Our Startup Story

This is a TechCrunch post from March. If you don’t want to click over to TC (Don’t blame ya) I’ve pasted Reid’s big points and will expand with my thoughts.

1. Small business loans. Apply a micro-lending model that has proved successful in developing countries, extending credit lines up to $50,000.

Why? Because models of investment besides just venture capital can stimulate the economy. Let’s not neglect entrepreneurs who create coffee shops, florists, taxi services or other small businesses that help the economy thrive at the local level. Sometimes, a coffee shop becomes Starbucks. These don’t require venture funding; they just need a small business loan to get started and grow. Micro-lending has proved viable around the world — let’s do more of it at home. If a service like Kiva.org (disclosure: I’m a board member) can succeed in 12 countries, it can succeed here too.

I couldn’t agree more! 360|Conferences doesn’t need 9mil! We don’t want 9mil! We really (and currently) need just enough money to push us into Full Time employee status and pay ourselves salary so we can focus on more events, which drastically improves our money situation. Right noew we’re at a weird tipping point, needing more money for more events, but not being able to do more events because we have jobs and need the money to quit those. funny Interesting, not funny ha ha.

2. Abolish the limit on H-1B Visas. Remove the cap on H-1B visas and impose a 10 percent payroll tax beyond the benchmark salary for each visa. Then channel the proceeds from the payroll tax into US re-education programs.

This is a country founded on immigration. We should welcome the best and the brightest as our own. Abolish the H-1B cap, and give me an economic reason for preferring local. I’ll only do foreign if I need to. A 10 percent payroll tax for each H-1B visa can be reinvested in whatever it takes to get American talent up to the same level. This has been proposed previously, but a payroll tax ensures that H-1Bs are used for skilled labor, not cheap labor.

I’m really torn on the whole H1-B. Reid’s solution at least makes sense to me. I just can’t stomach the typical reason for hiring H1-Bs, which is to essentially get cheap indentured slaves. People can cry fould, but I’ve worked at more than 1 place with H1-B folks, and have known many others.  The fomer companies find the cheap labor, screwing US workers. When I hear “There aren’t any programmers in the US” my Bullshit alarm goes super sonic and dogs start barking.

I’ve also known H1-B folks that have had to stick with a shitty company, that’s in a slow death spiral, working them 12+ hour days because the Americans have long since quit for better opportunities, because the company held their paperwork. Weak sauce.

So while I’m no fan of the H1-B ‘thing’ at least Reid’s idea incentivises companies to really try to find local talent, and invests in our future. The US is in a death spiral of our own. When kids see adults losing their tech jobs left and right (to outsourcing and H1-Bs), what on Earth makes us think they’ll want to go into a tech field when they’re older. We’re sowing the seeds of our own demise, for short term profit bumps (executive bonuses).

3. Match funds for venture capital and angel investors. Match up to $100 million in stimulus funds for qualifying venture and angel investments if they create jobs in the US. Let these investors keep their normal return plus 50 percent of the returns on the matching funds, while the other half goes back to the government to revitalize further investment.

This one doesn’t apply to Tom and I, since we’re in the Taxi, Coffee shop, Florist realm, but I think it’s a good idea. Screw GM and the big banks bonusing out and partying on our tax dollars. Put stimulus money where it can do good, in start ups who are creating jobs in the US!  This is a win/win idea as far as I’m concerned.

I love creating things, writing software was for a long time very fulfilling. The thought however of doing a software startup, doesn’t do much for me now. Or rather, me being the code writer doesn’t. Which poses interesting problems.

360|Conferences, Corp is a purely service business. Our offering is our abilities, our community, and ourselves. That’s it. No app, no website, no SAAS, nothing that can be bought, sold, or processed. (bonus points if you got that)

We can’t attract investment capital in the traditional tech start up way, since we don’t have any ‘out’ or clear return. To quote David Cohen (whom I hope to meet in person one day!) “i think raising money right now, especially for a business that doesn’t have the best scale economics, is just tough. there’s not much debt money available. ”

Our business however, works like any other, we require capital to continue, we’re bootstrapping, and that get’s us sorta kinda by, but the reality is we need capital like any other start up business that needs to expand it’s offerings. It’s quite the conundrum to be sure.

It’s one of those weird start up problems, that I never really thought about in starting on this adventure. We figured bootstrapping would be just fine, but in actually executing on our business we’ve found that we’re at a place where we can’t easily do more events without the free time of paying ourselves, but we can’t pay ourselves full time (or even part time) without doing more events.

I re-stumbled across this blog post and it gave me some hope, I think our ’13 months’ is a bit longer than 13 real calendar months since our events are spaced apart and there’s low periods.

