Greenlight Greater Portland, no place for start-ups

June 15, 2009 at 6:08 am | Posted in Sofware Startup | 4 Comments
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Every heard of GreenLight Greater Portland?  Don’t worry, I hadn’t really known of it until Rick Turoczy at Silicon Florist graciously invited me to hang out with a few other start-up types and invade the suit and tie world of economic development.  The annual meeting was held on June 11th at the Portland Art Museum.  The Greenlight organization is a private sector led economic development initiative.  According to their website:

Greenlight’s mission is to promote the greater Portland-Vancouver MSA to bring good companies and jobs to the region and to support and grow the diverse businesses that have made their home here.

As I descended the grand stairs to the ballroom I knew I was going to be out of my element all day long.  Black suits, power skirts and lapel pins filled the overlapping chairs wall to wall.  Several hundred people were in attendance for this second annual gathering to discuss regional economics and the city of Portland’s new economic development strategy.

The main attraction of the morning discussion was the introduction of the City’s new economic development strategy by Mayor Sam Adams.  Sam opened by getting the room to pledge that Portland would not be the last city to exit the recession.  He then boldly announced that the new economic development strategy would yield 10,000 new jobs to the Portland area over the next 5 years.  Rightly the Mayor explained that unless the city’s economy was strong and thriving, we would not be able to fund the quality of life that has come to be expected here.  He explained how 5 years worth of projects have been fast tracked to be completed  over the next 24 months.  He discussed the dismal 30% unemployment rate in the construction trade and explained how the city has helped to streamline the permitting process and how they are extending building permits to help companies get back to work once the funds started moving again.

As Mayor Adams began to introduce the strategic economic development plan he said that the city must focus on the opportunities for the greatest growth.  Then he made a back handed comment that I’m sure won’t be much appreciated by the likes of Stumptown, Widmer or Bridgeport.  He said “We can’t all buy and sell beer and coffee to each other and maintain our quality of life.”  Mr. Mayor, I know you were trying to be funny – but these companies actually employ people, they pay mortgages and they put kids through school.  Please show a little respect for companies who call Portland home.

The mayor then introduced Erin Flynn who discussed the strategic development plan.  She talked about the focus on four industries: Cleantech, Advanced Manufacturing, Software and Activewear.  As the discussion continued it was apparent that the focus was on trying to convince big companies to bring jobs to Portland.  There were two offshoots to the plan that talked about Urban Innovation and Neighborhood Business Vitality discussing green building initiatives and “20 minute neighborhoods” where residents can have reliable access to goods and services.

Erin then showed a video about why Portland is such a great place to locate a company or to re-invest in existing companies.  Throughout these discussions a common theme emerged.  In the marketing materials that hype up Portland, the economic development teams are not shy to use Portland’s creative community as a draw.  The materials and videos talk about how creatives like software developers, graphic artists and open source communities all have gravitated to Portland because of it’s “cool” factor.

As the rest of the plan was revealed and the city talked about building a “living” building, investing in workforce development and expanding exports, there was no discussion of helping the cottage industry of creative types or entrepreneurs and start ups.

When the floor was opened for Q&A, Eva Schweber asked a very pointed question about the lack of discussion around the tech community and support for building on that community.   As the speaker on stage looked into the sky for help, Mayor Adams stood up and took the microphone to respond.  His response was short and to the point.  The plan did not provide for the strengthening or incubation of the Portland indie tech community.  I’m sure that as Eva walked back to her seat she was a bit disappointed because of the expectations that were set during a meeting with Mayor back on May 18th. During that meeting the group was very positive that the Mayor understood the opportunity and they felt that they had gained the support from the city to help bolster the tech community.

The rest of the day continued on discussing clean tech and the future impact of stronger higher education system.  The day was then summarized with a luncheon that introduced the 2009 Greater Portland Prosperity Index which provides a plethora of statistics and information on the Portland regional area.   The report was informative and helped to put Portland in perspective to the rest of the country.

Overall the day was informational for this entrepreneur to experience how the city & the suits view their best opportunities for growth.  From the strategic plan and discussions there is great emphasis on enticing companies to expand or relocate to the Portland region.  They are looking to re-train the workforce to fit the needs of those they are pursuing. And there is a desire to attempt to make Portland a centerpiece in the world’s green technology movement.    Some of these goals are tangible and others are just theory.  All in all, I wasn’t moved by the overall plan.

