Monday, November 20, 2006

Adding a Human Touch to the Internet

When we first launched FundingUniverse, we used LogoWorks (Highly recommended!) to find a good graphic designer. The entire sale took place online -- choose a package, enter your credit card info, done. It was a pretty typical experience up until that point.

Within 1/2 hour we received a 5-minute phone call from a LogoWorks representative who ensured that we understood the process and offered us a discount on another package, which we declined.

I couldn't have felt more valued by LogoWorks. It totally impressed me and taught me an important lesson that I have often overlooked:

People need people -- even on the internet.

Most internet companies shy away from adding a human touch to their user experience because it is too capital intensive. Understandable.

However, a growing number of internet companies have proven that adding a simple customer service phone call after the sale can increase customer retention and revenues.

Two of those companies are here in Utah County: Ancestry.com and Doba. Both companies increased their revenues many times over by adding customer service calls to their user experience. The massive number of subscribers that these companies have proves that the process is scalable -- contrary to what most online companies believe and practice. I have inside info that two of the largest subscription sites on the web have begun experimenting with courtesy calls to their new subscribers.

At FundingUniverse we're following the lead of these great companies by adding a human touch to our customer experience. Every entrepreneur who posts a business plan on our site has been receiving a courtesy call from one of our representatives to ensure that the entrepreneur understands what we do and how get the most out of FundingUniverse. The response so far has been fantastic.

Can you add a human touch to your internet business?

What other internet companies have added human touch to their users' experience?

Wednesday, November 08, 2006

Will you ever, ever, EVER raise investment capital?

This past week, I've spoken to a handful of entrepreneurs who are trying to raise capital for the wrong reason: to avoid death.

It's unfortunate, because each of them are good companies with great business models. The CEOs simply got so busy running their businesses that they didn't start raising money until they were nearly out. Now they are raising money with absolutely no BATNA (best alternative to a negotiated agreement) to bring to the negotiation table. As soon as an investor gives them an offer, they'll have nothing to fall back on and are therefore much more likely to accept less than favorable terms.

Every entrepreneur should ask herself if she will EVER raise investment capital -- in six months, seven months, a year, two years, whenever.

If raising money is in your future, start talking to investors now and (prepare for shameless plug) subscribe to FundingUniverse's AngelReady Subscription to learn everything you can about raising angel capital. A combination of know-how, relationships, and (most importantly) execution on your business model will make you an attractive copmpany. Starting the process when you have plenty of ramp time ahead of you will also give you the ability to walk away from unattractive terms without risking death.

Monday, November 06, 2006

Angels Investors are Human Too

Tonight I had an enjoyable dinner with Chris and Brock before Brock and I did a little guest appearance in Chris' entrepreneurship class at Westminster College. Chris must be inspiring his students -- they were all well-prepared with thoughtful questions and insights.

Because of time issues, we were unable to fully cover a very important element of raising angel capital -- the human element.

Angels vs. VCs

VCs have a strict fiduciary responsibility to their partners that -- unless you're Tim Draper, John Doerr, or Mike Moritz --leaves very little room for "gut instinct" investments. With few exceptions, VCs have to invest in proven companies with proven models or they risk disappointing their LPs and disappearing when it comes time to raise the next fund.

Angels, on the other hand, can be influenced by several factors in addition to their desire to make a good return on their investments. Here are three of them:

Moral obligations -- I once heard a prominent angel investor here in Utah say that his angel group decided to invest in a company because "the company deserved to exist". Translation: The company stood for something they all suported. Before you pitch to an angel, do your homework and find out what, if any, moral/religious causes he supports. If you can show angels how your company promotes their cause, you'll be in good shape.

I'm not encouraging anyone to take advantage of anyone's moral convictions. I'm just saying that you should do your homework before you pitch so you know which angels would make the best match for your company.

Peer pressure
-- Frank Peters, an active member of the Tech Coast Angels, has confessed that he has closed his eyes and signed checks for companies simply because he trusted the other angels involved.

Part of this is the old "jockey and not the horse" philosophy applied to angel investing. Another part is something I've seen in many angel groups: If one or two influential angels in a group get behind your deal, odds are that a few others will follow for no other reason than they don't want to look stupid.

Personal interests -- A widget company posted a business plan on FundingUniverse.com for several months and received no contact or interest from angels until an angel who had used the widget in one of his favorite leisure activities got a look at the plan. A short time later the widget company was featured in the angel's angel group meeting.

The motives of angel investors vary from person to person. But if you do your homework and learn about the hidden forces that influence your angel's decision-making process, you'll find yourself in a much better position to raise money from them.

Friday, November 03, 2006

What do you listen to while you work?

With the launch of the new and improved FundingUniverse.com, everyone on the team has shared the responsibility of rating the 3,000+ business plans already posted on the site. Fortunately, we use an algorithm that makes rating plans very simple because there are few subjective judgments to be made.

During the hours of business plan rating, I keep myself sane with a steady flow of background music. I've discovered that not all good music makes for good "work music".

For instance, I'm a huge hip-hop fan, but great MCs have a way of getting their rhyme style to the front of my mind and breaking my focus. Soundgarden is grunge at it's finest, but it's just a little too power chord/distortion heavy to allow for any free flow of thought.

I've been getting things done with Counting Crows, Fat Boy Slim, Ben Folds, Rascal Flatts and a mix of instrumentals.

What do you listen to when you work?

Thursday, November 02, 2006

FundingUniverse Gets Facelift

Tomorrow morning, FundingUniverse.com will have a new look and a new business model. In my unbiased opinion, there's nothing like it on the web or anywhere else.

Here's what's new on the site (I'll add links to the features when the site is live):
  • Every business plan posted on FundingUniverse.com receives a rating (0-4 stars) based on an algorithmic formula developed by angel investors.
  • Entrepreneurs can purchase their ratings details for a song and find out what they need to do to improve their business plan and thereby receive more views from angel investors.
  • Investors will be able to sort through plans based on rating, industry, amount sought, business model, sales channel, etc. Each time a business plan that fits the investor's criteria is posted on FundingUniverse, an email is sent to the investor (as long as he/she opts in).
  • Entrepreneurs will be able to subscribe to a menu of services including chats with angels, interactive webinars, VideoPitch capability, ratings details, consulting, etc.
  • Registration for both investors and entrepreneurs is still free.
Bottom line:
  • Prepared entrepreneurs will get in front of angel investors and find funding.
  • Unprepared entrepreneurs will have the opportunity to learn and improve their business at an amazingly affordable price.
  • Investors will have increased access to business plans that meet their preferences.
  • More deals get done.
Big shout out to the whole FundingUniverse team for putting together such an amazing service -- especially Matt Bradley, our product development alpha dog, and Trent Miskin, our fearless and sleepless CTO. Nice work, fellas!