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Here was a great discussion that I read on the OKDork.com blog. It is about starting locally versus national. This has direct relevance to the iRent2u launch.

There is one point I want to make in response to the views below. There are comments pointing to the fact that many of these companies came out of tech friendly areas, but I think a point they are missing is that these are also capital rich areas, meaning they have lot of investment money. I also think this has great impact on the success of these companies.

Post Found here:

http://okdork.com/2007/06/05/every-major-web-company-started/

Post Starts here:

Every Major web company started… Local. Think about it?

* Myspace started with parties in Los Angeles.

* Google had the tech geeks from the Valley all over it.

* Facebook was Harvard.

* Wordpress was Texas.

Now when you think oh man we should start nationally, think twice.

Any other examples?

* This is especially when you have limited funds. If youridea has real legs it will grow based on being successful locally and will make it easier for you to raise additional funds if needed. Get on base and grow.

* The majority of artists on http://www.indiefy.com are local. Would I like to have national exposure?…yes, but you can’t beat face-to-face communication with bands in the area. 80% of the artists signed up because of a local referral by a friend.

* Don’t forget AOL was all over Dulles, Virginia (I know, where the hell is that right?)

* Yahoo was StanfordCraigslist, eBay and Yelp were SF

Napster was Northeastern U.

Digg, Friendster, and Meebo had the tech geeks from the Valley all over it.

Skype had the oversee asians all over it.

I think all of them have two things in common–Geeks and Hipsters/Trend Setters

Any idea how YouTube got started?

* I think where is got started is not same thing as the target market.
“Start nationally” sounds like you are talking about launching nationwide.

The real point is don’t go nationwide (ads? Marketing..ect) if your
best friends and family can not even use the services. Successful
companies are started to fill a local need i.e without greed of taking
over the world.

* If you think of it, it’s not weird that things happen like that: most of these companies got their momentum from word-of-mouth, which is a local phenomenon. Although it has a scaling advantage, in the beginning web works the same as brick&mortar companies like starbucks did; you need to build a critical mass, which is easiest done locally.

* I can relate to this. I started a small social networking site and tried to go national from day one. It wasn’t until I realized that half of my users were Stanford grads from the Bay Area that I stopped focusing on national reach and focused instead on going deeper in the region where my users already seemed to be.I think the reason is simple — it’s a lot easier to get word of mouth to happen in a geographically dense area. It’s also easier to understand how those in your home geo behave.

* Good point on Starbucks with their Seattle roots. I doubt they would have done as well starting in Wyoming.

* So is it just really hard to start a LOCAL tech company outside of SFI know that some of the PayPal folks think the next huge company will come from the Palo Alto/Mountain View area (they used statistics, of course).

Pretty much all of the companies mentioned in the post started in tech-friendly areas, even if all of them weren’t started in California.

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Of course, we don’t have the pull that Guy has, but still…

How I built a Web 2.0, User-Generated Content, Citizen Journalism, Long-Tail, Social Media Site for $12,107.09

June 03, 2007
By the Numbers: How I built a Web 2.0, User-Generated Content, Citizen Journalism, Long-Tail, Social Media Site for $12,107.09Because of Truemors, I’ve learned a lot about launching a company in these “Web 2.0” times. Here’s quick overview “by the numbers.”

0. I wrote 0 business plans for it. The plan is simple: Get a site launched in a few months, see if people like it, and sell ads and sponsorships (or not).

0. I pitched 0 venture capitalists to fund it. Life is simple when you can launch a company with a credit-card level debt.
7.5. 7.5 weeks went by from the time I registered the domain truemors.com to the site going live. Life is also good because of open source and Word Press.
$4,500. The total software development cost was $4,500. The guys at Electric Pulp did the work. Honestly, I wasn’t a believer in remote teams trying to work together on version 1 of a product, but Electric Pulp changed my mind.
$4,824.14. The total cost of the legal fees was $4,824.14. I could have used my uncle the divorce lawyer and saved a few bucks, but that would have been short sighted if Truemors ever becomes worth something.

$399. I paid LogoWorks $399 to design the logo. Of course, this was before HP bought the company. Not sure what it would charge now.
$1,115.05. I spent $1,115.05 registering domains. I could have used GoDaddy and done it a lot cheaper, but I was too stupid and lazy.