I think 360|Confferences is at this tipping point right now, we just have to hold on. Hope we can.

This post comes out of a conversation that John and I had a while back.  We thought it would make a good post here; so this is my attempt at ‘summarizing’ the discussion.

We were discussing potential topics and sponsors for our podcast, The Flex Show and that led to a comment on pricing of various conference tickets.  Obviously that is a topic important to John.

Jeffry Said:

I don’t have the magic wand to tell us where the value / cost line should meet.  I do tend to agree that some conferences have crossed a line, where their cost no longer matches its value.

I think I read a blog post that made me think 360|Conferences was struggling with the same cost vs. value issue.

I was reading something about the down turn of the newspaper industry.  A lot of people complaining about the downturn seem to say that the newspaper “business model” was to sell news to people.  But, I read something that said the real business model was selling the access to people (community) to advertisers.  It makes a lot of sense to me.

The [current] business model of The Flex Show is to sell our community to advertisers.

The [current] business model of Flextras is to sell software to the community.  I worry it is not a long term sustainable approach, though.  I believe the real profit benefit to customers is going to be selling access (support) to myself [and other Flextras employees.  Plenty of companies (Redhat, MySQL) have had success with the "premium support" style models.  A lot of my support option ideas don't apply to a company w/ no proven record and/or only one component, though.  This comes back to my theories on the difference between digital / infinite goods and scarce goods.  Many of these theories were fueled by reading techdirt commentaries.

I think the business model for a conference (such as 360|Flex) is to two fold.  You sell access to the community to advertisers. And to attendees you sell access to the experts.

John responded:

We're actually in the opposite problem as some other conferences  (IMO). We offer way more, but charge too little. We're realizing that we're so bent on two very counter ideas. We're obsessive about being less than everyone else, and equally obsessive about offering the most value. If we were wal-mart and conferences were made in China, that might not suck, but for Tom and I, it sucks.

We're not thinking of raising prices, but realize our current pricing model's biggest flaw is our price/attendee mix. we can't do enough shows at that level to really be profitable. beyond paying our phone bills, writing a check here and there, but nothing FT Salary level.

Yeah I agree. it's more about connecting sponsors to community, while providing community a reason to be there. That's what I'm hoping to help us figure out with The Flex Show. we've got a very targeted community, there has to be some one who wants to talk to them.

I dunno, but these topics rock!!

Jeff Responds

I'd always recommend focusing on adding value and less so on cost through the door.  Companies who compete only on price die.  Because there is always someone who can come in and do it cheaper.  When I was doing focus groups for Flextras, no one blinked on pricing [as long as the components would help them get their job done].

I struggle with the difference between providing a discount (generally bad) and adding value (generally good).  I’m pretty sure that providing the pre-conference day free to attendees is adding value.  Most other conferences charge for such things.  Charging extra for that day might cause backlash.  But, I wonder if you offer a lower-priced 3 day pass for those that don’t want to / can’t make the pre-conference day?  I’m not sure.  I’m entering a realm where I don’t have experience to back me up; and I always have a sense of discomfort telling other people how to run their business.

Maybe we should turn this into an OurStartupStory post somehow.

John Responded:

Yup, exactly, wish we had realized it sooner, but yeah. We’ve woken up and realized low price is fine, but better value is better, and we have that in spades.

Shoot, Tom and I ran head first into a realm we had no experience with :) I actually prefer that, since experience leads to more of the same in my opinion, LOL

Jeff Responded

It is often hard to get out of the “more of the same” thinking, that is for sure.  Reminds me a bit of Courtney Love’s now famous article about the music industry.  Around that time she was quoted as saying she would hire non-entertainment lawyers who could offer a fresh view of the “indentured servitude” of musicians and songwriters.  Hard to believe she wrote that 9 years ago.

And for our readers, here is the post.

I got a message from Val yesterday on facebook. I had posted some info about 360|Flex Indy, and stuff. She saw our press release or the post we wrote about our changing how we do sponsorships, and wanted to let me know that Tom and I aren’t alone. When I sent Tom a copy of the message, his first thoughts were “It’s nice to know someone actually noticed and cared.” I have to agree, it feels good when people notice what you’re doing.

Val’s message really brightened our day. Val runs Flashpitt with her pal Joe, and they’ve been trying to figure out how to change things up as well. They came to the same conclusions as Tom and I, change sponsorships, make them easier to understand, and custom to each sponsor. Val you’re on the exact same page as us!

The Press release mentioned is here if you’re curious. It’s our first!

It’s nice to know the things we do get noticed. Sure there’s a bit of ego there, but hey, humans do most of what we do, so that it’s noticed (at least IMO, don’t lie to yourself). There’s so many other events around us, big and small, that we sometimes feel lost in the sea of them, even though few if any are direct competitors. We’re definitely in the David class right now and the Goliaths don’t notice us much.

