work from their various homes and they’re Mac based.

He had contracted the development of his UI, which took about a month to build. The actual development time for programming was about 2.5 months from mid January to March of 2008. The site just launched its beta on March 21st and they still have a lot of kinks to work out. However, it would appear the constant whipping of the team to do their very best has had some positive effect – they garnered 50,000 cars within just one week of launch.

Investments:

Each of the three co-founders have promised to put in $5,000 a piece to pool their seed money. Since they’re limited on funds, they’ve solved a number of problems using VERY creative solutions instead of just throwing money at it and hope it goes away.

They’ve spent about $5,500 on outsourced coding but their primary goal was to just get a product out – regardless of how buggy or incomplete it was.

I’ve yet to see a perfectly coded site launch that was guaranteed success. However, I have seen and worked on a number of failed startups because they never launched waiting for perfection.

About $1,000 was spent on logo design and website design. Contrary to their past startups, they found the best person for each job and only gave them that job.

It’s much better to pay a logo guru for a logo design and a guru at graphics/CSS/xhtml for UI design then to try and find someone who is mediocre at both and expect them to do a great job at everything. The same goes for programming – if you outsource, don’t limit yourself to one firm for database work, code, UI design, logo, etc. Find the best for each and give them all different tasks.

They haven’t spent a dime on promotion thus far. In total, they’ve spent less than $8,000 – a good chunk is actually for food at Panera, where they meet weekly thanks to their free Wifi.

Easy Auto Sales is currently making limited revenue, so that’s obviously something they’ll have to work out in the near future.

Feel free to check out their company blog, at ComefortheRide.com.

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01Apr

Why you don’t need a Venture Capitalist

By David in Startup Information with 8 Comments

Let’s begin by dissecting the title “Venture Capitalist”… Here’s a description from our good friend, Wikipedia:

Venture capital is a type of private equity capital typically provided by professional, outside investors to new, growth businesses. Venture capital investments are generally made as cash in exchange for shares in the invested company. A venture capitalist (VC) is a person who makes such investments.

Here are a few things every start-up should consider before seeking a VC that will let you sulk in his moolah:

Control:

The average founder of a startup who uses a VC owns 60% of his property initially, and 10% upon exit. That’s a significant amount of ‘company’ that you’re giving away, think about it. Now let’s take a look at what the other 40% of your company will be focused on. Money. Yes, that’s right, let’s stir up some controversy here. Think about what makes the average VC happy. Why would someone take risk in investing into your product? Money. It may turn out that the concern for money comes before your company, or your customers. VC’s can have the power to hire and fire people, when they own such stake in your biz (including you!).

If its not the ultimate necessity, do you really want this cash-cow second in command of your company? (Sometimes the answer is yes, but situation this comes into play later).

Do you really need it?

Hell, there’s no point in finding a Venture Capitalist if you don’t need one. The average initial investment is $3M+, and if you honestly think that you need 3 million in the bank for your startup to succeed, you’re either launching the next Paypal, or you need a reality check. Now of course, you’ll have many people bumming off of their VC cheques to pay for their apartments, their groceries, et cetera – if this is what you want to achieve raising funds for your company, why not just take out a loan?

If your reason for hiring a VC is to lower your personal risk, that means you don’t have enough faith in your startup to begin with. Entrepreneurship is all about risk taking. In fact, the actual word “entrepreneur” can be defined as “a person who organizes and manages any enterprise, especially a business, usually with considerable initiative and risk.”

Startup costs have gone way down over the past few years. The average funding needed for a startup is now 1/10th of what it was 2 years ago. Entrepreneurs can now outsource development work, which serves as a major benefit when cutting costs. Take a look at some popular success stories that have been circulating the blogosphere recently, start-ups have been launching for mere $X,XXX – low $XX,XXX! Save up, and if you must, raise some angel funding to cover promotion.

Abiding by conditions:

You couldn’t have thought VC’s would just give you money without conditions, right? Here’s a list of some of the conditions that you should expect, courtesy of Business Week:

  • Anti-dilution protection. If the company’s stock price goes down any time in the future, they get additional stock for free.
  • Dividends. In addition to stock, they get a guaranteed rate of return.
  • Liquidation preferences. VCs get their principal and dividends back before anyone else gets a penny.
  • Participating preferred. They get to double dip—they first get their investment plus dividends, then the value of their stock.
  • Mandatory redemption. This requires the company to buy their stock back by a certain date, establishing a deadline for an exit event.
  • Demand registration rights. The VCs can force the company to file a registration statement with the Securities and Exchange Commission to initiate an initial public offering—another way of forcing an exit event.
  • Approval rights. The VCs must approve any new financing and have the right to participate.
  • Reps and warranties. You’ll also have to accept personal liability for representations you’ve made about key aspects of the company. They will have the right to sue you for all you own if you forgot to give them any bad news.