55. I registered 55 domains (for example, truemors.net, .de, .biz, truemours, etc, etc). I had no idea that one had to buy so many domains to truly “surround” the one you use. Yes, I could have registered fewer and spent less, but who cares about saving a few hundred bucks compared to the cost of legal action to get a domain away from a squatter if Truemors is successful?

$12,107.09. In total, I spent $12,107.09 to launch Truemors. During the dotcom days, entrepreneurs had to raise $5 million to try stupid ideas. Now I’ve proven that you can do it for $12,107.09.

1.5. There are 1.5 full-time equivalent employees at Truemors. For me, it’s a labor of love.

3. TechCrunch wrote about Truemors 3 times: the leak, the leak with a screen shot, and the opening. I wish I could tell you I was so sly as to plan this. Michael Arrington thought he was sticking it to me. Don’t stop, Michael!

261,214. Much to my amazement, there were 261,214 page views on the first day.
14,052. Much to my amazement, there were 14,052 visitors on the first day.
$0. I spend $0 on marketing to launch Truemors.
24. However, I did spend 24 years of schmoozing and “paying it forward” to get to the point where I could spend $0 to launch a company. Many bloggers got bent out of shape: “The only reason Truemors is getting so much coverage is that it’s Guy’s site.” To which my response is, “You have a firm grasp of the obvious.”
405. Because some people had nothing better to do, there were 405 posts on the first day.
218. We deleted 218 of the 405 posts because they were junk, spam, inappropriate, or just plain stupid. Interestingly, half the bloggers complained the site was full of junk. The other half complained that I was deleting posts. 3. A mere 3 hours went by before the site was hacked, and we had to shut it down temporarily. I was impressed. The hacker who did this might be the next Woz. Please contact me if you are.
36. A mere 36 hours went by before Yahoo! Small Business told us that we were inappropriate for this service because of our traffic.

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$29.96. Our monthly break-even point was $29.96 with Yahoo!
$150. Because Yahoo! evicted us, our monthly break-even point quintupled to $150. If you’re interested in buying a monthly sponsorship for $151, you’d make Truemors profitable. 2. A mere 2 days went by before Truemors was called the “worst website ever” by the Inquirer.
246,210. Thank you God for the Inquirer because it caused 246,210 page views. Yes indeed, there’s no such thing as bad PR.
150. A week before we launched, if you typed “truemors” into Google, you would have gotten 150 hits.
315,000. Eleven days after the launch, “truemors” had 315,000 hits in Google. I can’t figure out how this can be, but I’m not arguing.
4. I learned four lessons launching Truemors:

There’s really no such thing as bad PR.

$12,000 goes a very long way these days.

You can work with a team that is thousands of miles away.

Life is good for entrepreneurs these days.

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Popularity: 8% [?]

Just read a very interesting article about niche marketing, where they say that you can market niche and still reap mass market profits, even more. This is very relevant because iRent2u is about to launch and we are constantly looking at how to do this launch. Everything I read tells me I need to launch niche and narrowly defined markets, but it is tough since our Ebay model is really relevant to a broad generic launch.

Article was found here:

http://adage.com/cmostrategy/article?article_id=117005

Article begins here:

Advertising Age - CMO Strategy - Today’s Niche Marketing Is All About Narrow, Not Small

Today’s Niche Marketing Is All About Narrow, Not Small
Big Impact: The Brands That Will Survive in the New Economy Will Give Up Illusions of MassivenessBy Marsha Lindsay

Published: June 04, 2007
The evolution of our mature marketplace, along with the technology that allows consumers to be in control, has created a seismic shift from one-size-fits-all mass markets to millions of markets of self interest. All mature markets inevitably evolve into this kind of economy, driven by ever-narrower markets of desire and ever-narrower facets of individual self-identities.
Nichecraft: American Girl is one marketer that already gets that ‘niching’ is the competitive strategy of the day. Its business objectives: improved share, margins and profits; faster growth; and the higher turns demanded by investors.
Nichecraft: American Girl is one marketer that already gets that ‘niching’ is the competitive strategy of the day. Its business objectives: improved share, margins and profits; faster growth; and the higher turns demanded by investors.
Photo Credit: Kate Lilienthal

Booz Allen Hamilton explains why: As every market matures, choice increases. Then competition drives up quality and convenience to the point at which offerings become commoditized. The only businesses that then thrive are those that move beyond “me-too” or incremental offerings to marketing more-relevant and more-differentiated products and services. The only way to accomplish this is to focus on a narrower target.

