Opportunity Knocked. I Opened The Door.
Jun 15 2008

You’ve probably seen those Nationwide insurance commercials that go something like “Life comes at you fast. That’s why there’s Nationwide.” And they show people whose car gets hit by a garage door, a leaf blower or some other random, humorous, or shocking thing.  Check out some of their video ads on their site.

Photo by Sandy Blanchard
Well in every entrepreneurial journey things can happen fast and often there appears a fork in the road.  I decided to pick one of the paths that will have quite an impact on my ability to spend time on Babble Soft.  The opportunity presented itself when I wasn’t looking and I had to take a cold, hard look at it.  The difference between success and failure can often come down to being open to opportunities that seem to randomly present themselves.

The decision on which path to take was not an easy one.  It was not made without much thought, stress, doubt, questions, frustration, etc., but I believe it is the right decision for me, my family, and yes even for Babble Soft.

I  worked part-time on Babble Soft for a while and started full time in late 2007.  As some of you know, I went out to raise funds in early February 2008.  By end of March and early April (because I’ve raised funds before and could see the writing on the wall) it became clear to me this was not going to happen right now for a variety of reasons including: 

1. We are too early.  In other words, we don’t yet have enough users or market traction to make investors comfortable enough to take the bet given they have started losing money on many of their Web 2.0 companies that they invested in at the concept or early beta stage.  It’s become clearer to me that we are trying to “create a market” which is often quite painful and takes a long time.  Therefore, I cannot yet prove that the market is HUGE for what we were trying to do.  By the way, what you see on the site is just a fraction of what I envision as a site for new parents.  It also did not help that we continue to struggle to find a good SEO rhythm due to a variety of reasons including the fact we are, as I mentioned, for all intents and purposes making a market.
    
2. I need a business partner.  It’s tough going it alone without someone to bounce ideas off of on a daily basis.  What I need is a strong technical co-founder and/or an expert consumer marketing partner.  I remember meeting with another Austin entrepreneur, Chris Justice of Sparksight, a while back and he shared with me a sound bite from one of his mentors: “People fund teams, not individuals.”  My husband helps me a lot, but he has a full time job and isn’t really into the business concept the same way I am.
    
3. The economy is in flux.  Investors and consumers alike are concerned about the economy, high gas prices, home foreclosures, job losses, the presidential election, impending tax increases, etc. and their behavior and outlooks have changed.  I won’t freak you out with links to all the articles about the demise of Web 2.0/social networks and people losing their money and their jobs but suffice it to say there are many.  There’s also a lot of good stuff happening but uncertainty is definitely in the air.
    
4. Other personal stuff I can’t blog about yet but which is probably the biggest driving force for choosing this path right now.

So, not being one to continue banging bang her head against a brick wall, I took a J-O-B (another form of insurance that I don’t think Nationwide or any other insurance company offers) to support my entrepreneurial addiction!

I wasn’t looking, but the opportunity arose for an interesting, most likely fun, hopefully low stress job working with people I like.   My boss (who has been a long time subscriber to my blog) is a very cool guy who I’m sure I’ll enjoy working with.  He knows I will continue working on Babble Soft and is very supportive of my doing so.  He also knows I’m a mom to two great kids and wife to a pretty good guy. 😉

I’m excited about the potential of this job combined with what’s going on in the rest of my life.  Of course, I will have to become a guru in time management to make it all work.

The entrepreneurial lifestyle is not made up of beautifully paved, straight roads.  There are often detours and roundabouts.  Right now I’m crossing my fingers that this path I’ve chosen will lead to bigger and better things for me, my family, and my company.  A friend of mine, who is a screen writer trying to make it big in Los Angeles, CA (probably similar odds to building a successful company), wrote an excellent post about his decision four years ago to do the same thing I’m doing now when he took a job.  He reflects on how its been both a good and bad decision for his goal to become a recognized, well-paid screen writer.

I’ll continue to blog and will eventually tell you more about my new ‘day job’ so Sign up for free email updates so you can see a) how I make it work or b) a train wreck in action.  If you see a train wreck about to happen, please leave comments and maybe if I read enough of them, I can find a way to build another track or jump off the train beforehand!

Aruni

What They Don’t Tell You About SEO – Part 3
May 19 2008

Photo by Sandy Blanchard
We are about 5 months and thousands of dollars into our search engine optimization (SEO) campaign managed by SpryDev and before you read the rest, I suggest you check out my Part 1 and Part 2 posts.

Let’s just say I’m not yet ecstatic with the results.  On the plus side, Website Grader now shows our grade as 79 which is up from 67 when I ran it for my Part 2 post on March 3, 2008.  We are also just now starting to show up in the first and second page of Google for our current keywords of ‘breastfeeding support’ and ‘baby sleep.’  We are showing up in the top 30 for other important terms.  Interestingly enough, we are showing #1 for ‘baby care software,’  but I have no idea what the search volume is for that term!

On the not-so-great side, although our overall traffic is increasing at a pretty good percentage rate, we still aren’t seeing a huge jump in total number of visitors or more importantly a significant jump in trial sign-ups which have shown in the past a 7 to 10% conversion rate to purchase!  For instance, according to Google Analytics, in December 2007 we had 873 total visitors of which 626 were unique visitors.  In April 2008, we had 1,585 (82% increase) total visitors of which 1,162 (86% increase) were unique.  Page Views during that same time have gone from 2,364 to 4,898 (107% increase).  In the world of the Internet, the percentage increases are good, but the total numbers seem low to me especially when you see numbers like 1 million visitors per month thrown around often on Mashable and TechCrunch.

