Start Up Lessons from a Slimey CEO

If you have a middle schooler in your family, you will know that homemade slime is sweeping the schools in the US. Even WSJ wrote an article on entrepreneurial middle schoolers building businesses to sell homemade slime to their friends. 

As an investor (Dad) to one such slime business CEO (11 year old daughter), I have a first hand view of how she is building her business. Not surprisingly, many of the principles apply to other start ups:

Back of Envelope Proof of Finance Model

Her slime business started when we were driving around town hunting down clear glue in retail shops for her to make slime for herself. When trying to locate a source online we realized that there is a 5x markup for glue at the retail level compare to buying volume. A bit of math back and forth between the two of us convinced this potential investor that there is a business, and the budding CEO decided to take on the responsibility.

Lesson: Difference between a hobby and a business often is the financial model.

Leverage Technology Early

The CEO first worked out the pricing model with pencil and paper. As a tech savvy investor I spent some time teaching her how to use google sheet to verify her model, and she immediately see the benefit of having a easily updatable pricing model. We also decided to use another sheet to track orders and production status. That turned out to be extremely useful as orders flow in.

Lesson: Technology is a time saver. Seek out help if you need to as early as you can.

Energizing your Early Potential Customers

When the CEO's older brother's friends were over at the house, they asked whether they can try their hands on making slime. Instead of turning them down, the young CEO offered up her supplies and taught them how to make their own slime. The boys were impressed with the process, and the product. Soon, one of the boys became a evangelist for the slime business at school. Reaching a differ market segment (an upper grade) he brought in a lot of new sales.

Lesson: word of mouth marketing is important, especially at the beginning. Energize potential early adopters.

Tune your product line Often

Initially the slime company offers basic slime as well as many add on options: different colors, scents, fluffy and more. Their customers were delighted. After taking in a large batch of orders, the CEO, who is also the primary slime maker, realized that it takes too much time to fill each orders because each order has to be individually tuned. They changed the product line, announcing to their new customers that they will make batches of the same product and rotate through the product line periodically.

Lesson: Design your product for manufacturing. If the cycle time is too slow, reduce product variety.

Manage Your Partners

The slime company has four founding partners. They brainstormed their business together. Once orders started to come in, it became obvious that not everyone has interchangeable expertise. The CEO is also the only person that fully understand the techniques in making, especially the more complicated, slime. The founders has to divide up the work functionally to maximize outcome.

Lesson: Leverage founding members individual strengths.

Customer is Always Right

Not too long into the business, one customer asked for a refund because she was not happy with the product. While the partners all know that there was nothing wrong with that particular custom made product, they kept their cool and accepted the return and refund. It is important to keep the customers happy. At the same time, they updated their order form to explicitly says "no refund"

Lesson: Customers are always right even when they are not

Competition

Surprisingly, the slime company has no real competition in this middle school community. There were a few people who started to sell slime but soon gave up after they realized how much work it takes to make and sell.

Lesson: Business is hard. Perseverance and hard work is the only way to succeed.

Paul Graham is Wrong

In Paul Graham's latest blog post, he voices his support "to make immigration easier" to allow easier hiring of foreign tech workers by using a overly simplistic argument:

The US has less than 5% of the world's population. Which means if the qualities that make someone a great programmer are evenly distributed, 95% of great programmers are born outside the US.

US does rougly has 5% of the world population: 320 million at end of 2014 out of the world's 7.3 billion. But is comparing strict population appropriate? Are rural farming families in China likely to apply for technical jobs in the Us? No.

A better comparison maybe to compare number of college graduates. The data is less accurate, but this gives you a good picture:

• China has 7 million college graduate

• India estimated number is 9 million

• Where as the US has 5.9 million graduates in 2010

The ratio of these numbers are much closer, far less dramatic.

Constrained for Talent, or Cheap Talent?

Graham argues that there are just not enough great programmers to go around and the immigrate programmers are being paid the same:

But if you talk to startups, you find practically every one over a certain size has gone through legal contortions to get programmers into the US, where they then paid them the same as they'd have paid an American.

Personally, I cannot imagine a start up that can affort this type of legal fees are start ups anymore. I would love to see the actual figures that back this argument up.

Immigration is Good

Ironically, I believe immigration reform is good, and it is good not just for the tech world. I like free markets. I like competitions. Within the startup world, I have hired and worked with great programmers all around the world.

