is a DIY mobile app development platform for native iOS, Android and HTML5 apps. Bizness Apps powers 50,000+ apps in the Apple app store.
How did you get started?
- In college, I created a website for a class that connected developers to small businesses that needed work done. I noticed that there a lot of restaurants that wanted websites and mobile apps. I jumped on the idea that I could build a template mobile app for one restaurant that could be used for any restaurant. I really didn’t want to get a job after college. I honestly just started with the idea that I could get a few clients and make a living selling to maybe 50 restaurants and make $50K a year.
What resources were most helpful in college and what advice do you have for other college students?
- Chico State was a huge help and a big piece of my success. I was a rookie entrepreneur and there is a lot that I needed to learn (and still need to learn!). My original goal was very modest (design agency, lifestyle). They had a business plan competition. I entered 3 times and never made it to the finals. Teachers saw how driven I was. Ryne Johnson and Peter Straus would meet with me and they would help me work though gorilla marketing strategies, basic business principles and they forced me to follow through on our discussions. I entered the completion again my senior year and I won 1st place. One of the teachers introduced me to Christian Friedland and he became an investor/mentor. At that point, I had 30 customers and I was only generating $1,500 per month so he was helpful. Chico had a lot of resources and guidance available and I am very grateful. I was the only person who was really driven so I got a lot of attention. My advice to college students would be to seek out help. Colleges and professors want students to be successful but they are not going to go out of their way. You have to earn their help through hard work and persistence.
What is one thing that Bizness Apps is exceptionally good at and what is your secret?
- Every company has so much room for improvement and I always say that good is the enemy of great. I am proud that we have a such a strong focus on the customer. A lot of startups are very focused on raising venture capital. I always figured that I would raise money from my customers by solving problems and making them happy. As a result, we built a very efficient company. We have always focused on every dollar as if it was your last.
What advice do you have for anyone with a non-technical background who wants to do a startup?
- You need to hire an awesome developer. The best ones are just wired to develop – their personalities and brains are just wired differently and it comes so naturally for them. You have to find someone who just loves it. Because I wasn’t technical, I had to have a skill so I wasn’t dead asset. I am a designer focused founder so I did UI and focused on gorilla marketing. You need to find a yin to your yang.
Who would you like to thank for helping you along the way?
- Christian Friedland. The guy is such a great person to work with and has been absolutely critical to the success of Bizness Apps. In addition to that, he's one of the rare investors you'll find that really does care about your outcome more than his. That's hard to find these days in business.
is a San Diego startup helping retailers automagically manage inventory and analyze sales by tapping into mobile POS data (Square, PayPal Here).
What was your inspiration for leaving the comforts of a cushy job at Intuit and starting Shopventory?
- My wife Hannah owns a boutique retail store in San Diego and I was amazed at how difficult it was to find an inventory management platform that tied in with Square. I built a solution for her on the side. At the same time, I knew I wanted to work for myself and take a shot at building a company. When I started thinking about it, I realized there was very little downside. Ask yourself, what is the worst that can happen? You will always be able to find a job given the developer skill set. You give up a little bit of salary in the short term so you have a shot at building something that changes the world. It's a no brainer. If I do go back to a corporate job, my experience is so much richer because I've taken this risk. My advice to anyone considering a startup, just do it!
What is the best advice you received when starting Shopventory?
- The best advice I've received is that you want to be solving a real problem - a pain point. On top of that, you have to solve a problem that people are willing to pay for. I've always found that the idea is to build something with a business model from the beginning. Starting something just to acquire users and then figure out monetization later is really tough. When they succeed, those companies have crazy multiples and get tons of press, but the outcomes are so fickle.
What is the luckiest break in Shopventory's early history and why did it almost NOT happen?
- Tough question. Because you are essentially selling to a consumer when you sell to SMB, I decided to do some quick tests with adwords before I even decided to turn Shopventory into a business. The response was overwhelming. That was lucky. Then my co-founder Rares and I threw in an application to Techstars at the last minute and we were shocked and very when we were accepted. Dave (our CEO) joined as a result of Techstars and that was a completely unexpected and very lucky break.