In February and March we saw an increase in percentage totals of people finding us using organic search engine terms but saw a drop in organic search and trial sign-ups in April.  The more trial sign-ups we have, the higher the conversion rate of customers purchasing our apps.  Direct and Referring site traffic is still greater than 70% of our traffic sources which means that’s a heck of a lot of my time emailing, blogging, twittering, as well as links from my friends and other interested parties.  My family does not blog or twitter so unfortunately I don’t get back links that way. 😀

I know that the SEO link team is submitting articles, press releases, and creating directory submissions on a monthly basis which seem to be getting accepted and picked up at a reasonable rate.  SpryDev gives me good weekly and monthly reports, and I check out our Google Analytics to see how things are going. So I know that they are sharing all the information they can with me.

We did have an account manager change back in early March when Rose, who I mentioned in a previous post, left for personal reasons and now our account manager is Erik.  We also had a keyword shift around that time from ‘pregnancy week by week’ to ‘baby sleep.’  I’m still not sure why we selected that keyword since we don’t have an offering for that keyword, but I think it was because it had a high search volume…needless to say it had a high bounce rate.  In other words, people who found our site using ‘pregnancy week by week’ didn’t stay long on the site. 

We have also made several website conversion changes based on recommendations by SpryDev via Brian Massey of Customer Chaos, who I also mentioned in one of my previous search engine optimization posts.  Some examples include:

a) Changing trial period from 30 to 15 days
b) Changing our trial follow up emails from same text emails X and 2X days from sign-up to different text emails on sign up, X days out, and Y days out.
c) Adding the Try It Free button on the Babble Soft home page and throughout the site.
d) Creating a new Contact form.

I can’t really opine on the conversion changes until we see a huge jump in trial sign ups. So honestly, I’m a little stumped and frustrated.  Maybe my expectations at the beginning were not correct?!  I had hoped we would see better results by now especially since I was tying some of our fundraising success to SEO.  I don’t know if I’m alone in this or if everyone just has stellar SEO experiences and all of a sudden trial sign-ups and sales go through the roof!  Anyone?

As I mentioned in my SEO, Here I Come post, I signed up with SpryDev because of their guarantee:

“By the end of your contract you will have at least as much additional business from your Web site as you spend on our services…  or we’ll work for FREE until you do.”

Since the contract is for 12 months, we have 7 more months to go and they are assuring me that around the 6 month mark is when their customers start to see the big results…although so far May hasn’t been proving to be a big trial sign-up month yet.  I’ve heard from others that they’ve seen big results in as little as 3 to 4 months from their SEO endeavors. 

So now I’m wondering what could we have done better and what could we do better?  Are we optimizing for the right keywords?  Do people know to even look for applications like ours?  Are people even interested in using applications like ours?  Do we need to do more marketing around the benefits of using these kinds of applications more than the parent stories I pull together when the opportunity arises?  Should I put the money that I would be putting into SEO into paid ads on parenting related sites, Google AdWords, etc. instead?

I have pretty much come to the conclusion that I will need to continue to bootstrap Babble Soft since fundraising has been challenging given this economic environment and because we have yet to demonstrate a compelling increase in the number of our users.  I would feel much better going out to raise funds with thousands or tens of thousands of customers.

I am beginning to think that I might just have to get a job to support my entrepreneurial addiction! 😯

If you are interested in reading more about my SEO trials, tribulations, and hopefully victories think about subscribing to this blog.  If you know more about SEO than I do (which is likely), then leave a comment and share your advice with the rest of us!

I’m a Semi-Finalist for the Women 2.0 Napkin Business Challenge!
Apr 17 2008

I made it to the semi-finals for the Women 2.0 business plan competition in California for my company Babble Soft! It’s so exciting because it’s a great opportunity to meet people who ‘get’ what I’m trying to do.  People in Silicon Valley live & breathe social media and social networks which is very different than here in Texas.  The grand prize includes some money ($1500) but more importantly access to a network of people with great experience!  Here’s the email I got this morning:

Congratulations! You’ve made it to the semi-finals of Pitch 2008. This is the next step you should take.

Please log into your application via Angelsoft and upload a 2 min video pitch. Any pitches that are more than 2 mins will be disqualified.

Upload your video by Apr 20 2008, 11.59PM (PST). If we do not receive your video pitch by Apr 20 2008, you will be eliminated from the competition.

If you have already submitted a video, please ignore this message. You are only required to upload a 2 min video pitch. Do not upload any other files or presentations.

Please RSVP to this message so that we know you have received this email. Thanks.

All the Best,
Women2.0 Team

I guess my napkin handwriting skills were better than I thought! My husband, who has much better handwriting than I do, didn’t have time to help me, so I ended up doing it myself.

Now I have to submit a 2 minute video for a chance to make the finals.  I haven’t done a video pitch for Babble Soft before so I’m not exactly sure what to do.  Actually, I have never done a video pitch.  Should I be formal about it? Should I have my kids in it? Should I walk through a slide deck? Should I beg, borrow, or steal a professional to help me with it? Should I just use our digital camera and record something in our house or should I do it outside, etc., etc., etc.?!?

Help!

I’m Applying for the Women 2.0 Napkin Business Plan Competition
Apr 7 2008

I’m applying for the Women 2.0 business plan competition in California for my company Babble Soft.  Thanks to Angie Chang for leaving a comment on my recent Economy and Entrepreneurs post letting me know about it.  At the time the deadline was April 1, but they’ve since extended it to April 15.  They encourage companies located outside of California (and the Bay Area) to apply so we’ll see if they will actually select a company from l’il ‘ole Austin, Texas.