For those that have already forgotten, yeah that’s like everyone, Cuil launched in July 2008.

No one cared.

Cuil launched, and didn’t work, results sucked, the site went down, etc. As launches go, it was a dud.

Being stealth in general, is LAME, IMHO. No idea is that revolutionary, and hello! Cuil was a search engine! Stealth just raises the bar high, higher than you probably want. How about you embrace the web, stop being so secretive? Get the community behind you?

Techcrunch has a good write up on Cuil’s loserness.

From time to time Tom and I have thought to keep something underwraps, save it up for a big announcement, etc. It always blows up in our faces, without fail. Some one will call us out “I was going to blog about your event, but you had no sponsors up” or something like that, when in fact we had sponsors, but were waiting to announce on a certain day, whoops!

This is short and it’s my take, but don’t be stealth, and don’t be lame, and don’t rely on hype to define your value. Be worthwhile, and be something people will want to use. Don’t be a 33mil money trap, “Google killer”, don’t be an anything killer! Just be. Be good, be a venture that meets a need, not a venture looking for a problem.

Buh bye Cuil, it was an uneventful life, and you’ll be remembered… ok well you won’t, but thanks for all the fish.

This post is in response to a recent article on Businessweek, entitled “A Wrench in Silicon Valley’s Wealth Machine“.  It’s our first panel style post where we ask our startup contributors to give their views on a certain topic.  Let’s hope it works out. :)

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John’s Thoughts:

VC’s seem to be largely morons and most startups seem to be the perfect match.

Only a startup would exist and not have a plan to make money. Only a VC would give money (large, large sums of money) to a startup that would “Make money in the future”, if everything goes according to plan.

That’s not to say startups have to be profitable or even bringing in money when they start, but Digg is what? 2? 3 years old? And not making money still.

From Businessweek

Jay Adelson, Digg’s chief executive, says it’s clear the environment has changed for all startups. With venture money harder to come by, entrepreneurs have to concentrate on building their businesses. He says Digg is dialing back some expansion plans and trying to reach profitability as soon as possible. “All I care about is making sure the business foundation is solid,” Adelson says.

Really? Now the focus is on profitability? Now that they’re being seen for what they are? Just another over hyped startup with no clue how to make a dime, hoping that profitability will find them on its own.

What really amazes me is that all the Digg fanboys and gamers of the system singing Digg’s praise etc. are simply filling Digg’s DB with data that they [Digg] intends to sell. Sell for a retardedly over valuated price of 300m! Holy crap! Smooth move guys, give your meta data and attention to Digg so they can hope to sell it. NICE!

One reason may be that Digg’s public profile is much larger than its financial might. Last year the company lost $2.8 million on $4.8 million in revenue, according to Digg financial statements reviewed by BusinessWeek. In the first three quarters of 2008, Digg lost $4 million on $6.4 million in revenue. Adelson declined to comment on the figures.

Those better be some damn good Christmas parties, and some 70 and 80′s style whoring and coke snorting, I’m talking Studio 54 here. Lost 4 million? On what? It’s a site that people give content too, they don’t pay for it! Oh wait, Diggnation probably isn’t cheap to produce, that explains it.

As some one who runs a business completely in boot strap mode, it’s insane to imagine how some of these businesses can exist. Tom and I started ’08 owing 15k on our line of credit and were contemplating closing up shop rather than continue moving into debt. Startups seem to have mastered the art of spending money that isn’t theirs in exchange for retarded amounts of their company and probably a sizable chunk of soul.

Is it worth it guys? You couldn’t have done with out millions of someone else’s money?

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Tom’s Thoughts:

I wouldn’t say all VCs are morons, just the dumb ones.  :)  Perhaps that should read the greedy ones.  I understand VCs provide more than just capital.  Take a look at eBay.  It was successful, but Pierre realized that he didn’t have the knowledge needed to take the company to the next level.  VC investment helped him get Meg.  Then there are visionairies that have expensive visions but the visions have profits in mind ala Bezos.  Amazon took what, 4 years to reach profitability?  But Bezos had the system worked out in his head to reach profitability.  Heck, at least it was a goal for those 4 years.

Article Snippet 1: With venture money harder to come by, entrepreneurs have to concentrate on building their businesses.

Now, that could just be poor writing on the author vs something dumb Jay Adelson said, but that line just blows me away.  What the heck kind of statement is that?  What entrepreneur doesn’t concentrate on building a business?  And what kind of people give that entrepreneur millions of dollars?