What is a failure you have experienced as an entrepreneur and what did you learn from it?
- Looking back at my previous attempts at startups, I had a lot of failures and I realized that I spent WAY too long building product before I ever tested to see if anyone would sign up and pay for what I was building. That made me embrace the lean startup approach which changed the way I think about product development and that's why I emphasize early interaction with customers. Another important lesson I learned was how to balance the emotional swings of a startup. I force myself to take one day off every weekend and do something fun. Startups are completely overwhelming. There is always work to be done, but you have to take breaks. Enjoy life.
Who do you admire and who would you want to thank for helping you along the way?
- My lovely wife Hannah! I'd also like to thank the people at Techstars - guys like Brad Feld. He has a very interesting take on being a founder. He taught me the value of transparency. That really resonated with me. Transparency should extend to every relationship in a startup - entrepreneur to Board, CEO to employees, startup to customers. That's the way I want to do business and that was the advice I got from Brad. It's also my strategy to deal with failure - you have to be honest with yourself and the people around you.
Thanks for stopping by Bach.
According to a Sarah Lacy article
from earlier this year, Andreessen Horowitz almost had an iron clad rule to never invest in verticals. The main reason to avoid vertical investments was because they had small addressable markets and thus it was difficult to build a big business.
Thankfully, Emergence ignored traditional thinking and bet early on Veeva Systems (NYSE: VEEV). What did we see that made us think it was a big enough market? We had a core thesis that SaaS made verticals more attractive. SaaS products can evolve faster than on-prem deployments and thus, we believed vertical SaaS applications could achieve high levels of customer satisfaction by combining vertical market expertise with rapid, focused iteration. This customer satisfaction would enable vertical SaaS vendors to perfect a use case and then sell additional products and services to their happy customer base.
Let’s look at RealPage (NYSE: RP) as an example. RealPage sells web-based property management solutions to the multifamily real estate industry. Using the 2009 US Census, I used a bottoms-up approach to calculate total available market size for RealPage with their initial product at ~$780MM. By 2008, RealPage had expanded its product offering and increased ASPs almost doubling their market size to ~$1.7B. Lastly, at the IPO, analysts projected future growth in product offerings which tripled market size to ~$5B.
I was really impressed by the Techstars Boulder demo day. Luke Beatty and Eugene Wan put on a fantastic production and the 10 founders did a phenomenal job showcasing their ideas. In contrast to other incubators, the consistency of quality really stood out for me. This may be the result of Techstars' focus and small class size. Of course, given my focus on B2B cloud, I was also very happy to see that the majority of the startups were focused on solving the needs of businesses.
The Boulder ecosystem is also quite impressive. The community here is incredibly open, thoughtful and willing to help. I met so many angels, advisers and service providers who had volunteered their time and resources to help accelerate the lives of 10 startups.
Of course, I have to give a shout out to Bach Le and Rares Saftoiu of Shopventory. I'm so proud of you guys for grasping the opportunity
This piece originally appeared in TechCrunch.
Away from the fickle eyes of consumers, deep in the basement of app stores, enterprise mobile apps are fighting each other for the attention of business users. Given the restrictions of their target audience, business app developers simply cannot utilize the same techniques that consumer app companies leverage. Why is that? And more importantly, how can mobile business apps efficiently speed up user acquisition? Customer Acquisition Models For Consumer Apps
First, let’s examine the methods consumer app developers have used to efficiently acquire large user bases and why business app developers cannot leverage the same techniques.
Obviously, consumer apps have a large target audience as everyone with a smartphone is a potential customer for a consumer app. As a result, the size of the target audience is capable of generating enough web and app-store search volume to build an initial customer base for apps. Plus, the undifferentiated nature of consumers means that cross promotional advertising on consumer apps can be a very effective and efficient user acquisition technique. For example, an advertisement for a mobile game can appear on any mobile app and the end user is always a potential target. On the contrary, the target audiences for business apps are often much smaller and may be focused on a particular vertical niche such as doctors or real estate professionals. As a result of the smaller target audience, business apps do not see a sufficient level of web and app-store search volume. Further, cross promotional advertising is much less effective because of the niche target audiences. For example, less than 1% of US smart phone users are doctors, which makes it very difficult to target that vertical with display ads.