Tech help
Of course, narrower targeting is not a new concept. But today, technology encourages and enables it. Marketers are empowered by more-detailed consumer data, able to micro-target messages, interactively engage consumers with a whole new level of intimacy and frequency, and customize to consumer specs with small-batch manufacturing and new distribution options.

This evolution has brought about a revolution in the economic model we’re all working in regardless of the category in which we compete. As Best Buy, Intuit, Sundance Cinema, Method and others are proving, the really stunning nature of this new economy is how nonmass markets now rival or exceed mass markets in their economic potential.

How do Booz Allen, The Economist, academics and even the popular press now refer to this permanent economic shift in brand strategy? They call it niche marketing. “Niche” is derived from the Latin word for “nest.” The inference of marketing as something that helps individuals feel snug and in harmony with their self concept is the antithesis of the old economy’s marketing to the lowest common denominator.

Today, niche also means something different from marketing segmentation. While segmentation looks for similarities among a diverse group, niching looks for differences within a similar group. It then finds opportunities to customize products and services to the narrow interests of each niche. In this way, nichemanship is a complement to segmentation. In fact, you could call it optimized segmentation.

The smallest nest
The brands that will survive and thrive in the new economy will be those that give up illusions of massiveness and figure out how to excel at attracting and keeping loyal as narrowly focused a niche as is economically feasible.

It’s not just that technology enables and requires it. It’s because consumers who have experienced ever-greater levels of having their self-interests met by a niche provider never again settle for anything less. (You know mass marketing has heard its death knell when even a senior Wal-Mart official admits that “no customer today will stand to be treated as part of a mass market anymore.”)

That’s why, no matter what category you’re in, the future of marketing is niche marketing. It cannot be stereotyped as irrelevant.

In fact, those who ignore niche marketing will experience loss of share, margin and profitability; their value propositions simply will be less relevant than those of competitors. For those slow to adopt niche marketing, the future also is bleak. Attempts to recoup share will be difficult because competitors will have preemptively established closer customer relationships.

Turtles finish last
It’s pure survival of the fittest — but with technology such as DVRs and the world “live” web it will feel like economic Darwinism at the speed of light. The only marketers that survive and thrive will be those that quickly embrace the principles of this new economy’s nichecraft.
Photo Credit: Chuck Berman

Of course, an impressive list of brands in every category of business already get that “niching” is the competitive strategy of the day. These include PepsiCo, Kohler, Hallmark, Crocs, Annie’s Homegrown, Red Bull, American Girl, Clorox, University Islamic Bank, Shouldice Hospital, Fair Indigo, Unilever’s Axe, Target, Crate & Barrel and Hewlett-Packard.

All these companies — from legacy brands to start-ups — have the same business objectives: improved share, margins and profits; faster growth; and the ever-higher returns demanded by investors. That they are turning to niche marketing to deliver on these objectives should tell you one very important thing: They believe that the mature marketplace and resulting new economic model require new means of achieving the universal goals of all business.

While the classic definition of niche marketing — the targeting of a more narrowly defined customer group seeking a distinctive mix of benefits — still rings true, it no longer implies what it did five or ten years ago: A small, low-volume, erratic market opportunity that is transactional, likely unsustainable and unscalable — a course taken by less sophisticated businesses.

In contrast, the new meaning of niche marketing is quite positive. The Economist argues that the very definition of a flourishing economy today is one rich with niches.

Glut of niches
There are many reasons for this esteem, the first of which is that a niche’s size no longer has the same limitations of magnitude as in the past. In fact, today niches come in many sizes. Yes, some are small, like those described in Chris Anderson’s “The Long Tail.” But many can be quite large, like the million-customer “mega niche” described in a recent Wired magazine feature. Especially heartening is that many niche brands already represent hundreds of millions in annual sales. Some niches target a narrow interest that becomes the next big trend, disrupting a whole category. Target, Starbucks and Apple, when they started, were all believed to target a narrow passion of seemingly limited potential.

So rather than equating niche with “small,” think “narrow.” As in narrowly targeting a group whose self interest/self concept is so clear that a marketer can offer something ultrarelevant and vastly different from alternatives. Then the scarcity principle allows the marketer to charge a premium, reaping higher margins.

When you expand the relevance and differentiation to multiple products and services (even information, experiences, networking and more), you gain share of wallet and can experience volume and growth that makes up for the narrowness of the target.

