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Startup leaders talk shift

By   /   Thursday, September 18th, 2014  /   Comments Off on Startup leaders talk shift

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There’s only one thing you can be sure about in business: shift happens.

Whether it’s customers coming and going or a competitor rolling out a new product, every business faces change. By their very nature, technology companies face the constant of change more than most, and the ones that succeed are the ones that embrace it as an advantage rather than view it as a threat.

“You’re leveraging change to go beat bigger companies in the marketplace,” said Jason Spievak, CEO and co-founder of the inbound call marketing firm Invoca. “Change is a good thing for you.”

Spievak was one of four startup veterans who addressed a crowd of more than 125 on Sept. 17 at the Central Coast MIT Enterprise Forum’s fall kickoff event titled “Shift Happens: Strategies for Adapting to Changing Market Conditions.”

The speakers — Spievak; Mike Pugh of eFax parent j2 Global; Albert Oaten of Goleta-based SecureDocs and Brian Coryat, original founder of ValueClick and now Local Market Launch — all found ways to navigate tech booms and busts to remain successful. They shared strategies for doing so.

At Invoca, the company started out with a transaction-based business model, taking a small cut every time it tracked an inbound phone call to a business that generated a sale. It was supplying that technology through advertising networks, but its revenue exploded when it began working with brands directly. Spievak said one key was listening closely to target customers.

“There’s so much technology out there that’s searching for a problem to solve. You have to do it the other way around and found your business on a pain point,” he said.

Spievak also advised entrepreneurs to challenge their assumptions and “be your own disruptor” and think like an upstart gunning to put them out of business. He emphasized the importance of putting together a creative and dynamic team. Technology will change, “but what’s not going to change, without a crowbar, is the team.”

At j2, Pugh said the company enjoyed both the best of the tech bubble and the worst of the burst after the Sept. 11, 2001 terrorist attacks. The company took a widely used free product, eFax, and slowly built it into a paid product that costs $16.95 a month, a price increase that took 10 years. “Know your north,” Pugh said. “We’ve never been a technology company per se. We’ve always been a company that turns investor dollars into more dollars.”

J2 now has about $700 million in cash to work with. Part of that came from “pricing to value” — that is, if it provides value to the customer, charge for it. In 2001, “we had no revenue, and nobody cared about a company with no revenue and a fast-growing user base. Over 10 years, we went to $16.95 a month by adding value and features.”

Pugh’s firm also followed its customers. It didn’t have an eFax offering for business customers until it noticed that it had 300 customers with @cisco.com email accounts. “Each one was putting on their personal credit card,” Pugh said. The company started an enterprise offering.

Oaten has seen massive changes at three different companies. He was the first sales person to sell GoToMyPC at what is now Citrix’s software-as-a-service division. He was the first person to sell the new property management software at AppFolio and SecureDocs, a secure digital document room company spun out of AppFolio.

At Oaten’s first company, venture capitalists pushed the founders to build a product that customers had no interest in paying for, a mistake that didn’t become apparent until after about $10 million in investor money had been spent. Executive John Greathouse gave Oaten a list of potential customers and told him to try to sell them something, anything. Oaten dug in, and it worked. He had customers willing to cut a check, though no software.

“What do we do? We don’t have a product!” Oaten asked Greathouse.

“Go talk to some people about that,” Greathouse replied.

It was Oaten’s first major lesson in the idea of selling a product before building it, rather than vice versa.

At SecureDocs, the firm thought it would sell a secure digital document storage system that would let users view but not copy docuements by pushing it out to lawyers who where working on deals. It turned out that lawyers didn’t really care – they’d set up a digital document room at a client’s request, but they didn’t care how much it cost or whether it worked well. SecureDocs instead focused on the businesses themselves, offering them a document room that was cheap enough to keep around permanently, rather than just for the short duration of due diligence during a deal. “Going through lawyers was very slow for us. Going directly to customers — much faster,” Oaten said.

Coryat founded Local Market Launch with the idea that he would compete against the Yellow Pages. In this day and age, customers find a business through the Internet, and he would offer to create and maintain an online presence in various directories for the mom-and-pop shops of America for less than $19 a month.

But it turns out that mom and pop are completely clueless and wanted to call Coryat’s sales teams several times a day with a stream of inconsequential questions and requests for hand-holding. “I turned to my sales guy and said, ‘Can you ask the guy: If we give him $19 a month, will he stop calling us?’” Coryat said. “It became absolutely clear that we could support the cost of selling to them.”

Eventually, Local Market Launch ended up selling through the Yellow Pages companies, which were looking for platforms to offer their existing customers to gain an edge against native digital competitors.

Coryat said new strategic ideas can come from a variety of places, like when one of his engineers told him that he had experience recruiting and managing remote engineers from Russia and India. Like all tech companies, Local Market Launch has to compete hard for engineering talent, so Coryat gave his employee the green light and now has a small international team.

But the reality is that some time changes are tough, and Coryat echoed others in saying that having to lay off good employees as a result of market shifts beyond their control is the hardest part of starting and growing companies. Coryat said his non-entrepreneur friends sometime ask him how he handles the stress of constant change in his businesses.

“Entrepreneurs sleep like babies,” Coryat tells his friends. “Every morning, we wake up at 3 a.m. crying.”

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