Lastly, consumer app developers with deep pockets have been known to game app store rankings. At the launch of a new consumer app, the developer can pay for downloads through services, such as Chartboost and Tapjoy, until they crack the top 25 of an app store. At that point, their visibility on the app store leaderboard increases their discoverability to the point where organic downloads can take over. Given their smaller target market, mobile-first business apps simply cannot compete with consumer apps for space in app-store rankings (there are no business apps in the iOS Top 50 as of this writing).
Building Virality Into Enterprise Apps
Now that we’ve explored what is not working for enterprise mobile apps, let’s focus on what is working: designing your product work flows to drive direct exposure to new potential users and building in opportunities for indirect referrals through word-of-mouth virality. Dropbox
is the quintessential paradigm of designing virality into a product. Users are incentivized to refer Dropbox because they receive free additional storage for doing so. Additionally, the act of sharing a file with a friend inherently exposes Dropbox to new potential users and serves as a trigger for customers to talk about the service.
Building on the lessons learned from Dropbox, there are three techniques that emerging mobile-first business app developers are using to build virality into their products: triggers, incentives and work flow.
Triggers are events that spur an action. In this particular context, triggers are actions that an app user takes which provide for an opportunity to discuss the application. Expensify
, a mobile app for business users to submit expense reports, has built in two word-of-mouth referral triggers: 1) every time a user takes a picture of a receipt for expense reporting, they are triggered to talk about the app with the coworkers or clients present; 2) the act of submitting an expense report triggers an explanation of the product to the person approving the report.
Incentives play on the concept that users are much more likely to actively refer a product if they receive some practical value for doing so. Plangrid
, an iPad app for managing construction-site blueprints, uses incentives to spread among the different companies that collaborate on construction sites. Plangrid’s value to each site user increases with each additional company and user that joins and adds to the project. Thus, users have a practical incentive to refer the product to new target users.
Lastly, building virality directly into the workflow of how a customer uses an app is a very effective way to expose the app to new potential users. Doximity
, a mobile professional network for physicians, has built virality into its product workflow through its secure messaging capability. Doctors use Doximity to send HIPAA compliant messages to other doctors. Every message sent from a user to a doctor not yet on the platform exposes a new potential user to the product as the message recipient must install Doximity to read the message. Key For Enterprise Apps
Mobile-first business apps have to follow different rules for customer acquisition in order to achieve the scale and marketing efficiency of their consumer-focused brethren. The key for enterprise apps is to focus on building virality into the product so users directly or indirectly spread the app within their target audience. The mobile-first business apps that emerge victorious will be the ones that leverage triggers, incentives and work flow to kick their user acquisition flywheel into overdrive.
One of the keys to Yammer’s success was their focus on metrics, and tracking customer invites was one of the most important metrics. Yammer’s success relied on two types of customer invite virality: one, intracompany virality – when employees invite their colleagues to join the company network; and two, intercompany virality – when employees invite outside companies to sign up a new company network. Measuring the intracompany virality is pretty straight forward, but calculating the effectiveness of intercompany virality is quite a bit more complicated and will thus be the subject of this post. Why is it more complicated? Because you first have to measure how many intercompany invites spawn new networks and then you have to calculate how many new users join the new company networks.
In the attached spreadsheet, you will find anonymized user and company data for a mobile social networking company. Using the domain names of corporate email addresses is an easy way to determine if an invite is intracompany or intercompany. In my analysis, for 1,000 users which were created via intercompany invite, roughly 30% of those users spawned new active company networks (they invited colleagues to join their new company network).
Taking the analysis to the second step, each active company went on to invite 10 additional users (on average). Roughly half of these new intracompany invited users became active and engaged users.