Offerings that resonate with the target for which there are few alternatives create a loyal customer base with all the benefits: more predictable revenue streams, lifetime value and word-of-mouth advocacy on your behalf. This, along with consumer-generated content and online communities, create marketing efficiencies that further drive growth and profitability.

In all these ways, the value of niche marketing today is so different from the old stereotype of a marginal business opportunity. Some of its best practices have changed as well.
Marcia Lindsay is CEO of Lindsay, Stone & Briggs, a marketing-communications agency based in Madison, Wis., that hosts the annual Brandworks University, held this year June 5-6. This year’s topic: ‘Why and how to harness the new niche marketing.’
Marcia Lindsay is CEO of Lindsay, Stone & Briggs, a marketing-communications agency based in Madison, Wis., that hosts the annual Brandworks University, held this year June 5-6. This year’s topic: ‘Why and how to harness the new niche marketing.’

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Smaller targets, larger focus
Ten years ago, the medium was still the message. Eight years ago, we could still think of the 4P’s — product, pricing, place, promotion — as essentially independent strategies. Five years ago, everyone started to buzz about customer-relationship marketing. About two years ago, we got really excited about digital-marketing tactics and started to apply them without any real strategic purpose. All this has changed.

So what’s really new about the new niche marketing? It’s realizing that while our targets have to narrow, our definition of marketing communications has to broaden. Today, everything communicates what a brand stands for, all the time.

It’s like the old saying: If you are on the wrong train to begin with, every stop along the way is the wrong stop.

So how do you get on the right train? Ask the niche for directions.
Niching now
To harness the power of niche marketing to achieve your business objectives in the new economy, follow these principles:

1. Position your brand as narrowly as is economically possible.
2. Become the specialist that anticipates the needs of your target.
3. Rapidly work with the target niche to co-innovate.
4. Set as your goal such consumer centricity that the target niche will want to co-brand their identity with yours.
5. Live by a higher standard of ethics.
6. Embrace a business model and metrics that grow the most valuable assets of the new niched economy.
7. Reap first-mover advantage by learning how to identify a niche of opportunity.
8. Re-imagine your role as that of entrepreneurial founder of a special interest group.
9. Forget push marketing; excel at pull marketing.
10. Realize your brand is now “media” competing against all other media.

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Here is a great note from Pamela Slim in her Escape From Cubicle Nation blog. It focuses on the need to monitor your competition, but not to use it as a way to create your own strategy. Instead of constantly trying to beat your competition through imitation and monitoring them, it is often better to use them as a reference but create your own strategy based on differentiation.

Post was found here:

http://www.escapefromcubiclenation.com/get_a_life_blog/2007/05/obsession_with_.html

Post starts here:

Obsession with the competition is a luxury of the over-funded

Any business-minded consultant or entrepreneur will tell you that you need to know about your competition. It is an important part of understanding your market and differentiating yourself from the rest of the herd.
But some business owners get so focused on every move a competitor makes that they completely lose focus on their own business. At the extreme, it is not only distracting, it is downright self-destructive.

I lived through an example of this working with a very talented artist and dance instructor in the 1990s. He was creatively brilliant and a gifted teacher. But he was completely obsessed with other instructors in the area and would fly into a rage if a student from his school left to join another school. At a certain point, he was as focused on studying, subverting and badmouthing the competition as he was on creating new art and building his own school.

I learned a number of lessons from this experience, and many others like it, working with entrepreneurs:

• When you shift focus from understanding who your competitors are to spending half your time thinking about them, you have ceded your own power. In essence, you are choosing the role of follower and not leader. Instead of obsessing over what they are doing, focus on what is exciting, special, unique and revolutionary about your own business.
• No matter how much expertise and experience you have, if your market is worth operating in, there will always be a worthy competitor. Rather than fight it, constantly look for ways that you can reshape and refine your business to match your greatest strengths and better serve your customers. If you find that there is nowhere to grow or innovate, maybe you are operating in an overripe market and should look for a new one to play in.
• No matter how secure you feel, a competitor will come along that pushes a personal button because they are smarter, younger, richer, better looking or more charismatic than you are. This is where you have a chance to put into practice what they say about the best lovers: They are most often not the suave and good-looking sports all-stars, they are the quiet, unassuming, average looking people who develop their “skills” based on reading and responding to the needs of their object of affection. Don’t let your own insecurities run away from you and cloud your business judgment. Celebrate your unique strengths and know that you are perfect just the way you are.
• Coercing customers to stay with you based on badmouthing competitors will always backfire. People like to feel they are free to make a choice about where to spend their time and money. And like a first date with a man that spews venom about his ex-wife, they will wonder how long it will take before you start spewing your venom at them. The more open and secure you are about your own business, the more secure your customers will feel with you and more likely they will stick around. Remember, if you truly want to serve your customers, you have to realize that at certain times your competitors may be a better fit. As Sting says, “When you love someone, set them free.”
• There will be times when a competitor does something that feels unethical or mean or just plain shifty. If it directly impacts your business or reputation, you must address the issue quickly and appropriately. But once it is handled, go back to focusing on the needs of your customers. If it involves legal matters, you must weigh carefully the return on investment of your time, energy and money to resolve the issue in the courts. Play out the two scenarios: if you win, will it make your business stronger and better able to serve the needs of your customers? If you lose, will you have a business to salvage? I think we often engage in legal battle more to punish the offending person rather than to achieve a desired business outcome. Don’t worry about punishment … karma takes care of that for you.
• There is nothing wrong with competition — it is all how you react to it. A business building reaction to a strong competitor would be thinking “So you want to amp up this game? Bring it on bucko, I can handle anything you throw my way.” A business destroying reaction to a strong competitor would be: “No one does that to me and gets away with it. I will crush you and everyone who supports you to prove that I am the best.”

If you are Intel, you may have an army of lawyers and consultants to track and monitor every move AMD makes. If you operate in a niche desired by Larry Ellison, you should watch your back, as you never know when he will feel like flattening your business by landing on it with one of his noisy jets.

But if you are Jane the Dog Walker with a small practice in Boise, Idaho, or Matthew the Marketing Genius in Boston, Massachusetts, your real focus should be on studying and understanding the feelings, aspirations, problems and desires of your target audience. When you do this, you will naturally grow your business in the right direction, and serve your people in a way that makes them feel truly special. And you will enjoy your life a whole lot more.

Popularity: 11% [?]

This is an interesting article about choosing your perspective correctly when you begin your marketing campaign. This is totally relevent to us as we try and figure out how we are going to market iRent2u.com. Are we marketing to the few, or the most. According to this article it would appear our service needs everyone to use it for it to work, like eBay. But I think in this circumstance we are probably different from eBay. We dont need everyone in the country to use it, only the majority of people in a specific geographic area.
But at least in that area, we do need many people using the site to make it truly effective. In that case then it appears our strategy needs to be, according to this article, to be exceptional first of all. Then after standing out we need to amplify the excitement of the few and make it easy for them to spread the story to the caring majority.

Does this make sense for iRent2u.com?

Article Found Here:

http://sethgodin.typepad.com/seths_blog/2007/05/one_a_few_most_.html
Article Starts Here:

There are four kinds of marketing situations, and the approach to each is radically different. Yet most of the time, we lump them together as just plain ‘marketing’.

If you are trying to sell a house or fill a job, you only need to persuade one person.

If you want to make your book sell a bunch of copies, your restaurant to be filled on Saturday night or your coaching practice to have a full schedule, you need to sell a few people.

On the other hand, viral bestsellers, killer websites and essential conferences hit their stride when most people in a marketplace have been converted. You can’t get elected President (most years, anyway) without persuading most of the people who vote.

Lastly, when the market is defined right, there are situation in which you need to persuade all of the people involved. If you need 51 Senators to agree with you on a bill, or if you need the purchasing committee at a big company to buy your software, then you need a unanimous decision.

This four-way distinction is important for two reasons. First, because you often have a choice. You can choose which approach your venture will take on its way to accomplishing its goals. Gandhi didn’t need most of the people to change India, he instead relied on a smaller few, but with more passion than most politicians are able to generate.

You could, for example, plan a business that works once almost everyone adopts it (like eBay) or you could alter the business so it works just fine if a much smaller universe of people embrace it (like threadless). Worth noting that neither business would work if just a few people showed up. 37Signals has done a great job of designing web products that only need to be sold to a few people, and then those people do the hard work of getting everyone in their organization to use them.

Here’s a quick list of how the four differ:

ONE: You’re a needle, the market is a haystack. Make your needle as sharp as you can, put it in as many haystacks as you can afford. Alternatively, you’ve already decided on your one (the date for the prom or the perfect job). In that case, throw the haystack out and engage in a custom, one-on-one patient effort to tell your story to the person who needs to hear it.