Alternatives:

  • Friends and family are often more than willing to invest in your startups. They know you, and what you’re capable of.
  • Don’t use expensive software! Stick with freebee’s such as Basecamp (and the rest of the 37signals apps), Skype, Google Spreadsheets, and Blinksale. If you must upgrade, the monthly fees are very affordable.
  • There are many budgeted designers and programmers that are just waiting to be found! Browse through logopond for some logo designers, and post some job listings on one of the many job boards. *Hint hint: Take a look at our first sponsor, who happens to be a genuine designer with shockingly low rates.
  • Who needs an office? Not me! A lot of people who acquire VC funding spend it to relocate or buy office space. Working from home is perfectly fine, and saves a fair bit of costs.
  • Still short? Mortgage your house, and save save save! Another option would be is to bring some developers onto the projects as partners.

Final Thoughts:

Before going to any Venture Capitalist, make sure you thoroughly weigh out all the positives, negatives, and alternative options.

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30Mar

Motivate yourself: Drink some water.

By Julian in Resources with 13 Comments

Okay, I’m sure you all are aware of the importance of water. Now, I’m not referencing the shortages of fresh, or clean, water in the world – I’m talking about water in your body. Its one of the fundamental necessities of life. Not to begin a begin a boring health lecture on a start-up blog here, I’ll get right to the point. 

A few days ago I came across an article guest written by Alex Shalman on John Chow’s blog. The article was called “With better health comes more money online”, and later went on to introduce what I’d like to share with you today. Shalman brings up a list of nine things one can do to benefit your healthy workflow. The first suggestion on the list goes something like:

Drink A Tub Full of Water. The recommended daily water intake is 64 ounces on average. However, the majority of people walk around dehydrated for most of their lives. Water gives you energy, focus, and motivation. Drink more.

This seems easy enough, but I realize how many times I’ve tried to drink at least a glass of water per day, and how many times I’ve failed at doing this consistently. Fortunately, I ended up finding a great way of ensuring my daily water intake is at least something, and this ‘way’ is what I’ll be teaching you with this post.

My theory is very simple, and its very possible it won’t work for others, but I’ve been doing this frequently and it works well for me. Put a glass (or a bottle) of water on your desk. That’s it. If I ever have any beverage sitting next to me as I work on tha’ machine, consider it gone in an hour or two. It seems like I do this subconsciously, as I never realize that I’ve finished the water once I actually do. Try it out for yourself, see if it works, and if it does who knows? You may feel more energized, and more motivated to do some work on your start-up.

To spice this post up, I’ve added a hopefully inspiration detailed documentation on how easily a glass of water goes down. Enjoy.

Fig. 1.1: Full glass waiting to be consumed.

Fig. 1.2: Nearly half of the liquid has been consumed

Fig. 1.3: Getting there

Fig. 1.4: Success!

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29Mar

Legal Fees: How to minimize or rid the expense.

I’ve been reading a few blogs lately, particularly posts entailing the costs and procedures of a new start-up. There seems to be a growing trend of minimizing start-up costs and times, and I think it is great that entrepreneurs are finally learning of the many places and ways to downsize their investments to get a start-up running. (Keep an eye out for a friskily controversial new post we’ll have coming up on this topic).

But here’s something that caught my eye, an excerpt from Guy Kawasaki’s side of ‘da net’:

$4,824.14. The total cost of the legal fees [for Truemors] was $4,824.14. I could have used my uncle the divorce lawyer and saved a few bucks, but that would have been short sighted if Truemors ever becomes worth something. Here’s a breakdown of what I got for this amount of money.

Now before I go on, do know that what Guy dropped nearly $5 grand on was more than just a “Terms of Use” agreement (see here), but for the sake of this post I’ll be focusing on what’s out there.

First of all, do you really need something like a Terms of Use, or a Non-Disclosure Agreement to protect your start-up? Let’s take a look at what can happen, and what good one can do for you.