So what can we make of this analysis? In aggregate, of the 1,000 intercompany invites, 293 created new company networks which ultimately spawned 1,633 users. From here, you can calculate the marketing costs of the 1,000 intercompany referrals and accurately compare that cost to the customer lifetime value of the 1,633 active new users. If the CLV is higher than CAC, you can add more marketing fuel to the fire. So how do you accurately calculate CLV? Well…I’ll save that for another day. :)
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Customer churn is simply a consequence of doing business. Even the best SaaS companies, like Salesforce
, will lose customers when companies go out of business. So how do you keep your customer base growing when you will eventually lose some of your older customers? Do you constantly have to sell new ones to make up for the ones you lose? Won’t this simply get harder and harder the larger your existing customer base gets? Well, yes and no. Acquiring new customers efficiently is critical, but you can also offset the loss of customers with upsells and growth from your existing customer base. In fact, the best companies actually experience negative churn – their existing customer base generate more upsell revenue than the revenue lost by churned customers. Veeva Systems is a great example of a company that has turbocharged its growth by following this model. The key to generating negative churn is to have a flexible pricing model that increases with usage (number of seats, number of servers, amount of storage space). Let’s see what this might look like:
As you can see in the chart, revenue growth per cohort increases over time. As a result, by the end, each cohort starts to tilt upward. In this example, the Company actually lost ~16% of its customers over the time period for this chart but more than made up for those customers with additional seats.
The spreadsheet below shows you how to create this chart from the raw data. You can take this analysis one step further by building cohort retention curves, but I’ll save that for another day. :)
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This piece originally appeared in VentureBeat
. Consumer-to-consumer (“C2C”) marketplace startups
are enjoying a Renaissance, as exemplified by Airbnb
and others. Sites like these that facilitate transactions between people have disrupted older offline business-to-business marketplaces by taking advantage of ubiquitous mobile access, and delivering a better experience.
This recent C2C marketplace success is spurring a new crop of similar business-focused ventures, which I believe have tremendous potential to leverage the unique synergies of combining the marketplace model with the software as a service (“SaaS”) platform.
By serving as the access portal to the marketplace, the system of record and most importantly, the paywall that drives predictable revenue, SaaS can revolutionize the marketplace model to offer modern advantages the failed B2B marketplaces of the early 2000s never had. These include revenue predictability, favorable unit economics and a barrier to disintermediation.
Here are the three key advantages of SaaS: Larger market size and revenue predictability
In the late 1990s, Zoho Corp. emerged as an online marketplace for hotel supplies that raised $63 million. Targeting the massive hotel industry ($120 billion in revenue in 2012 according to IBIS), Zoho operated on a transaction model whereby the company received a small percentage of each transaction. This transaction model severely limited revenue potential and made commissions unpredictable.
Zoho ultimately shut down when key buyers, including investors such as Harrah’, purchased only a small fraction of products from the heavily commoditized hotel supply chain. As a result, Zoho earned small commissions on low margin business with little predictability.
Today, business marketplaces can use SaaS platforms to increase market size and improve revenue predictability by selling subscriptions to access and manage the marketplace. For example, LiquidSpace enables individuals to reserve meeting rooms, conference or office space at commercial venues such as hotels. As a transaction marketplace alone, the market size is similar to Zoho’s which aimed to apply a small commission to a large target market and win by capturing volume. However, in addition to monetizing transactions, LiquidSpace also sells their platform directly to hotels (50,000+ potential), universities (100,000+ potential) and enterprises (potentially in the millions) as a service to manage their own meeting spaces internally.
These internal networks greatly increase the market size opportunity as well as revenue predictability with a monthly subscription service instead of a transactional model. Further, adding subscription customers with internal networks of captive guests, students, and employees greatly increases the number of individuals with access to the public marketplace since it is all one platform. Better Unit Economics
Every successful startup faces competition and, eventually, margin pressure. This is particularly true for transactional marketplaces. For example, oDesk, Elance and 99Designs are all sizable marketplaces that connect jobs with freelance workers. But, the success of these marketplaces drove up the cost of keywords used to acquire traffic and drove down the price of jobs (and therefore net margin to the marketplace provider).
On the other hand, using a SaaS-based subscription model, business marketplaces can improve unit economics in three ways:
- Subscriptions lower customer churn, which improves customer lifetime value.
- Subscription breakage improves gross margin.
- Constant customer acquisition costs combined with increased customer lifetime value drives sales and marketing efficiency.
