Jerry Weintraub, the famous music producer, provided a great example for all start-up leaders in a piece I heard this week on NPR.  Here’s the excerpt on how Weintraub landed Elvis Presley: 

RYSSDAL: That’s an amazing thing to be able to say, “When I got Elvis.” Tell us the story of how you wound up in business with Elvis Presley.

 

WEINTRAUB: I sleep — still do — with a pad and pencil next to my bed. And I had a dream one night, and I wrote down, “Jerry Weintraub presents Elvis Presley at Madison Square Garden.” Wrote it down on a piece of paper, showed it to my wife, and she said, “Why don’t you go back to sleep?” She said, “You know Elvis Presley?” I said, “No I don’t know Elvis Presley.” She said, “Well, how are you going to do this?” I said, “I don’t know how I’m going to do it, but I’m going to do it because I wrote it down.” Next morning, I called his manager, a man named Colonel Tom Parker. And he got on the phone, talked to me, and I said I want to take Elvis Presley on concert tour. And he said to me, “Not a chance. Not going to happen.” And for the next year — one solid year — I called him every morning when I got up.

 

And one day he said to me, “You still want my boy for concerts?” And I said yes. He said, “OK. You come to Las Vegas tomorrow, bring me a check for $1 million, or cash, either one. A million dollars. Now in those days, I thought only one person had $1 million — Rockefeller. I didn’t know anybody that had $1 million. A million dollars was way out of my league.

RYSSDAL: How old were you? 

 

WEINTRAUB: I was a kid, 20-something years old. But I got the million dollars to the Colonel, we sat down. Three weeks later, and I ended up in San Diego and I was a multimillionaire. 

Like chasing a deal with Elvis, start-ups are really hard work.  You are breaking new ground and trying to change the way the world works. 

Our team is knee deep in the start-up challenges with Alice.com now.  Getting a manufacturer to sell its goods in a new way or a consumer to stop going to the store to buy toilet paper and toothpaste is hard, hard work.  Some days you are on top of the world; some days you feel like you’ve been punched in the gut. 

How do you keep driving forward?  By doing exactly what Jerry Weintraub did.  You visualize your success.  You see what your company can become.  And then you go out and relentlessly “will it to happen.”  I’ve heard my business partner Brian say this on many occasions.  “We are going to will this to happen.”    

I’ve tried to summarize some of the things that startups need to do to succeed on this blog (see for example, the 3 advantages of a startup).  But everything starts with this relentless will to succeed.     

Visualize what you can become, and go out and make it happen. 

I think our experience with Jellyfish.com, and now Alice.com demonstrate that Stacey is right, and maybe wrong at the same time.

The Jellyfish experience is exactly what Stacey is talking about.  We founded and sold the company to Microsoft in 18 months, without Venture Capital and with a sizeable investor return (the sale was widely reported to be for $50 million).  As Stacey writes “Maybe the ideal technology startup isn’t really about making it big through an initial public offering. Maybe it’s about selling a compelling feature to a larger company and setting the agenda at a Google or a Microsoft or a Cisco.”  Exactly.

In contrast, Alice.com, our current start-up, presents a counter Stacey’s new start-up animal.  To date, we’ve avoided VC (raising around $10m in common stock thus far), but we’re going after an enormous market (Consumer Packaged Goods) and building a platform that isn’t easy to start from scratch.  The potential rewards are huge, but this isn’t a quick hitter.  We are taking a big swing that is going to take a big investment, even with the decreasing costs of starting a company.  Raising a quick angel round just isn’t going to cut it if we are going to realize the potential opportunity Alice presents.

My take: the start-up funding environment is certainly changing, but there are still plenty of opportunities for both small scale and large scale investments in the market.

I learned this very early in my career from my business partner Brian, and I really believe that it has been a critical element of the success we’ve had at NameProtect, Jellyfish and now Alice.

I came across a blog post from the former lead designer of Mint.com recently that reminded me of this point.  The post (here) highlighted several important reasons that the Mint team succeeded in the market and ultimately exited for $170 million.  Not bad for a two year old company.  The post raises lots of good points, but the big familiar takeaway for me involved the precious commodity of credibility.