But Local is Important

There is a lot to be said for having software developers that understand the local culture and market. To use a reverse example, can a US designer successfully design a UI for the Chinese market without a lot of local help? No.

What to do?

To solve the root of the program, America needs to pay more attention to STEM in school. We need to eliminate the gender gap in engineering. We need to teach more and better maths in elementary schools. Otherwise we are loosing the race to build a great talent pool.

EventDove is much more then a EventBrite Clone

I learnt of EventDove several years ago via my Boston connections. I even used it once at a small local event in the Boston area, but honestly did not find it particularly different from eventbrite. I was so wrong.

I attended a talk by Jun Chang, the CEO and founder of EventDove in Shanghai. She gave a very personal talk about the company and it's business model. My key takeaways make me believe that this company is going to be very successful:

EventDove focuses on B2B

While the EventDove platform clearly is useful for event registration services for events of any size, (there is a free plan), the company is focused on servicing large scale, repeated customers. EventDove often provide back end system integration with their larger customers to provide many features that may not be visible to the event attendees. This provide a high barrier of entry for competitors, and high exit costs for their integrated customers.

These integration reaches beyond event organizers. It can include event revenues operators as well, which are a source of new customers.

A customer is a customer when they are paying for the service

Jun stress that while she values all customers who uses her platform, paying customers are where she is concentrating her companies resources on. The initial paying customer based is most important. Having worked with many start ups, I completely agrees with her. A start up sometimes too eagerly chases after potential paying customers by listening to their non paying customers too much.

O2O - Online too Offline (and back)

This is a key feature of EventDove that I did not see before because I did not attend a large scale event serviced by EventDove. Their platform has significant feature set to support onsite registrations, badge handling and much more. It is geared towards a large scale event hosted at a convention type venue. These onsite, off line features, with venue system integration, create another high barrier of entry for competitors.

EDM and Data Mining

As EventDove is used by more and more conference venues, with it's integration with both the event organizers and venues, it has access to a large data set of attendees. While currently the platform can feed this data back to the conference organizer for used in the electronic direct mail (EDM) marketing, is it possible for EventDove to mine this dataset across events and organizers?

Jun also mentioned that events in China a slowly moving away from focusing on big name speakers as the key marketing source. As the event organizers focus more on the content of the events, and the quality of the attendees, (think barcamp) can EventDove leverage it's combined attendee dataset and provide social networking features like meetup.com?

Standards and Platform

If EventDove is the first platform to integrate event organizers and event venue operators, it has the potential to set the standard for data exchange in this space.  Will it become *the* platform for large scale event hosting?

Dove

I want to end this summary with a fun fact. The "Dove" in the name EventDove has a meaning that perhaps get lots in the English name. Doves can also be referring to carrier pigeons. They carry information back and forth. EventDove then is a platform for information exchange between event organizers, attendees and venue operators!

CustomMade and 18 Million

What can CustomMade do with it's new round of financing, 18 million dollars? a lot. I am lucky enough to experience the inside view of a large funding round like this for the second time. The first one, AdvisorTech Corp, was during the Internet Bubble years. 20 millions were nothing to talk about. This time around, the market conditions are much more realistic, and the CustomMade round is well deserved and it is a vote of confidence by the markets. One of the main success factors for CustomMade is the pairing of co-founders Seth Rosen and Mike Selguero. They have complimentary skills in a way that I have not seen for a long time.

Another factor of CustomMade's success is the first mover's advantage. While being first does not guarantee success, being first and having a team that have worked and worked to understand the customer gives CustomMade a tremendous advantage over any competitors. Any two sided market place business is difficult to understand. Which side of the market should subsidize the transaction (makers)? How to deal with competition within one side (how to encourage maker participation without shrinking the maker pool by favoring high performers)? How to match make between the two sides (customers and makers)? The CustomMade team has built up a lot of internal knowledge of how to make this market work.

But remember, to quote Mike quoting Seth:

A dollar raised is a dollar not earned -- Seth Rosen

This is a beautiful insight into the truth about startups -- Having raised this large round of financing just means that we are in the hot seat to delivery value to the investors by multiplying those dollars into revenue growth.

Here is a picture of @pks, @MoonlightLuke and @markstenquist working hard with their pen and paper... (We were signing forms for a welding class, to understand how to custom make objects!)