For example, Scripted connects businesses to freelance journalists through its online marketplace. Since Scripted sells access as a SaaS subscription, businesses sign annual contracts (which lowers churn) with Scripted supplying a minimum quantity of written content. If the customer does not utilize the full quantity of service, subscription breakage occurs – Scripted still earns the full revenue but does not incur the cost of providing the unused service (which expands margins). In combination, these two forces increase customer lifetime value, allowing Scripted to increase sales and marketing spend to scale growth more aggressively. A Barrier to Disintermediation
The threat of disintermediation should be top of mind for any good middleman. Marketplaces serve as insurance to both supply and demand and provide the necessary security to complete transactions in an uncertain environment. However, once a network connects two parties, nothing prevents them from circumventing the platform and dealing directly.
For example, MetalSite
, one of a few vertical specific marketplaces in the early 2000s, connected commodities buyers and sellers via auctions. But, MetalSite and many other vertical B2B marketplaces failed because they were taken out of the loop after the first transaction as suppliers began bidding lower prices directly to buyers, without paying commissions to MetalSite.
On the other hand, OpenTable
, a restaurant reservation marketplace, has become the de facto system of record for many customers. As a result, customers are locked in to using the platform, which ensures OpenTable captures each transaction and receives its commission. Additionally, restaurants are much less likely to replace OpenTable with a competitor because it keeps the system of record as opposed to simply being a source of reservations. Final Thoughts
The initial wave of business-focused marketplaces crashed in the dotcom bust because they focused on transactional pricing, competed with incumbents on price and failed to build relationships with their marketplace participants. We are in the early innings of a new wave of business-focused marketplaces that are likely to succeed, thanks to SaaS, which can serve as the system of record, and generate predictable revenue.
Forecasting user retention is hard enough for monthly subscriptions, but the problem becomes exponentially more difficult when you want to forecast daily retention. And quite frankly, social apps (like Zynga’s Farmville
) and mobile games like Plants vs. Zombies
really care about daily active users as that is what drives their revenue.
In the chart above, you can see that new installs as a % of the overall user base should decrease over time. The earnest hope for social and mobile app developers is that you drive initial installs through marketing, retain that user base over time and hope for viral word-of-mouth marketing to drive continued growth.
After you’ve downloaded the spreadsheet below, take a few minutes to break down and understand the formula that calculates retained DAU. <Warning> It’s a pretty complicated formula. “Why would you make it so complicated?” Well, you could build out a waterfall table like you would for monthly retention, but that would get out-of-control in a hurry. And, let’s face it…I love making crazy formulas in excel. </Warning> In most cases, companies drive installs through SEM or other forms of pay for performance marketing. The other key assumption to play with in this model is the retention curve. You will ultimately want to forecast user retention based on historical data. How do you do that? Well…I’ll save that for another day. :)
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Congratulations, you’ve just acquired a customer. Now what? In traditional enterprise software, you would be done and move on to find the next customer. However, with today’s SaaS and freemium
models, you need to focus more than ever on user experience and driving engagement. Why is engagement so important? Well, in monthly self-service subscriptions, customers can churn out just as quickly as they sign up, and in freemium models, customers can remain free forever if they aren’t engaged (and sometimes even if they are).
Let’s examine the graph above. If you only looked at user counts, you’d see a nice up and to the right trajectory. Unfortunately, when you break the users down into monthly cohorts, you can see how difficult it is to build an engaged user base when customers are quickly losing engagement. It’s hard to tell by user counts, because in this case, the free users aren’t quitting, they are just inactive.
Before you can begin testing and optimizing your product for engagement, you will need to build a dashboard to measure engagement.
With this sort of a dashboard, you can track cohort engagement over time and tie improvements to engagement to changes in product.
The spreadsheet below contains both of these dashboards plus the formulas to build them from the raw user data. After you’ve put in your data, you should begin testing ways to keep your customers engaged and bring back inactive users. In the beginning, you may not have enough data points to create meaningful curves. You can actually extrapolate curves from as little as 3 months worth of data. How you ask? Well…I’ll save that for another day. :)
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