It’s a pretty short application form that challenges even the most frequent twitter user (i.e., type your thoughts in less than 140 characters) with maximum character requirements between 210 to 410 characters to describe things like your target market, business summary, or competitive advantage!  It sure made me focus on picking what I believe are the right words.  The online application form is run by Angelsoft, which I mentioned in one of my SXSW posts.

I will be submitting my application later today and then mailing in my paper napkin with my best paper napkin handwriting ability (UGH!) soon thereafter.  I might have to ask my husband to write it for me because his napkin handwriting talent is much better than mine. 🙂

Wish me luck!!

The Economy and Entrepreneurs – Hold On!
Mar 17 2008

Unless you live under a rock or don’t drive a car, you have no doubt heard about or felt the state of the US economy.  It’s in a state of well let’s say ‘confusion’ with indications it’s moving in the wrong direction.  Gas prices are at record highs, people are filing for bankruptcy, they are losing their homes, the government has a record amount of debt, the stock market is going down, etc. etc.

So where does this leave us entrepreneurs who want to raise funds to take their businesses to the next level?  Well, that’s a good question and a challenging one to answer.

I’ve had a handful of meetings with potential investors and a couple of them have expressed interest in participating, but they might change their minds given what’s going on in the economy.  As the saying goes “It’s not in the bank, until it’s in the bank!”  Fred Wilson, a venture capitalist in NYC, linked in his Read the Blogs post to a post on the Bear Stearns bailout by JP Morgan, which illustrates why even if you think it’s in the bank, it might not actually really be in the bank!  Our personal savings accounts are also going down with the market.

I had several conversations with entrepreneurs coming from different parts of the country at SXSW Interactive who have been struggling for a while to raise funds for businesses that are up and running with strong visitor and user traction.

So despite only being less than two months into the process, all of this has forced me to revaluate my fundraising plans for Babble Soft.  Entrepreneurship is not for the faint of heart as there are many ups, downs, and false starts.  The economy changes however have a huge impact on the success or failure of a startup.  If the economy is doing great you get all sorts of crazy new ideas/businesses popping up with chances to live and prove themselves.  If it’s bad, even the companies with wonderful ideas can suffer, die out, or never even get a chance to shine.

The good news is that of all the industries out there (except for maybe the alcohol industry), the baby market is fairly recession proof.   People don’t stop having babies nor do they stop buying things for their babies or things to help them take care of their babies.  The bad news is that what we are trying to do at Babble Soft does not yet have a predefined “mental need or want” (because it’s so new) like say bouncy chairs, bright/shiny toys, Baby Einstein videos, or diapers.

On the plus side, we have not taken any outside money to date so we don’t have to worry about how and when we pay investors back like some other start-up companies.  The downside is that if we don’t raise money right now, it will take longer to bring the exciting, potentially life changing vision I have to the world or worse we might miss the market opportunity.

I’m still trying to figure out the best plan of action.  I wish we had more money to create a new user experience, enhance our current applications, and create new applications ourselves.  I’m evaluating trying to raise a smaller amount of money and growing slower.  Now’s the time when the creative juices start flowing!

If you know an entrepreneur, give them a hug (if you can’t give ‘em money) because it’s going to be a tough roller coaster ride for the next probably year or so.  Some will be able to hang on and emerge stronger and better, some will get off gracefully, others might fall off unexpectedly, and yet others will wish they had fallen off before they lost their money and lost some of their sanity. 🙂

If any of you have any thoughts, advice, virtual hugs, or even questions please share below…

SXSW Interactive – Tuesday, March 11, 2008
Mar 12 2008

Yesterday was the last day of SXSW Interactive and I have practically a desk full of business cards.  Our son came yesterday (yes, it’s Spring Break here) for part of it as well but went with husband this time to a panel he attended.  I was only able to make one panel yesterday and spent the rest of the time networking.  Check out my posts on events I attended on Sunday (including my take on the Zuckerberg/facebook interview) and Monday.

Robert Scoble even did an interview of me that was posted to Qik but for some strange reason (due to the 3G connection) it got broken down to 16 different few second clips.  Here’s the first one, here’s a middle one, and here’s the last clip.  They are going to try to see if they can string it together, but it’s looking doubtful.  Guess that means we’ll have to do a more official one next time!

UPDATE: Qik was able to string pieces of the video together and you can see it HERE.  Once they get Robert’s phone, they will see if they can fill in some of the missing gaps using the files on his phone.  Once they do that, I’ll embed the video in a future blog post.

The Insiders Guide to Angel Investing
This panel was not really a panel because the only speaker was David Rose.  David is the founder of New York Angels and Angelsoft, a software application that helps angel investing groups manage plans received by entrepreneurs.  He had some great info on angels and angel investing.  He mentioned that he would make his slide-show presentation available and I will update this post if and when he sends the link, but here are some highlights:

• There are 600K new companies started each year.  Of those 350K are self-funded, 200K are funded by friends and family, 50K by Angel investors, and a mere 1200 by venture capitalists.
• Angels are generally about 57 years old, they have a master’s degree, 15 years of entrepreneurial experience, have been involved with and/or started on average 2.7 ventures.
• To be an accredited investor you must have $1 million in assets and have to have made $200K of annual revenue for the past 2 years.
• The average angel investor has spent 9 years investing, had done 10 investments, had 2 exits (profitable or lost their money), and 10% of their wealth is tied up in angel investments.
• Angels look for companies with Scalable Business Models, an “Unfair Advantage,” a Great Entrepreneur, External Validation, Low Investment Requirement, Reasonable Valuation ($1 to $3 million pre-money range),  and a 20 to 30 times return on their investment within 5 to 7 years.
• The single most important characteristic an Angel investor looks for in an entrepreneur is Integrity.  Then they look for Passion, Experience, Knowledge, Skill, Leadership, Commitment, Vision, Realism, and Coachability.