A FEW: Being exceptional matters most. Stand out, don’t fit in. Shun the non-believers.

MOST: Amplify the excitement of the few and make it easy for them to spread the story to the caring majority.

ALL: Compromise. You need to be many things to many people, embraced by the passionate but not offensive to the masses. Sooner or later, the issue for the reluctant part of the buyer community is that it becomes more expensive/risky to stand in the way of the group than it is to go along.

Blogs, for now, are almost always about the few. Google and Starbucks and the iPod are exciting stories because they’ve moved from the few to the most. The most important industry trade shows make huge profits because they’ve transitioned to the all.

Choose wisely, and realize that as you succeed, the game will change.

Popularity: 7% [?]

Just a quick reminder of the reality behind starting a company. You need to be dedicated to stick with it for more than a short while, and you have to know it will be difficult. You will lose people, you will experience doubt and risk, and you will endure hardship. Stick it out though, and it can be the most incredibe experience of your life.
Post was found here:

http://www.smallbiztrends.com/2007/05/avoid-the-overnight-success-trap.html
Post starts here:

Seth Godin has become one of today’s most recognizable marketing voices. Most people would agree he has been VERY successful.

When you do a Google search for “Seth,” the first entry returned is for Seth Godin.
Yes, he’s THAT Seth. He needs no last name to be found — just Seth.
Seth founded a social networking site called Squidoo last year and took some criticism because it wasn’t an overnight success. It is a success (ready to hit 8 million monthly page views), but it was the “overnight” part that eluded him.
Read over at the Success Magazine blogs about how inspiring Seth’s experience is for small business owners and startup entrepreneurs.
Why inspiring? Because the vast majority of small businesses will never be overnight successes either. Successes yes — instant successes no.
With most businesses you rarely hear about the months years of hard work behind the scenes. You rarely hear about the near-death experiences and minor miracles that brought the businesses back from the brink. You rarely hear about the owners who took out second mortgages to make payroll or to hire a salesperson.

If you don’t have realistic expectations, you can quickly get into the wrong state of mind. You’ll be thinking that to be a success your business has to be an overnight success. Then you’ll give up WAY too soon.

Popularity: 7% [?]

I just read a very interesting mini-case study on the startup-review.com blog. It talks about how Elance became a success, even though their original product was released before the market was truly read for it.

I see a very strong connection between their circumstances and my soon-to-launch website www.iRent2u.com. Elance wanted to create an online marketplace for outsourcing, creating a website that connects service providers with service purchases. Unfortunately, the market just wasn’t ready to support such a system. The general public just wasn’t ready to make that leap, but an opportunity presented itself. Instead of just focusing on the long-term product Elance was originally created to support, they also took on a short term project selling an enterprise system. This provided them enough money to survive until thier original product, with much more potential, succeeded.

I view iRent2u the exact same way. We want to create an online marketplace like Ebay for people to rent items to and from each other, but I dont know if the public is ready. Because of this we will start by facilitating rentals from existing businesses. This will give us startup capital and operating funds, but the true end-goal is to create this massive online marektplace, and I believe we can do it. How long it will take, that is another matter.

Please read the mini-case study, I found it here: www.Startup-Review.com

Article starts here:

How to work with imperfect timing – an Elance example
written by Jay Parkhill, posted on May 13th, 2007

Rare companies like YouTube show what happens when entrepreneurs stumble on the right idea at just the right time, but I suspect that most companies miss the time window slightly and have to adjust. Elance is an interesting study in how to adapt when the market isn’t ready.

Elance is an online agency that matches technical, design and other professionals with businesses needing such services. Project “owners” post their requirements and service providers bid on them. The company was founded in 1999, currently receives 130,000 unique visitors per week, and matches 2,500 projects with service providers every week.

A “long detour” through a secondary product.

Elance launched in 1999 as an “eBay for outsourcing”, a marketplace where project sellers could shop for professionals to get the work done, and vice versa. The company raised $80M, $60M at the height of the bubble, only to see the market collapse. Worse, at the time “outsourcing” was viewed by many as distasteful and distributed workforces were not well understood. Due to all of these factors the online marketplace struggled.

One bright spot, however, was in large corporations. Although Elance was founded to bring outsourced, decentralized workforces to a range of businesses, it found that big companies were the segment of the market that had most embraced the concept. Many of these companies had engaged the services of numerous contractors, yet had no reliable systems to manage their distributed workforces.

