Inside a Startup Pivot: Shopcastr

By Mark Evans in Social Media, Startups No Comments Tags: , , , ,

If you’re looking for the definition of a pivot, you probably couldn’t find a better example than Shopcastr. (Note: Shopcastr is a client).

The original idea was Hipsell, which had huge ambitions to change the online classifieds marketplace by letting people cross-post listings on Craigslist and Kijiji in a way that leveraged mobile and social media. After some trial and error, founders Matt O’Leary and Aron Jones realized the concept wasn’t going to work.

Rather than pack up, they decided to take the insight they had learned about local commerce to come up with another approach. In testing a new idea, they did something Eric Ries (aka The Lean Startup) would have loved: they conducted in-market research by visiting dozens of retailers to get feedback on whether the new idea had any legs.

Armed with real-world intelligence, Hipsell was rebranded as Shopcastr, which lets retailers quickly and easily create online stores to feature their products. Consumers can browse Shopcastr to discover new stores and products.

While Hipsell was a sexy idea, it was challenged by a lot of moving parts and entrenched behaviour. On the other hand, Shopcastr is one of those ideas that makes sense. It lets local retailers establish an online presence that can complement their Website or be their Website. And it plays right into the shop local movement by providing consumers with a user-friendly way to discover what’s around the corner or across town.

To get a better idea of Shopcastr, which is part of the Mantella Venture Partners portfolio, I fired off a few questions to Matt O’Leary:

1. What is Shopcastr and when did the idea come from?

Shopcastr is a simple and beautiful way for retailers to show off their best products and let’s consumers window shop their favourite stores from a phone, tablet or computer.

Shopcastr was a pivot from Hipsell, a real-time mobile marketplace. Hipsell set out to disrupt online classifieds giants like Craigslist and Kijiji by building a real-time, mobile, social, location-based web and mobile app that solved a ton of problems in the space. Hipsell had some unique ideas on how to solve the chicken and egg problem a new marketplace faces. One of the ideas was to use Amazon’s Mechanical Turk to cross-post all Hipsell ads to Craigslist and Kijiji. Kijiji quickly shut us down, and then we decided go back to the drawing board and do some customer interviews on a fresh idea with a slight resemblance to Hipsell.

2. Who’s the target audience for Shopcastr?

Independent local retailers with one to four locations is our primary target on the retailer side. We don’t target big box and like shops with unique products. On the consumer side, our target is shoppers primarily from the age of 20-40. 65% female, 35% male.

3. What’s been the reception so far? Who’s signing up for the service?

We’ve had a great reception from retailers. We’re signing up over 20 a week, and now have over 250 shops and 2500 products. Our top 20 retailers post an average of eight products a week. Our early adopters range from amazing furniture stores like Design Republic to bike shops like Duke’s Cycle.

We only started our consumers acquisition methods last week. We debuted at Sprout Up putting on a four-minute presentation in front of 500+ people. In our 90 day beta period, most of our consumer traffic was coming from our retailers existing networks (Facebook and Twitter).

4. What’s the growth strategy? Are you focused on Toronto for now or plan to expand to other cities?

We’re still focused on Toronto as we build our playbook for a multiple city rollout. We’re planning to expand into multiple cities throughout North America in 2012 and beyond. Stay tuned for an announcement within the next few months. In the meantime, you can request a city on our main page.

5. What’s the business model?

Our business model is simple, we plan to charge retailers a monthly subscription fee starting as low as $9/month. We will also have an interesting paid advertising/positioning model that we’ll be experimenting with in the coming weeks. We plan to have an API and have a few other tricks up our sleeve. SaaS with a little bit of Class if you will.

More: The Toronto Standard ran a good feature on Shopcastr earlier this week.

Warning: Watch Out for Startup Roadkill

By Mark Evans in Startups 1 Comment Tags: , ,

When it comes to startups, I’m a glass half-full person.

To me, every startup has the potential to be successful, although it does depend on a combination of their ability to execute, some luck, and being in the right place at the right time.

Although I don’t want to burst anyone’s bubble, here’s another reality: For all the enthusiasm and entrepreneurial bullishness, there’s going to be a lot of startup “roadkill”. Maybe not over the next few months but it’ll happen, and it ain’t going to be a pretty.

It goes against the grain for an entrepreneur or startup to talk about the possibility or even admit their startup is struggling, but starting any business is a high-risk proposition. Not everyone is going to succeed, no matter how good their idea, how hard they work, or how much money they raise.

Startups are going to flounder and fail because their products don’t resonate, there is too much competition, there’s a lack of execution, the wrong people are hired, too many strategic mistakes are made, etc.

As much as we celebrate every seed financing and collectively cheer when a startup is acquired, it is also important to be prepared for bad news. Startups will flame out, burn through capital or attract no customers – some of these failures will be high-profile, while most of them will quietly shut their doors. It’s the way of the world for startups.

At the end of the day, there will be plenty of failures, lost dreams, frustrated entrepreneurs and disappointed investors. The thing to remember is failure is a part of the startup landscape. It happens. Rather than wallowing in our failure, we need to learn from it so that the next startup doesn’t fall victim to the same mistakes.

Now, it’s your turn to provide some thoughts.

How Generous Should Startups Be with Stock Options?