David said most angel investors don’t end up making a ton of money from angel investing.  In fact most lose money.  Many invest because they want to give back and help other entrepreneurs.  He even offered us a joke that goes like this:  How do you make a small fortune angel investing? You have to make a large fortune first! 🙂

He then went on to talk about the process of applying to an Angel network and described what the entrepreneur as well as the Angel investor sees if they are using the Angelsoft software application tool.  If you are an entrepreneur, he suggested you submit your plan at www.angelsoft.net/entrepreneurs.   They will soon be launching a site called Open Deals where entrepreneurs who don’t have access to a local angel group can submit their plan.  For a full list of angel groups, check out the Angel Capital Association site and their directory of angel groups.

All in all, I had a great time at SXSWi.  I look forward to attending next year and maybe even being a panelist!

Venture Capital Investment Competition at USC in Los Angeles
Mar 8 2008

For the past few years I have served as an Advisor to The University of Texas at Austin MBA team that competes in the Venture Capital Investment Competition (VCIC).  

It all started when I was an adjunct lecturer of entrepreneurship at UT Austin and since then I’ve continued to advise as they need me and my schedule permits.  This competition did not exist when I got my MBA, and even if I had the opportunity to participate I was too busy trying to start my first venture.  What a plus it would have been for any entrepreneur to have seen a term sheet presented by experienced investors in an academic environment rather than in real life when you feel like you have to learn another language just to understand parts of the investment terms!

This year the regional competition was held at USC in LA on March 7, 2008.  The UT team this year was comprised of:

Ben Jones – MBA 2008
Kyle Reese – MBA 2008
Rajiv Bala – MBA 2009
Ryan Sanders – MBA 2009
Scott Chiou – MBA 2009

I connect them with local venture capitalists and entrepreneurs to help them prepare but we had a late start with only about 5 weeks to get ready and midterms in between this year.  Other teams have semester long classes to prepare for this competition!

At the competition, 6 teams were given business plans for 3 real companies including NiLA, makers of environmentally friendly lighting, on Wednesday, March 5 at 5:00 pm.  They use the Internet and other relevant sources to research the companies and come up with questions for the entrepreneurs.  On Friday, they heard the entrepreneurs pitch their business concepts in front of 11 real live venture capitalists, including Aditya Mathur of Revolution Ventures, Nathan Joyner of Pacific Ridge Capital, Neal Hansch of Rustic Canyon Ventures, representatives from Tech Coast Angel Group and many more. 

They then go into little rooms and subject the entrepreneurs to answering several of the same questions over and over again from the 6 different teams.  Why would any entrepreneur do this you might wonder? Because the VCs are in the room while they are being asked the questions so they are getting exposure that they might not have had otherwise to them.

After the questioning sessions are over, the teams again regroup and come up with a PowerPoint presentation which outlines which company they would chose to invest in and why.   For the company they choose to invest in, they create a term sheet.  They present their choice in 3 minutes in front of the VCs.  The VCs then grill them for about 15 minutes on their company choice and investment terms.

At the end of the day, the judges decide who wins and who takes 2^nd place.  The 1^st and 2^nd place winners get money and the opportunity to compete in the national competition at University of North Carolina Kenan-Flagler Business School in April.  I have personally seen one student get a job on a team I advised in venture capital because of participating in this competition.

As an advisor I get to be a fly on the wall and watch the VCs deliberate and observe the decision making process.  Plus I build my network in areas outside of Austin.  Personally, I believe this experience has helped me gain better perspective on what venture capitalists are looking for which is why I’m currently seeking money from angel investors or smaller boutique/seed stage venture firms. 

So I’m sure the suspense is killing you as to whether or not our team placed and unfortunately they did not. They picked the company with the biggest market potential but with the highest risk and the VC judges picked NiLa, which has a great opportunity but less risk and less upside.  Goes to show you that most VCs are not early stage investors!

There are so many variables that go into winning from judges backgrounds, to student’s experience, to understanding of the market of the presenting companies, etc. that you can’t always prepare for everything.  But what an experience! 

Flying back to Austin today for SXSW Interactive and will post about my experience as a newbie SXSW attendee.  I’m looking forward to meeting many of the people I’ve met through blogging and twitter!

Cost of Customer Acquisition – What Is It?
Feb 18 2008

One of the interesting things about fundraising is the different perspectives you get from potential investors.  If they spend enough time to really understand what you are trying to do, they offer great feedback, suggestions, and advice.  They also sometimes ask a tough question or two.

I officially started the fundraising process a couple of weeks ago and have had a couple of meetings and a few more set up in the coming weeks.  Since many of these angel investors are really busy, getting on their calendar can take weeks!

One question I was asked had to do with the cost of customer acquisition.  It’s so hard to tell what that might be given the uncertainty and newness of many business concepts out there (including mine) today.  I searched and searched and oddly only found very dated ancient info (i.e., 1999 – 2001) figures for sites like Amazon.com.   At a high-level, the cost of customer acquisition is how much it costs to get a customer/visitor to your site.  My guess is for sites with successful viral uptake like facebook the cost is in the cents (i.e. [total marketing and some R&D costs]/number of unique visitors).  On the other hand I’ve heard that customer acquisition costs for companies like Vonage are in the hundreds of dollars.  Anyone who has seen their mailers and expensive TV commercials can see why that number is so high.  Last I heard I think it takes them at least 2 years to break-even on each customer they get.