Like any start-up, Mint.com’s big challenge was to establish credibility in the marketplace.  To get folks to trust them enough to do business with a totally new company, and in Mint’s case, to enter their guarded financial information.  How did they do it?  Jason mentions two key things:

• Great Design. “Design has given us the credibility we need to overcome the downsides of being the new kid on the block.  It isn’t easy to convince people to give their credit card numbers to a company with a dot.com in its name, let alone all of their online banking passwords.  Design matters.”
• Get the Media to Tell Your Story.  “We abandoned all paid search and concentrated 100% on PR and organic search.”

These are great lessons for anyone launching an online start-up, and I couldn’t agree more with Mint’s approach.  In fact, we’ve applied the exact tactics in our start-ups, and it really starts with hiring a great graphic designer to make your product or service come to life.  Without good design, you create a huge (and unnecessary) risk that your initial customer prospects, media, etc., will question whether you’ve got what it takes to succeed.  If you look like the shaky new kid on the block, you’re probably never going to get anyone to take you seriously and you’ll have a very difficult time building the momentum needed to succeed.  Bad design is the kiss of death for an online start-up.

Alice.com is an example of the benefits of good design.  We hired a fantastic designer as one of our first 10 employees.  And we leveraged his design to build a brand and establish credibility with investors, partners, customers and media.  Like Mint, we’ve also stayed away from spending lots of marketing dollars in paid search, instead focusing on media coverage (social and traditional).  The strategy has worked really well and our customer growth has been ahead of expectations because of it (you can see our growth from our launch in June 09 below).

There are lots of things that have gone into this growth, but without good design, it would have been much harder, if not impossible, to make this happen.

Day One—Starting from Scratch

Here’s a great picture of Brian, sitting in our empty office space on our first day on the job with Alice.com last June, contemplating what we had just signed up to do.

We had just left the safety and security of our roles at Microsoft.  A place with great resources, lots of smart people, and a seemingly endless supply of customers.  Now we had no employees, no company name, no salary, nothing to sit on, and a general idea about selling toilet paper on the Internet.

Fast forward to today—Our team accomplished an incredible amount in the time since this picture was taken.  We raised money, hired a bunch of amazing people, refined our business plan, created the Alice brand, developed the website user experience and  back end systems, set up a fully functioning warehouse and eCommerce fulfillment operation, and launched Alice to the world.

This picture really illustrates the allure of the start-up for me.  Last year, all we had was an empty office and an idea.  Today, Alice is an exciting new company with real customers, a unique value proposition and a disruptive business model (you can read all about our model here)   There are a lot of drawbacks to the start-up world, but building something from scratch like Alice is a remarkable experience and one you won’t forget.

Launch Day

Launch Day—at no time is the thrill of the start-up more acute than when you flip the switch and unveil the company to the world.  Rebecca Thorman, our PR and Communications Manager, did a great job of covering the excitement of launch on her blog Modite here.  It is exciting/scary/thrilling/overwhelming all wrapped up into one 24 hour period.  And it’s something that I’m sure is difficult to replicate in any other type of job.  It’s big part of the experience that makes being in a start-up so great.

Alright, that’s enough cheer leading for the start-up life.  In my next post, I’ll dive into the business goals of the launch and highlight some of the really important things we did to meet those goals.

Here’s my two cents on why cashback is working, and what Msft needs to do to fully capture the opportunity.  

Why is it working?

The paid search system became a cash cow for Google because it allowed Google to capture and sell off the thoughts and intentions of its users on a performance basis.  When I search on “Florida vacation”, for example, I’m effectively telling a bunch of advertisers what I’m interested in at that moment.  Google (copying Overture’s model) created a robust market for that intent.  This system creates amazing profits for Google, but there is a major limitation; the end consumer doesn’t get to participate in this giant market for her attention.    

In contrast, the cashback program brings the end consumer directly into the advertising value chain for the most valuable kind of search–queries with commercial intent.  Use cashback when you want to buy something and Microsoft shares advertising revenue back with you.  The end result of this is that more folks use Live search for commercial queries, leaving Google with non-commercial search traffic (e.g., when I need to find the address of my local public library I go to Google, when I’ve got my credit card in hand, I search at Live cashback).  The data published by Nielsen backs this up, showing that Live Search is the most efficient engine at generating sales for its advertisers.  This is small now, but think about what happens if Microsoft can continue to siphon off commercial queries, and the big amount of ad dollars chasing those queries.  

What Next?