By Mark Evans in Social Media 1 Comment Tags: , , , ,

One of the many fascinating aspects of Facebook’s S-1 filing for its $5-billion IPO was how it handed options to employees, freelancers and contractors. This included graffiti artist David Choe, who accepted options rather than a few thousands dollars for painting Facebook’s first office.

It put the spotlight on the question about how generous startups should be with option grants.

On one hand, options are an effective tool to motivate and reward employees and people who have helped a startup and/or provided services.

For employees, it gives them skin in the game, particularly given the hours and effort involved. As much as employees may be compensated well, the benefits of giving people even a small number of options far outweighs the resentment of having founders hang on to as much equity as possible.

Options are also a good way to conserve cash because they’re seen as having no value unless there is a liquidity event.

On the other hand, a startup may not want to grant too many options because they can dilute existing shareholders.

At the end of the day, how often and how many options to grant is a balancing act. They can be a valuable corporate tool to drive and support growth. But like anything, there can be too much of a good thing, including option grants.

The Week in Startup Land (Edition #2)

By Mark Evans in Startups No Comments Tags: , ,

After kicking off my weekly look at the Canadian startup landscape last week, here’s edition #2. It features highlights of the Canadian landscape, as well as some other interesting startup-related information and content. Leave a comment if there’s something interesting I should add.

1. Extreme Startups (a rebranded and recapitalized version of ExtremeU) kicked off with $7-million in financing, including a big chunk from BDC, which will be handing out $150,000 in convertible debt financing.

2. Of the posts on MET this week, “You’ve Raised Venture Capital; Now What”, got a lot of attention.

3. Burn Rate vs. Runway - Mark MacLeod (aka Startup CFO) takes a look at the balancing act between spending money and managing it to last awhile.

4. Scars: Jason Cohen has a nice post on how entrepreneurs can succeed by getting advice from other battle-scarred people.

5. Signs You’re Not Building a Minimal Viable Product: With all the talk about lean startups and MVP, Anthony Panazzo offers some good insight into the definition of an MVP and what it involves.

6. Talent for Tech: Recruiting the Right People: A nice talent/recruiting blog package from MaRS on the different aspects of attracting and hiring tech talent.

7. What’s Your Personality Type – Insights for Lean Ventures: Flow Venture’s Ray Luk looks at how the top five personality archetypes fit into the lean startup world.

8. In my Globe & Mail “Start” column, I put the spotlight on Startup Edmonton‘s impending move into a new facility, and the launch of a $450,000 accelerator.

Bonus: We Love Lean has a great post putting the spotlight on 15 tools that “every lean startup can’t live without”. In particular, my attention was caught by Lean Canvas.

Forget About Lean. It’s All About Lunch for Startups

By Mark Evans in Startups 1 Comment Tags: , , ,

There are lots of different “secrets” for startups to be successful. There’s the lean approach, minimal viable products (MVP), bootstrapping, crowdsourcing, strategic seed capital, etc.

But in working closely with startups, here’s a key ingredient few people talk about: lunch.

Yup, lunch.

Think about it. Lunch is not just about nutritional intake, it’s about community and collegiality, and a time for a startup employees to take a break from the go-go-go nature that can be stressful and exciting.

Lunch is a time when everyone – founders, developers, marketers, salespeople and admins – can gather to talk about sports, pop culture, sports, the latest episode of “Glee” and, yes, even work.

While lunch doesn’t get much attention – there are no best-selling books about the power of lunch and startups – but lunch is one of the keys to startup success.

Lunch is important because it develops and nurtures teamwork, which can be powerful, particularly when startups operate lean and mean. Lunch brings people together so working together makes them more effective and productive.

It’s one of the reasons why I like it when a startup’s employees start bantering back and forth about where they should go for lunch. While it may sound like a discussion about food, it’s really about creating a strong startup culture.

You’ve Raised Venture Capital, Now What?

By Mark Evans in Startups, Venture Capital No Comments Tags: , , ,

For many startup entrepreneurs, raising their first venture capital round is like winning the Super Bowl. It validates what they’re doing, their vision and all the hard work that’s happened. When the deal is signed, there are lots of high fives and the champagne flows. It’s good times, baby!

The funny thing is you wake in the morning with a whack of cash in the bank, and realize the work has just started. For all the effort that happened pre-deal, there’s even more work ahead post-deal because there’s another party (or parties) who have a vested and financial interest in how you operate the business.

For some entrepreneurs, it can be an abrupt wake up call. Suddenly, there are board meetings, regular updates to be filed, plenty of questions, and performance reviews. If you thought there was pressure before, it’ll come in waves now.

At the same time, entrepreneurs also need to get their head around the money. While it is being invested to grow the business, it will eventually run out, even if it does seem like a large amount at the beginning. I worked with an entrepreneur who seemed to think the money would last forever and, as a result, start spending it on products and services that weren’t a priority.

Here’s funny thing about raising your first round of venture capital: investors are happy to give it to you, and they’re happy to see you spend it.

Why? It’s because they know it’s likely you’ll to come back for more if the business shows traction. While there may be more suitors but your initial investors will more likely be involved and be assertive in making sure the deal rewards their initial investment.

The bottom line is raising startup capital is a terribly exciting and rewarding experience, particularly given it is like winning a lottery ticket in many ways. At the same time, it’s the end of one stage and the start of another with just as many challenges and demands.

More: For another angle on raising capital, Mark MacLeod has a good post looking at burn rates versus runway.

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