I even had the MBA student who helped me create the financial model search his resources and no such luck.  I would be happy to get information on even what the amount that a magazine like O Magazine or Pregnancy Magazine spends getting one customer to sign up.  You’d think that as much has been written about facebook, that their cost per visitor would be somewhere on the Internet, but for some strange reason that information is not readily available.  Go figure!

In my quest, I happened upon the following links that might be useful for any other entrepreneurs looking for the same information. 

Calculating Customer Acquisition Costs  (an online calculator)

Customer Retention and Acquisition (definition and 1999 info on Amazon.com)

On Measuring The Cost of Customer Acquisition (a 1999 Entrepreneur.com article)

There may not be a satisfactory answer (or more likely I don’t have access to the money or resources to help me find it) but at least being aware that there could be an answer is probably not a bad thing.  I ended up backing into some numbers using the information in our financial model which to me, the ever optimistic entrepreneur, seemed reasonable enough. 🙂

UPDATE: This post was re-published on Found|Read here. Check it out to see additional comments by their readers.

A Story About Angels And Venture Capitalists
Feb 5 2008

Several readers who saw my Fundraising Toolkit post have asked me about my experience raising funds from angels and VCs for my first entrepreneurial endeavor.  We raised about $15 million of which $3.5 million was from angels or what I would call boutique VC firms (i.e. a group of angels under one investment roof).   Keep in mind that was all before the bubble burst back in 2001.  Here are some of my observations based on my experience and from stories I’ve heard from other entrepreneurs.

Angels

They tend to invest their own money and reputation in earlier stage companies that can benefit not only from dollars but also their advice and contacts.

The really good ones (yes, there are fallen bad ones) have built their own businesses from the ground up.  They have a great appreciation of what it takes to build a business and are creative with solutions to the inevitable unexpected issues that arise.

They tend to get their ‘hands dirty.’  Our lead angel investor for my first company was Marc Seriff, founding CTO of America Online.  You may recall that in 1999/2000 talent was scarce and the Internet bubble was close to its biggest.  Marc actually manned a career fair booth that we had at The University of Texas at Austin.  He also participated in the interview process of finding great developers!  Needless to say we found some good people.  Since Marc was our lead for our first round, he even assured our vendors that he would make sure (i.e. personally guarantee) they got paid if for some reason we couldn’t close the round!

They tend to bring their friends along for the ride.  Marc and another of our angel investors, Jack Baum, brought in their friends and contacts making the fundraising process a little bit easier.  Jack also introduced us to the owners of our very first big paying customer who ended up doing a nationwide rollout with us.  I remember framing the check! He and his partner Steve Winter brought in two of our three venture investors.  The two good ones!  Steve even served as our interim-CEO between the time we parted ways with the first CEO we hired to replace me until we found the next one.

They don’t necessarily have to invest money to be an angel.  Richard Benkendorf was one of our advisors who introduced us to our first key customer in the Coca-Cola bottling system that helped us achieve our first $1 million in revenue!  We framed that check too!

When the dollars needed get big for future financing rounds, angel investors usually voluntarily step back or can’t provide the needed growth capital.

Some of them may not have sat on a Board or been involved in building their own businesses making some board meetings interesting to say the least.  In other words, an angel who made his/her money from their own business versus someone who came in later at Google, Microsoft, or Dell have different perspectives and experiences.

Venture Capitalists

They tend to invest in later stage companies with some revenue, product completed, and market traction.  They seem to like to come in after an initial angel round of investment (if the deal structure is not too messed up).

The really good ones (yes there are bad VCs – in case you haven’t heard) have had repeated success with other portfolio companies, have built their own businesses, and come with a big rolodex of contacts and partners to help you cross some of the early hurdles.  One of our venture investors, SAP Ventures, led by Jeff Nolan who blogs at Venture Chronicles (the only former investor I found who blogs publicly) introduced us to departments within SAP who were targeting the same customers that we were.  He also gave me a copy of The Monk and The Riddle by Randy Komisar (see below for book link) that was a great read at a time when I think he sensed I was no longer enjoying the journey.

They tend to be more bankers/financiers than operating (i.e., built their own business) people.  They tend to look at a business with a black/white eye on numbers and how fast they can get their money plus a nice return on their money out.

The good ones will often bring along investment partners in what is called a syndicate.  A few VC firms who have worked together before will join forces to fund a deal which makes life easier for the founders because they can go back to building the business versus fundraising sooner.

They seem to use and apply a formula that they have achieved financial success with before which often means replacing the founding CEO or other key founders with people they have worked with many times before.  If more often than not something has worked for them with a portfolio company in the past, they’ll apply the same logic to future deals companies.

They are investing other people’s money (i.e. their limited partner’s money – insurance companies, wealthy individuals, other corporations) and if they perform well those people will give them more money to invest.  In other words they are risking more than just their finances and reputations, they are risking other people’s finances and reputations as well.

Who To Choose?

Personally, I think it all comes down to the investor fit and the stage of the start-up game you are in.  It’s definitely better to have people who have built businesses on your side.  It’s also good to have people who have backed high-growth businesses if you plan to IPO or sell to an established business in the near future.

Most technology start-ups don’t make it big.  It’s a unique combination of talent, dedication, luck, timing, and great people that make the difference between the companies who become household names and those who shut down on the wayside or find another comfortable existence.   We often forget that it is more than OK to start a good profitable business that provides value to your local community.  If you want to play with venture capitalists, then you need to aim for the ‘household name’ category like Google or Yahoo! even if chances are high you won’t make it to an IPO.