Aside from the obvious things (like continue to create brand awareness and better functionality for users), one element to watch is whether Microsoft can create competition and liquidity in its cashback advertising system.  If advertisers begin competing for sales on Live Search by increasing their advertising spend (what they are willing to pay for a sale on a product), the end result is that consumers will get lower net prices than anywhere else on the web.  This advertising competition is what made Google’s revenue ramp in the pay per click system: advertiser competition meant that many keywords on Google went from pennies per click to dollars per click over time.  If this happens in the cashback system, both Microsoft and the end user benefit, creating a virtuous cycle of more users, more searches, more advertisers, lower prices, more users . . . . you get the picture.

I hope Microsoft can pull it off.  The death of traditional interruptive advertising is creating amazing opportunties, and cashback is just one example of an ad system that directly benefits the end consumer.  

Brian and I are working on this theme again at Alice.com, this time in the Consumer Packaged Goods space where manufacturers spend billions of dollars a year on traditional advertising.  Alice is launching next month, and we’re excited to start talking about ways those CPG ad dollars can start working more directly for the consumer as well.   

At a recent meeting with the Alice management team we went over the finishing touches of our revenue plan.  After the meeting was over I looked up at the white board to get a sense of what we accomplished and the image below is what I saw.  I then proceeded to wonder if we actually accomplished anything.  Believe it or not it was a very productive meeting.

In some ways I thought it was a piece of startup artwork.  If you really look at the whiteboard image again it could be easily confused with the Whiteboard image below.  They aren’t that far off

To follow Alice in more detail be sure to check out the following options

Alice Twitter page – http://twitter.com/alice

Alice Community Blog – http://blog.alice.com/

Alice Company Blog – http://company.alice.com/

Brian

We hope to use the company blog as a place to announce official company news, and to engage in discussions about eCommerce, online advertising, and why everyone should buy toilet paper online. We hope you stop by and say hello.

Marketing is about doing something for people

I watched a very interesting presentation by John V Willshire yesterday that captures a lot of what Brian and I think about the future of advertising, especially for start-up companies. The presentation is here (thanks to paul isakson for the find). I’d sum up my view of this presentation as follows:

• Marketing has always been about connecting people with companies
• In the pre-Internet days of mass produced, broadcast media, the easiest way to make that connection was with interruptive advertising
• Then the Internet arrived, and marketing started to lose the mega-phone it held to yell at people to buy stuff
• Without that mega-phone, marketing now has to add value to get people to pay attention
• The result: if you actually do something useful for people with your marketing budget, they have the power to make more meaningful connections for you

This is especially true for the start-up. If you’ve got the next great product, the best way to introduce yourself isn’t with mass marketed, interruptive advertising. You’ll lose that game to a big company. The best way forward is to work really hard to be useful to a targeted community of users that will respond to what you are doing and will use their connections to spread your message.

The Alice community blog is our first step in this process. It’s an effort to spend our marketing resources engaging with people on their terms and in ways that (hopefully) enrich their lives. Please let us know what you think.

This doesn’t come as a great surprise, as the published focus of the Microsoft acquisition of Jellyfish was to jump start what has become their Live Search cashback program and deliver a more customer-centric form of advertising to online shoppers. So although Smack Shopping is wrapping up, Jellyfish appears ready to live on in the Live Search cashback program. Brian and I think that cashback can be a game changer for online advertising, and remain excited to see what Microsoft is able to accomplish with the program.

Nonetheless, it is hard to see Smack Shopping go. From the start, the Smack Shopping community was fantastic. The talented team at Jellyfish worked really hard to deliver a unique shopping experience with Smack and the community responded, rewarding us in ways we didn’t even think possible when we launched the service. I’ve never seen a more loyal and engaged community of users online. All Brian and I can say is thanks to everyone who was involved. It sure was fun while it lasted. And we hope to see you stop by and say hello when Alice.com launches in a few months. Who knows, maybe even SD will be there.

So in honor of Smack Daddy (and Carl), here’s a toast to Smack Shopping and the Smack community. *Don’t wait too long buddy. Because once it’s gone, it’s gone

(Disclaimer: Brian and I no longer work at Microsoft and the opinions expressed above are from us individually).

Our beta test will begin with a core group of friends and family and expand from there. If you are interested in participating in the beta, you can sign up on our site right here.

We have never launched a company with a closed beta test, and I’m already feeling the benefits. It seems like quite a luxury to kick things off behind closed doors, learning and tuning the user experience before our official launch.