Hypothetical, disadvantageous situation:

There’s far too great of a variety of websites and services offered on the internet to list specifics for each type of situation, but to make my point, I’ll use a content sharing / storage service. Call it StartupX. Imagine this, you have no acceptable use policy (aka, a Terms of Service, or a Terms of Use), and you’re running a successful marketing campaign. A flurry of new users sign up, and life is good. Then you notice a few illicit files being uploaded, and oh baby take my word for it – these files are viral. By the time you go and check out what these users are up to, this trend will catch on. Since the users didn’t agree to anything prior to creating their account, they go wild.

Imagine by nightfall, your server has copyright infringement written all over it, with thousands of mp3’s, ripped or unreleased movies, and more. You wake up the next morning to find your inbox flooded with hundreds of cease and desist letters, take-down notices, and legal threats from the likes of the RIAA, the MPAA, and independent producers. You’ve dropped some dollar on your site (or worse, you’ve raised a few grand from angel investors, but then again this article isn’t about those ventures), and you really hate to see it go down. You’ve seen what organizations like the RIAA have done to other sites. That’s not you.

But what can you do? StartupX didn’t require, or even give users the choice, of accepting and abiding to a Terms of Service (because it doesn’t exist). You, as whole representative of StartupX, can’t ride on the fact that the user’s are to blame… and now, not their server, but your server, houses thousands of infringed content. Now correct me if I’m wrong, but I do believe this makes you the one responsible for these files. And now, you have no choice but to shut down your service, all because you couldn’t shell out the $5,000 in legal fees to cover a Terms of Service (Admittedly, though, this could be taken to trial, which would just mean more fiscal duties). But hey, look at the bright side, chances are StartupX just made some big headlines in the blogosphere.

So what can be done to prevent this kind of situation from ever arising on your field? Plenty. Of course the statement implying one needs to spend $5,000 to obtain a viable Terms of Service (above) is a joke – a ToS, and plenty of other legal forms and agreements, can easily be found all over the internet for a one time fee of $0. (Now this doesn’t go without saying, if you’ve raised capital, or are planning to launch a large service that needs to be scalable, hiring a lawyer to consult and write your agreements for your start-up is the best way to go). I’d like to end this post by providing a few useful links to free legal templates that are out there for your use. :)

Terms of Service

Non-Disclosure Agreement (Good when outsourcing development, design work, or other services that you may want to keep on ‘the down lo’, or may need to reveal some figures to)

Privacy Policy (Good when requiring personal or private information from your users)

Operating Agreement (See comments for some discussion on this topic)

And finally, if you’d like to Incorporate or set up a(n?) LLC, or trademark your name, the most recommended place around is LegalZoom.

If you enjoyed this post please feel free to comment, or share it (check out the “SHARE” button below this post).

 

Update: A few commenters have brought to my attention that the example situation I described may be a little too extreme, so maybe its best not to take the story too seriously, as one would still be protected under various laws or acts in the US (EG. The DMCA). The goal of this post was to remind entrepreneurs about the importance of legal work for your start-up. I loved the great discussion through the comments, by the way. 

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28Mar

Study Curve

By David in Startups with 13 Comments

Study Curve launched last August, after a year of development and beta testing. It is the brainchild of a Aaron Allina, a recent college graduate who had the idea when he was asked to do some computer programming on software that he had never heard of, and it took him weeks to finally find someone to help.

Allina thought it would be great to create a network where help was easy to find and the platform was equally easy to use. He began the development of Study Curve with the help of some students from a local university. The initial funding was between 50 – 100k, which came from years of savings, and from a couple family members. It seems quite steep, but what kind of things can you get for that kind of money? A Study Curve car for instance!

Since launch, schools have started using Study Curve as a student aid, and Study Curve has been recognized by the National School Board Association, the media, and are a finalist as “Educational Newcomer of the Year”.

We tried out Study Curve for ourselves, and we found extremely beneficial. During the signup process, you include courses that you have or are currently taken, as well as your general interests. Upon completion, you get prompted to your main page where it displays questions you can answer based on the information filled out. We didn’t have to dig through subjects we didn’t care about – we just got sent right there. The discussions were great, and everyone was very helpful. Study Curve also gives you the ability to rate other peoples answers, which is a great way to weed out the inaccurate answers. There’s also various social networking aspects, such as profiles, photo galleries, and groups.

Although startup costs seemed quite high, Study Curve looks like a promising site, and a fantastic resource for anyone in school.

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