My biggest learning was how important it was to be able to communicate with your investors openly and honestly.  Trust your gut and if they respect and trust you as a person and you respect and trust them, it will be much easier to weather the inevitable storms.  It’s easy to take money for money’s sake but in the end it can end up being more costly than what it was worth.

As Ben Yoskovitz says in his Startup CEO School of Hard Knocks post, you must have fun!  When you are no longer enjoying the journey, take a break and look around to make sure you are doing what you should be doing.  Make sure you are in the right place at the right time for yourself and don’t be afraid to make changes.

Choosing A Corporate Attorney
Jan 20 2008

Picture by Sandy Blanchard
Choosing a corporate attorney is an interesting endeavor.  I have avoided using attorney’s for Babble Soft in the past because a) they are very expensive, b) sometimes they make you feel like they need to review everything you do for fear of some horrible thing happening, and c) I wasn’t sure what I was going to do with my life what my strategic business plan was.   Since I have a new business strategy and have decided to raise funds, an attorney is a must have.

I’ve met with a couple and spoken to a few more.  The first I spoke to was the attorney at my first company and although I would love to work with her we both agreed that the firm she is at now is catered more for more established businesses (i.e., very, very expensive).   It is so much better to understand that up front because we have worked on many outside projects together, and I consider her a friend.

The second attorney I spoke to was referred by another entrepreneur in the area.  I liked her and her partner but a few things gave me pause.  One potential area of risk is the fact we might end up doing business with the other entrepreneur’s company which might result in a conflict of interest.  They had good rates and good experience but did not have an in-house tax attorney.  Since Babble Soft is currently an LLC and we’d like to continue as an LLC for at least our first round of financing, having someone who understands the tax implications could be important.

The third attorney I met had done some pro-bono work for me a year or so ago because I guess he knew I couldn’t afford his services at the time.  What I liked about him is that he does have a tax attorney in his firm, has represented several small companies in the technology space, one of my business Advisor’s has worked with him in the past, he was on time for our meeting, said he could help with introductions to potential investors, and he sent a brief follow-up note after our meeting expressing his interest in working with me.  However, his rate is $125/hour more than the attorneys at the second firm I spoke with!

Special thanks to @princess_belle who blogs at GloKay, @chelpixie who blogs at Chelpixie.com, and LPT who blogs at Direct2Dell who tweeted me things to think about and questions to ask the attorneys.  I plan on making a decision in the next couple of weeks so if you have attorney stories or suggestions to share with me or the blogosphere, please leave a comment.  Thank you!

My Fundraising Toolkit
Jan 10 2008

Following on my Other People’s Money – The Hunt Begins post, I thought it might be interesting to share what I will be putting in my Fundraising Toolkit.  Check out The Entrepreneurial 7 Year Itch to get some additional background.

I plan to raise seed financing from angel investors for Babble Soft, and here’s what I will have in my toolkit.

An Executive Summary.  Thankfully people have moved away from the 35 to 40 page business plans that used to be required when I raised money for my first company.  Now it’s easier to get your foot in the door with a 5 to 7 page summary.   If they are interested, they will ask for additional information.  In a typical Executive Summary you will see sections on: 

• The Company
• The Problem
• The Solution (i.e., Your Products)
• The Market (including Competitors)
• The People
• The Numbers (i.e., the Financial Projections).

Financial Projections.  In my opinion, creating Financial Projections for an Internet startup is often an exercise in futility that shows you have an idea of how you will make money.  Most experienced technology investors know that predicting the future is a crazy process at best especially when you are starting from ground zero and success primarily depends on many viral factors.  Financial projections for IBM are much different than financial projections for an Internet start-up.  The assumptions you make are the most important part of the model as they give the investor an idea of the homework you have done on the market. 

Some venture capitalists like high profile Fred Wilson (a.k.a. A VC in NYC) of Union Square Ventures go as far to say that sometimes you can wait to scale before figuring out and executing your business model when describing his stance on Twitter’s lack of a current business model. 

Since Babble Soft is not Twitter, I’m not already a gazillionaire, and I have a million things to do, I have a sharp MBA student, Anand Balasubramanian, helping me create an Advertising and Subscription based model.  I love energetic, rock star, cheap, student help!  He has done a great job so far building a simple, easy to understand financial model for me.

Visuals.  Since I’ll be raising funds for products that do not exist yet, I have engaged a great local design, user experience, and information architecture firm, Projekt202, to create a few mock-up pages illustrating both the web and mobile components of our new applications.  They seem as excited about the vision as I am and are taking on some of the financial risk with me.  It makes me so happy when I find people who get what I’m trying to do!  I’ll also have a demo account of Baby Insights and Baby Say Cheese ready to log in to demonstrate our existing applications.

An Investor Leads List.  However you choose to keep track of your calls, meetings, and referrals it’s important to do so.  I have met entrepreneurs who want to raise funds who aren’t organized about the process and end up looking a bit flighty.   Unfortunately the investors are allowed to be flighty but they usually don’t tolerate too much flightiness in entrepreneurs.  Remember:  “She who has the gold makes the rules.”  After a while it’s easy to forget what you promised to get to whom and who referred you to whom.  It’s important to remember at what stage of the investing dance you are in with each potential investor.  On this spreadsheet I plan to keep track of:

• Name
• Contact Information
• Professional Background
• Who Referred Them to Me
• Investment History
• Typical Investment Size
• What Items They Need From Me, and
• Personal Assessment on the likelihood they will invest. 