In 2001, then, Elance both scaled down to conserve its cash and refocused on the opportunity to serve large corporations. It kept the online marketplace, but put its principal energy behind the development of an enterprise software package to permit big companies to manage and track contract workers. By 2005 the enterprise software product was used by 200,000 employees of companies such as American Express, BP, FedEx and GE, to procure manage over $10B of contract work.

In 2005 Elance perceived that the enterprise software industry had started to consolidate while the general public had come to understand and accept distributed workforces. Elance then re-evaluated its product line and decided to return to the original business idea by selling the enterprise suite to ClickCommerce for a reported $15M. Elance’s CEO Fabio Rosati described this product arc as a “long detour” on the road to deployment of the founders’ original vision.

Flexible business model, but adherence to the original ideals

Elance could have simply abandoned the marketplace concept and pursued the enterprise software path exclusively, but didn’t. I asked Fabio Rosati why the company chose to maintain two product lines, and why they ultimately decided to refocus on the original concept.

He told me that the Board considered a variety of strategic alternatives and ultimately came to the conclusion that the online market route offered the best mid- and long-term prospects. At the same time, near term needs in 2001 required that the company secure revenue from another source, namely the enterprise market. During the detour the company continued to believe that the marketplace product held promise and decided not to abandon it, but instead to maintain and manage it for the future.

I find the concept of the “long detour” fascinating. It says that the company believed strongly in the original’ vision, but recognized that the time was not ripe to realize the plan. In addition, Rosati told me that the company saw the enterprise product as having limited room for growth except as part of a larger supply management software suite, whereas the distributed workforce market was still virgin territory. This combination of factors led the company to end its detour and come back to the path originally envisioned.

Reasons to sell or not to sell a product line

Elance could have sold off or simply abandoned the marketplace product to simplify its operational workload. I asked Rosati why the company didn’t do this, and he told me that the company analyzed the situation and concluded that the marketplace, if properly managed, would not damage the enterprise product or divert undue resources from it (in cash or personnel). That being the case, there was no reason to abandon the possible long-term opportunity it represented.

Getting another shot

The founders and investors originally envisioned the idea of a broad market to match many thousands of service sellers with buyers. The enterprise software “detour” secured the company’s survival during the dot com meltdown and culminated in the sale of the enterprise suite for $15M, a return of less than 20% of investors’ capital but more than adequate to fund future growth. If Elance’s only product line were enterprise software it would be deemed a less-than-successful exit for the company. Maintaining and returning to the original idea, however, gives the company another chance to fulfill the original vision.

Elance’s early vision caused it to launch before the market was ready. As noted earlier, I suspect that many companies have the same problem and need to adapt. Elance adapted by reviewing the market landscape and developing a product to satisfy the immediate revenue-generating opportunity. Many businesses may be able to develop a service offering that can bring steady cash flow sooner, and fund development of the original product.

At the same time, keeping the original product rather than changing the business model entirely gave the company a chance to evolve with the market. Elance’s strategy illustrates one way a company can be flexible and capitalize on available opportunities while preserving a range of options for the future.

Popularity: 19% [?]

Here is the summary from an interesting article about putting together a great team for a startup. I must say that I have been really lucky with my team for iRent2u.com so far. So far I guess I have gotten lucky, mostly because people really like the idea, but from here on out I will try to use these principles to guide the process.

Article was found here:

http://venturebeat.com/2007/04/17/creating-a-killer-team/

Article begins here:

1. Find good co-founders, people you trust. Don’t be greedy. In my venture and entrepreneurial experience, many people mess this up.

2. Have an exciting vision. It’s the only thing you have to offer. If you’re not super stoked, nobody else around you will be either.

3. Have conviction and be passionate about your vision especially in the face of adverse feedback. High IQ analysts are a dime a dozen, and will raise a million exceptions. Ignore them; both as employees and as advisors.

4. Get the best and most experienced advisors around your company who share your passion. If u don’t know anyone, cold call until you find them.

5. Have a very high bar for recruiting, both talent and motivation. Don’t let fear and temptation get the better of you. It’s easy to convince yourself that the person has worked at other places and is probably good enough. Good enough is not good. You’ve got to be excited. Remember Jay’s BAD principle.

6. Pay lower than market in the early days; it’s a great filter.

7. Age is not a factor but motivation is. People who don’t work hard, will never be the key drivers in your startup. Perfection comes from hard work.