I’ll be honest.  I thought about approaching investors to help us grow 360|Conferences in the early days.  However, I realized we had no street cred. We had never ran a conference before, much less a conference business.  Even now, John and I are contemplating approaching angel investors, but I still tell John, “We’re profitable, but I don’t think anyone will care.  We’re not trying to take on the world and we’re definitely not sexy.”  John and I have spent a lot of time making our business what it is.  Sure it’s been tough, but we went from no money investment on either of our parts to making some money in less than 2 years, part-time.  People think we put on the best conference they’ve ever been to and are shocked to find out it’s just John and I doing the biz, part time.

The reason I think we make money and why people love our events is because from day one, we’ve always concentrated on building our business.  John asked during year 1 of our biz,  “Why didn’t you quit this idea like you did many others in the past?”  My answer came swift and still rings true to this day, “Someone trusted me with their hard earned money and it is my duty to live up to that trust by providing them the very best service.”  The only way you can provide a great service is by building your business.

Article Snippet 2: [Adelson] says Digg is dialing back some expansion plans and trying to reach profitability as soon as possible. “All I care about is making sure the business foundation is solid.”

Here’s where millions of someone else’s dollars makes you delusional.  Whereas Digg is now gonna focus on profitability vs expansion, John and I have been focused on profitabilty and are now looking at expansion.  I didn’t go to business school, so maybe that’s why I’m lost.  But don’t you usually test an idea out first to make sure it makes money?  Then once you’re profitable, you move on to expansion?  Like I’ve always told John, “Our profit model depends on x number of attendees per show.  If we don’t get those numbers, that means people don’t like our show.  We either need to change to get those numbers or leave the biz as our ideas obviously are all wrong.”  Now x is not in the millions or billions, we’re talkin roughly a few hundred.  But if there is no profit in sight, then you may have a good idea, but you surely don’t have a good business.

Article Snippet 3: In the first three quarters of 2008, Digg lost $4 million on $6.4 million in revenue.

Now, I won’t make accusations about what Digg did with that money.   John could be right, but I’m sure there’s some costs we’re just not seeing.  Some people accused us of throwing an “orgy” when we spent $90K on food, but after you realize a 6 oz soda costs $4.  You can see how fast things add up.  One thing companies should do is be more transparent.

I’m not saying throw your quickbooks file on the net. (Yes, I know they don’t use Quickboooks, just work with me will ya.)  But lay out what gets spent where.  Show people what you’re doing with the money.  If nothing else, your customers will tell you what your spending too much on.  Though I’m not sure that would work for Digg.  They have users and not customers, i.e. no one pays them to do a service.  Maybe that’s the problem then.

Can you be defined as a business if you don’t have customers?  Or more importantly can you be called a business if you don’t focus on profits?

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Andrew’s Thoughts:

My preference in starting a new business would be the conservative approach.  Save up money from a standard W2 job until you have a nice emergency fund before going for it.  Focus on those projects that get you to profitability the quickest.  Anytime you take money that you haven’t earned whether from a bank or from a VC, you’re giving up some control of how your business runs.  Unless the idea is truly revolutionary and needs to explode quickly, I’d stay away from taking VC or bank funds and doing it the old-fashioned way.  Having excess VC funds around is just plain distracting and a false sense of security.  It doesn’t make sense to have all those parties if you haven’t earned a dime.  Having a tight budget early on also forces you to find unique and cheaper ways of doing things.  One example would be a VC-funded startup throwing servers at a scalability problem whereas a self-funded startup would be forced to re-factor and optimize their code for maximum scalability.

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Jeffry’s Thoughts:

Are VCs Morons?  I don’t think so, but I do get the impression they only expect 1 in 10 of their ventures to be succesful; kind of like the traditional record company model.  That 1 success makes up for the 9 failures many times over.  With that in mind, I may consider factors other than the business plan when investing in companies such as enthusiasm and adaptability of the owners.

Cash flow is king, especially in a down economy.  Generating profit should always be a much higher focus than expansion.  Build your profit model right into the business from the start.  Think it through before you start coding or building the service.  Controlled growth is the best way to build.

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Ben’s Thoughts:

I have to say, I think this is a trick question. Let’s look at it this way, “What should a baby focus on: feeding itself or growing up?”. I guess the answer would be “yes”. Startups, like babies, require further growth by definition; otherwise you’re just running a business. So if a startup focuses solely on profit, it may never take the risks that are required to grow. By the same token if a startup focuses only on expansion fueled by VC money, it may not have legs to stand on when it needs to back up those extravagant claims it made (a la Digg). I’m not saying that VC is invalid or that projects with big ambitions (like mine) are dead, but I do think that inflated egos, hot-air pitches, and over-valued stocks are being market-corrected in short order. Hopefully that’s a good thing.