For me it seems the Portland city strategists are missing an obvious opportunity to incubate and encourage the tech community.  Portland already has a substantial base of information workers.  In that group there are entrepreneurs and leaders that have the potential to build the next $100M software company or dozens of $10M software companies.

Even the smallest of software companies create an ecosystem by not only employing workers at higher than average wages, but they also use services from providers like the independent graphic artists or the specialized iPhone programmers.  By fostering a tightly knit tech community the city could effectily help to keep money moving throughout the veins of the Portland region on an ongoing basis.

As the strategic plans progresses to the execution stage my hope is that the city decides to re-align some of their activities to foster growth in the indie tech scene.  As an entrepreneur creating a started called MioWorks, I know it’s up to me to build a business, drive revenue and become profitable quickly.  I would hope that the city can see that they have the opportunity to help foster the tech community so that startups and creatives can easily connect to one another, have access to other businesses to help generate revenue quicker and that they have a fair chance at attracting angel or venture capital financing.

I’m still optimistic that the Portland tech community and the independent creatives will figure out a way to band together and leverage our collective talents.  It’s just unfortunate that the City and Economic Development teams don’t see that potential. So my final report on GreenLight Greater Portland, is that they just don’t see a place for start-ups in their overall plan.

How FREE can kill innovation & your startup

June 4, 2009 at 5:21 pm | Posted in Sofware Startup | 2 Comments
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A strange dynamic has taken hold on the internet.  Just as people expect sunshine and air to be free, they also expect internet based software applications to be free.  Ok, maybe not completely free… they agree someone should pay, just not them.  Damn you Google, damn you Yahoo! why did you do this to us?

With companies left and right offering full versions of their products for free,  users have been conditioned NOT to pay for anything.  This conditioning can be seen across everything from social media sites to messaging to business applications.  The problem with this as I see it is the negative impact on innovation.

Users think that they win by getting free software or services, but do they really?  If you ask me the only real winners in the free ecosystem are the investors behind well funded companies.  By locking down markets with free offerings companies can effectively prevent new entrants from emerging.  This stifles creativity and innovation.

In a meeting a few months back with a partner from Benchmark Capital, I found out that on average they see 3-5% conversion rates on FREE offerings within their investment portfolio.  For most of us this is rather daunting news.

Let’s do some quick mathematics.  Let’s say that you are getting started and you have 2 servers from Amazon Web Services (1 web server/app server and 1 db server). Your monthly cost is going to be around $200.  Let’s now assume that your multi-tenant application can handle 100 accounts on that server, simple math $2 per account cost.  Now you go out and offer your service FREE and you have some success.  Let’s say you sign up 1,000 free accounts.   You scale your costs linearly so you are now spending $2,000 a month to support those free accounts.

You get 5% to upgrade (eventually) to your paid account of say $20/month – at this rate, even with success it costs you $1,000/month just to keep the lights on. Now add to that your Google Adwords budget, your credit card processing fees and the dozen other bills you have each month and you find yourself quickly in the hole by several thousand dollars a month.

Now what happens if you get slash dotted or an article about you ends up on ReadWriteWeb?  Your monthly costs can zoom beyond your meager savings account, all without any real revenue in return or an endpoint in sight.  The end result of your short term success will be the failure of your start up because you ran out of money.

There is also another aspect of the “FREE” account that costs you time and money.  To support a layer of free accounts you have to write code to restrict or to compartmentalize your solution.  This takes your valuable development resources and shifts them from building killer technology to building layers of management so you can support the free users.

I just heard you shout…”But David, you must have a free version or no one will use your software!” I disagree my new friend.  If you look at the Salesforce.com pricing page they don’t have a free model. Neither does Netsuite. These companies are in business to make money, not give away software.  I like this model and hope to see more and more start ups follow it.   At my start up project MioWorks.com, we are holding to this model and offering a free trial to introduce users to our software.  I feel this is an acceptable compromise because it has a definite end period and you don’t have to over-provision your computing environment to support thousands of free accounts in perpetuity.

As for you users out there, don’t be shy to actually pay for something you like to use.  You don’t think twice about dropping hundreds on a camera but you won’t spend $20 a year to store and manage your photographs in an online application.

In the past year or so, Apple has shown us that users will actually pay if the paradigm is broken.   The Apple AppStore is a great example of how to break the cycle and get users to  pay for technologies.  As entrepreneurs we need to watch how this model is evolving and how we can capitalize on it to help fund our ideas and companies.