8. Don’t undervalue engineers from top schools. We got guys from Berkeley, MIT, Stanford, Caltech, etc. and they are all really good. There are lots of great engineers from average engineering schools (like myself) too, so don’t over-emphasize school either. It really is about talent, hard work, and great attitude.

9. There are those who look for problems and those who look for solutions. This becomes clear in interviews very quickly. Hire people who look for solutions.

10. Grow a thick skin for rejection.

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I just read an interesting article about how to start an internet business by Chris Pirillo
I really like his comments on how communities work, and how if your community function of your website is not full of people it is likely not a problem with your software. How do we build this community is a key concern for the companies I work with, and is something we discuss constantly when planning for iRent2u.com.

The article can be found here: http://chris.pirillo.com/2007/05/08/how-to-start-business/

The article starts here:

The Internet is a pretty amazing tool for business—so long as you know how to use it. It is essential to understand that the Internet doesn’t work like more traditional forms of media. The Internet has changed the way that businesses and consumers interact. In order to help you understand this new paradigm here are a few of the key concepts essential to success on the Internet - especially in the blogosphere.
1. It’s not just about having an open mind; it’s about having an open strategy. You can’t control the Internet. Once you put something out there for the world to consume, assume that they will consume it but not just in the format you offered. It doesn’t matter if it’s audio, video, text, software, hardware or any other service—they’ll want to use it in ways that you can’t even imagine.

2. Piracy is the sincerest form of digital flattery. Which problem would you rather deal with: people stealing your intellectual property, or people ignoring it altogether? It’s a tough call, but if you empower your audience instead of offending them with restrictions, you stand a better chance of succeeding.

3. Mind-share is equally as important as market-share. You can’t have a share of the market if your product isn’t on the minds of the people in that market. If your brand has been mentioned seven times inside your own social circle it’s well on its way to being adopted by the market. Pay attention to your mind-share in the marketplace, but remember you can’t quantify everything: Brand is virtually untrackable.

4. “Viral” is a buzzword, not a marketing strategy. I can’t tell you how many times I’ve listened to a PR agent prattle on about how they have an amazing campaign in the works. I cut these people off mid-explanation and grill them on the meaning behind their catchphrases and what they hope to gain at the end of the day. Most of them don’t have an answer. You’d be surprised to learn that most marketing and PR professionals don’t have a clue about how the Internet works.

5. Community creates itself. Just because you install some forum software doesn’t mean people are going to be beating down the doors to get through. It’s good to have a structure for a community If it’s gaining little traction however, it’s probably not a software problem. If people aren’t interested in what you have to offer, maybe what you have to offer isn’t all that interesting.

6. Press releases are dead. Don’t stop issuing official documents that explain what’s happening inside your company. I’m warning you though, these things are on their way out as far as the global conversation is concerned. The name of the game is interaction. You’re simply shouting at brick walls with one-way distributions.

7. Join the conversation. It’s not just about having a blog, a podcast or an account on MySpace or YouTube—it’s about engaging your existing customers directly on their own turf, and attracting potential customers through similar means. The world doesn’t work for you or your company—they’ll see it differently than you do. Your approach should reflect this reality.

8. People trust people, not companies. Make your name(s) known and be as accessible as you can afford to be. When problems arise your biggest supporters will appreciate being able to connect with another person instead of getting lost in a voice mail maze. Your users will be comforted to know that another human being is going to help rectify their issue. Who hasn’t felt the frustration of “talking” to a machine when all you needed was to ask a simple question?

9. Transparency is crucial. The Internet has a built-in BS detector. It won’t take long for people to see through any kind of double-speak. If you did something wrong, admit it before people call you on it. The worst thing you can do is sweep something under the rug in the hopes that nobody will ever notice. Dude, it’s the Internet—someone will eventually realize what you’ve done. Your brand stands to suffer if you don’t admit your own mistakes.

If your product sucks, make it better. Don’t just throw money at a problem it only makes a more expensive problem. Worse yet is pitching resources into a marketing, PR, or branding exercise for a product that sucks. Don’t rely on staged focus groups—talk to your most passionate users and your strongest advocates. Read what people are saying across the World Wide Web (if they’re saying anything about you in the first place).

The Internet is unlike any other kind of media. It isn’t only a way for your company to communicate with consumers, but a way for them to communicate with you. If you remember nothing else from this collection of tips, remember this: The Internet isn’t just a bunch of cables and wires—it’s an interconnected network of people.

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