Passion Tempered With Wits.  I think that often the big thing that can swing an investor, especially an angel investor who has been in your shoes before when building his/her company is your passion.   Why are you doing this when there are much easier ways to make a buck?  What will keep you going?  What excites you about the business?  I am passionate about helping new parents and caregivers connect and find answers.  I am passionate about building a business.   I am passionate about finding great people to work with.   If that passion is tempered with some logical thinking, that’s a big huge ‘ole plus!  All of us entrepreneurs are a bit crazy at times so I just hope I don’t lose my wits in the middle of an investor pitch!

Since I am still working on everything above except for my passion which has recently been reignited, I’ve got a lot to do before the meetings I already have set up with potential investors in the next couple of months.  If you have suggestions on other things I should have in my fundraising toolkit, let me know by leaving a comment below.  It’s been a while since I have raised money and I’m always open to learning new things.

Join me for the journey.  Subscribe to the blog and hold on to your stomachs, it’s bound to be a scary roller coaster ride at times!

UPDATE Jan 12, 2007:  Found|Read republished this very post  on their blog and called it My Funding Toolkit.  Check out that post for some great comments!  They have many more readers than my blog currently does so I’m delighted that they chose to share it with their readers!

Other People’s Money (OPM) – The Hunt Begins
Jan 4 2008

If you are a regular reader of my blog you have no doubt caught on to the fact that I have begun the fundraising effort for Babble Soft.  If you are new you might want to check out The Entrepreneurial 7 Year Itch to get some background.

I’m currently working on creating a business plan comprehensive executive summary (who has time to write read a 30-50 page business plan?!?), the financial assumptions and projections (with assistance from an MBA student), creating screen mock-ups of our new applications (with Projekt202, a fabulous local design company), and setting up meetings with potential angel investors.  This process is an ongoing, reiterative process that can sometimes make you want to pull your hair out.  As soon as you type the last character on your plan, it is outdated because something has changed somewhere that you may or may not know about.  Strange but true.

While doing all that, I also need to finish software testing of our new Baby Insights mobile application, learn more social media, make SEO changes, make sales, establish partnerships, and make progress toward meeting my 2008 New Year’s Goals!  Hmmm something might have to give here…

Stay tuned for more about my journey to persuade people to part with their money in exchange for hopefully a lot more money at some time in the future…

Is Software Hard or Soft? Please Tell Me.
Dec 21 2007

I’ve seen companies doing soft launches of software products which makes me wonder what a hard launch is.  So far the main difference I’ve noticed is that the official press release about the new application or new feature doesn’t go out until after the ‘hard’ launch.  My guess is that a lot of bug fixing is going on between soft and hard launch.

So, I’m happy/thrilled/ecstatic to report that we just soft launched our new sleep and immunization recording features of Baby Insights Web!  We are still working on some development issues on Baby Insights Mobile and plan to hard launch that app in January 2008.  The mobile app is not web-based (yet) so we don’t have the luxury of a soft launch.

Babble Soft is offering FREE 3 month gift subscriptions valued at $19.95 until March 15, 2007 to anyone who discovers a software bug in our NEW Baby Sleep and Immunization features of Baby Insights Web. Gifts are transferrable!  Sign up for your FREE account today. Happy hunting!

So far the soft launch has been uneventful (i.e., no major bugs), which is nice.  Thanks go out to our development team Cressanda and especially our project manager.  I recommend them highly.  The smoothness of the soft launch is also because we don’t have thousands upon thousands hundreds upon hundreds of users yet.  I’m banking on our foray into SEO to help get us there.  I mean if the “right people” (a.k.a. target market) don’t know we exist; it’s not surprising that we don’t have thousands of users yet.  Even viral marketing takes a bunch of upfront work because you have to get to the right early adopters who have major Internet influence.  I need to figure out how to do a video and get it in YouTube.

Given the fact that over 4 million babies are born in the US each year then include Australia, Canada, Europe, Japan and other Internet savvy countries, I’m anticipating that once those new parents and nannies find out about us, the floodgates will open.  Babies and floodgates…not sure if the analogy works but I think you get the point. 🙂

I’ve been spending my time the last couple of days doing website updates to reflect the new features. And I’m working on pulling the pieces together of a business plan for some potential angel investor meetings that I have scheduled for early next year.  If you know an angel investor (or you happen to be one) who likes the baby/new parent/web application/social networking space, please send them my way!  The applications we have now are only the tip of the colossal iceberg.

Now for a short SEO break:

Whether you need breastfeeding support, are excitedly following your pregnancy week by week,  are experiencing baby sleep issues, or are already under way creating your baby’s first year album, Babble Soft offers unique, easy-to-use Web and Mobile software solutions that improve communication between caregivers about baby’s and mom’s schedules.

Baby Insights helps caregivers keep track of baby’s breast & bottle feeding, sleep periods, diaper changes, medicine doses, and immunization records, as well as mom’s breastfeeding, pumping and medicine intake. Having important information stored in one location makes communication between parents, their nanny, babysitters, grandparents, or doctors seamless and reliable and gives new parents insight into their baby’s patterns to help with crucial baby care decisions. Baby Say Cheese lets you create a wonderful online baby’s first year photo album with milestones and family tree that you can share with friends and family. 

If you are interested in reading about how I cope with manage software launches, fundraising, and SEO consider subscribing to this blog’s feed.  If you are an entrepreneur, it will be worth your while…even if I crash and burn….which I won’t…because I said so, that’s why.   Now go play with your Power Rangers.  Sigh.

The Entrepreneurial 7 Year Itch
Dec 16 2007

Picture by Sandy Blanchard

As I contemplate a plan to raise angel financing for Babble Soft in 2008, I have begun mentally preparing myself for the inevitable ups and downs of the process.  I have raised funds to the tune of $15 million as founding CEO of my first start-up, Isochron, back before the first Internet bubble burst, so I have that experience to leverage.  But that was just over 7 years ago and a lot has changed since then. 