My last word of advice helps both the user and the start up.  Users, if there are vendors with products you just love but they are too expensive, then tell them.   Tell them the price point that would be of interest to you.  Tell them how to get your business.

The end result of spending money on products you like will be a wider variety of products with more and more innovation.  And who doesn’t like variety! Maybe Google.

Telling your story – episode 1

February 4, 2009 at 10:59 pm | Posted in cloud computing, Software as a Service, Sofware Startup | 2 Comments
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Over the past few months I have been watching new technologies come to life  in the silicon forest of Portland.  Although I see some great new solutions that actually have a fighting chance, it has become clear to me that messaging is something that eludes even the smartest of the entrepreneurs.  It seems to me that there is almost a void when it comes to the concept of marketing with the small teams.  The focus remains on the technology for the duration of the project and only at the very end of the cycle the team spends a morning at a coffee shop trying to figure out how to market what they have built.   In a three part series of posts beginning with this one, I plan to  offer a bit of my assistance to help the young company come to grips with the fact that marketing must be part of the bigger process.  Marketing must be something you think of when you start your project, as your build your project and even past the day you launch the project.  Marketing isn’t just using twitter to tell your peeps about your cool application, it’s a process that takes some thought and process.

Now don’t get me wrong.  Marketing isn’t always about yelling “Sunday Sunday Sunday, big monster trucks in the mud.”  Marketing is as subtle as a simple story that explains what you are doing.  Unfortunately many think that marketing is rather simple and doesn’t really require much thought.  This would be yet another one of those mistakes that the entrepreneur can make.  Creating your story takes a little patience on your part and an understanding of what your target market wants to hear.  Creating the story is more than telling the world why you build something or what it actually does.  Telling the story is explaining why the software will help the user in terms that the USER understands.

Let me offer a scenario to make my point.  You are at a cocktail party and you are mingling around the group.  As you make your way across the room you are approached by the slick salesman wearing his pimped out suit and shiny shoes.  He introduces himself and starts to tell you all the great things about his condo project.  The earth quake proof building and how it took a design team 5 years to architect it.  He talks about the two story glass pool.  He talks about the great access to public transportation and the soundproof walls and the high speed elevators.  He goes on and on about the condo project.  You sip your drink and smile politely waiting for the opportunity to escape.  After he divulges all these great amenities he asks you if you would like to stop by to see the project.  You politely decline, telling him you like your home and aren’t in the market for a new one.    Finally you walk away and think to yourself, wow that’s 5 minutes of my life I’ll never get back.

Let’s make the correlation to what I see with software companies.  Many of the companies are just like this sales guy.  They start to spew out feature after feature hoping that something in there will gain interest by someone (I think we call this throwing s*&t against the wall to see what sticks).  They think to themselves “If I show all the features or how many whiz bang buttons I have, the audience will see for themselves that our solution is vastly superior and they will use it instead of the competitor.”   DING DING DING….wake up! This won’t happen.  Success isn’t a magical event.  It’s a planned strategy that takes time, hard work and great timing.

To create your story, the first step is to define your audience.   I won’t harp too much on target market, but if you have read my previous posts you are starting to see a pattern.  Once you know who you are speaking to, you will have the insight to speak to them in the terms that they will understand.  Your story should use words that make sense to the audience. If you are speaking to small business owners, drop the techno-jargon.  If you are speaking to doctors, talk about patients, medical records and insurance forms.    Do a little research about your target markets and find out how they refer to the issues or challenges that you solve.  Create a list of these keywords to use later in the process just like you would create simple functions to use later in your code.

As an example, if your application manages documents then get more specific based upon your audience.  In the case of MioWorks.com, we help to manage documents between companies and their customers across six verticals. But instead of just saying documents we look deeper at our target markets and find out the types of documents they use on a day to day basis.  This allows us to talk to our customers in terms that they will associate with and easily draw conclusions between our software and their business.

Now that you know how to “talk the talk” it’s time to take a walk through your own solution.  Put on your customer hat and view your application as if you were a customer.  Think about a day in the life of that person.  Think about how they would actually use your software.  One ritual I always perform with my applications is to physically set up an instance as each customer type.  I then try to mimic their use of the solution.  I also try to find a few people I know to help me simulate the role of the customer.   Afterward we have a chat about what we thought were the most compelling reasons for using the software.  At the end of this session you should have the foundation to your messaging and this is what we need to move onto the next step of creating your story.

Stay tuned for episode 2.

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