Isochron, which we started as part of a business plan competition back in 1997, was sold in 2002 after the bubble burst.  I had already left in 2001, but Erin stayed on for two more years until 2003.  The Founders/employees were washed out (i.e., got nothing) and the Investors got only a small fraction of their invested capital back.  At that time many companies were just disappearing all together.  When it was sold, Isochron was on its 4^th CEO with me being the first.   Now it’s on its 5^th, is still operating and as I understand it doing reasonably well, but not the high growth trajectory we had hoped for back when we started.  Looking back, if we (and our investors) had truly understood Porter’s 5 Forces we would have approached the business differently or maybe even run the other way because with a customer like Coca-Cola you don’t have much negotiating power!  But hey, we were young entrepreneurs (I was 27 – what did I know? ) who felt we could conquer the world of distribution to and maintenance of vending machines and other equipment after that.  Mostly because we were tired of going to school vending machines and them being out of stock of what we wanted so we figured we could help sove that problem with creative technology.

Since then, I have taken time to decompress, teach entrepreneurship at the University of Texas at Austin business school, have two amazing kids, consult, and dabble with the notion of Babble Soft.  Erin and I did some development and had a beta product ready in 2005 to use when our daughter was born, but it really wasn’t until 2007 when we launched our Web application and she started full time care, that I became serious about committing to the bigger vision of Babble Soft.  I quit straddling the mental fence probably around October of 2007 and jumped squarely onto the side of the fence that has a vast open field with mountains, land mines, cool rivers, placid lakes, tornados, sunny skies, rainy days, ego bruises, good decisions, bad decisions, no money, fun, and most importantly a yet to be discovered journey!

After Isochron, I didn’t think I’d ever want to do a tech startup again.  It was hard.  It was tiring.  I aged.  It was stressful.  I was disillusioned.  It didn’t end like I had hoped/planned it would.  But if you read my Entrepreneurial Self Portrait, you’ll see that I since discovered that it is in my blood.  Looking back, I wouldn’t trade the experience and lessons learned for anything!

Do I wish I had made the decision earlier to dive head first into Babble Soft or another tech company?  Sometimes, because I spent money on the wrong things due to not being focused/committed, which leaves us less money to spend now and means I have to raise funds sooner than  I might have had to.  But I know deep down I will not regret the decision I made to stay home with my kids when they were babies, work from home, and maintain a fairly flexible schedule for them.   So maybe now’s the right time to really scratch my 7 year entrepreneurial itch! 🙂  This time I want to make sure I laugh a lot more…which is not hard to do with little kids around.

Stay tuned for more stories about my start-up journey.  Next up in this series will be a subjective post on the pros and cons of raising outside capital.

If you are interested in reading ‘the rest of the story,’ you might consider subscribing to this blog’s feed (tell your friends too) so you won’t miss a thing!  Even if you just can’t bring yourself to subscribe right now because you have a boulder on your head, would you mind helping me increase my chances at winning $50K from Intuit in their Just Start competition by clicking on the Quickbooks widget on the top right hand side of my blog or clicking here.  Thank you!

Search Engine Optimization (SEO) – Yikes!
Dec 4 2007

I have never done any active SEO work for Babble Soft or this blog, but now the time has come to do some.  With the pending release of two new features to Baby Insights and my plan to raise angel money in 2008, I need to make sure people (our potential customers) can actually find us. 

We have unique products that sometimes people don’t even know they need until they see them.  How does a couple in their 8^th month of pregnancy with their first child even have a clue about all the things they will need/want to remember after their baby arrives?  They typically don’t!  Many people still don’t think applications like ours exist.  Right now we average less than 50 unique visitors to the Babble Soft website per day. I get more visits to my blog and from the cats in my neighborhood than to the company site!

Any links we have are because of luck, the kindness of friends & strangers, or links from our Partners.  We have had some press mentions but it seems like the online press has a moratorium on putting actual active hyperlinks in their articles for some reason.  I mean how insanely crazy is it to let your readers easily go to the sites of the companies/people you are writing about?  Ugh!  I guess they think it would be a bad thing to drive traffic away from their site?  I haven’t figured that one out yet.  Thank goodness for blog writers who don’t have those rules!

Based on an easy to understand post by The Karcher Group called Should You Hire an SEO Firm, or an SEO Consultant, it seems my options are:

1. Do it ALL myself.  At the moment, I can’t do this physically because there aren’t enough hours in the day.  Plus I am not an expert in this area.  This is the cheapest option when it comes to dollars but the most expensive when it comes to my time allocation and sanity.
2. Find a consultant who can tell me what to do.  See above comments for Option 1.  Unfortunately, I can’t clone myself and have my clone work for free also and implement what the consultant tells me to implement. 🙂
3. Find a one man/woman shop.  This is a possibility, but how do I find that one person who can put a comprehensive SEO plan into place?
4. Find a full service SEO firm.  This is also a possibility (with cost being a big factor).  The challenge is to find the right firm who is willing to work ‘flexibly and creatively’ with a small self-funded company.

This is a critical decision on many levels.  I can’t afford a mistake in this area especially since I’m leaning towards option 3 or 4.  This means I will have to take a calculated risk and place a bet on an individual or a firm that after a few months of hard work and payments, will start to pay off.  I have to part with precious cash up front for the hope of having it all come back to me and then some!

If any of you have gone through this process, I’d love to hear about the things you considered.  What questions did you ask?  What did you do on your own?  What did a firm do for you?