AsAble.com, empowering startups

GIANG BISCAN: Hi there, it’s Giang Biscan, from AsAble.com, a website to empower startup entrepreneurs. Today I have with me Michael LaRogue, he’s from Bumble Bee Flight School. Now Bubble Bee Flight School is… Well, I think I am going to let Michael explain this.

MICHAEL LAROQUE: Hi thank you for having me on your program. I’d love to explain what Bumble Bee does. We essential develop social media properties that helps niches of interested users communicate and engage in various platforms whether that’d be Twitter or Facebook users, engaging with a brand per se, reaching out in a promotional sense.

GIANG BISCAN: So the clients to you would be the brands, the handbag brands, the fashion brands, is that correct?

MICHAEL LAROQUE: Yes the client. Our clients and customers are brands, designers, fashion designers, handbag manufacturers and such.

GIANG BISCAN: Right, so the websites, for example, you talked about TweetMyStyle.com and TweetMyBag.com, how do these websites work?

MICHAEL LAROQUE: Basically from the user standpoint, if I have a Twitter or Facebook account, I can log in. And similar to TweetPic and TweetPhoto, but with a focus community and subject matter. For instance, TweetMyBag is geared towards handbag lovers. I would log in and upload pictures with me and my bag, and share that with my Twitter followers or Facebook fans. Usually can be corresponds to a promotion by a handbag company.

GIANG BISCAN: Oh I see, so this user would have a chance to maybe winning some sort of discount or maybe some sort of prizes, is that correct?

MICHAEL LAROQUE: Exactly. Most of the promotions would include some sort of giveaway by vote or random selection, as well as a financial incentive, to have a discount to purchase just by being contestants or participants in the promotion.

GIANG BISCAN: So we’re talking about your clients are the brands, so who have you got as your clients so far?

MICHAEL LAROQUE: Oh we did an initial launch in February with Rebecca Minkoff, she’s a handbag designer in New York city. And that was a 2 week promotion up to Valentine’s day. We’ve since done a charitable promotion with a number of brands that we have relationship with and you’re likely to be hearing about those as we unroll their promotions, but they included Thread Social, ALDO, UGG Australia… actually don’t have them all in front of me… Tiny Tage Designs, Jennifer Myer Jewelery… so it’s a variety of fashion. We have Nine West foodbag. So we run from shoes to handbag brand and every where in between for our clients.

GIANG BISCAN: These are amazing brands to be have them on your side, ALDO and Rebecca Minkoff and UGG and Nine West, so how do you get them. And actually what’s your revenue model?

MICHAEL LAROQUE: Right now we’re still exploring variety of revenue models, and it varies based on the clients and the ideas and goals of the promotion. For instance, some of the brands have been engaged with social media to a much deeper extent than others, and some are just larger and more recognizable, but may actually not have the penetration in social media, and the communication and the conversations that one would expects.

So we have kind of outline the promotions that we do with them with goals, whether it’s to increase Twitter followers or Facebook fans, or you get more conversations happening about the brand and products. We tend to look at what is the best interest. Is it giving a certain amount of time, is it to delivery sale? For example with Rebecca Minkoff, there is also a certain sale element.

Rebecca Minkoff has been fairly engaged with social media, with Twitter, facebook and her own blog, fairly active. So we knew that she had an audience, and we want to growth that audience, but we also wanted her audience to be… maybe not incentive, because incentive would have been the contest and the free bags that she gave away. Other incentive is that if you participate, you get a discount on her bag. So you could already be a follower and still be participating.

Because of the nature of the site and how they work, they spread virally. Every comment gets sent out to the Twitter and Facebook network. So when somebody participates they share that with their Twitter and Facebook followings. Anyone that comments on that, they also be sharing. So the brands and how we target them and how we meet their needs will vary on depending on the size of the brand, where they’re at, and their social marketing if you will.

GIANG BISCAN: So for example with Rebecca, what exactly is the deal, what was the arrangement? Did you get a fixed fee for the campaign or how did that work? Or do you have in the backend of your site some sort of analytic tools that she may be paying a subscription fee per month, or how did that work?

MICHAEL LAROQUE: Basically, with Rebecca Minkoff’s deal, we are not at the liberty to say all the details how… but we do provide an analytic element of it so that we can share with our clients as far as the conversations and how they are being talked about as well as traffic as far as users, followers that were added from the promotion. So with Minkoff for instance, we grew, I believe around 10,000 twitter followers. I have the numbers but they are not in front of me, but we grew it just over 20% over the period of the promotion.

So one of the thing we look at for revenue model is the value per user and try to see how that translates for small brands, big brands, medium brands. So when we get into the partnership with them, we focus on what we deliver for them. So for instance, with Minkoff, we added 2000 followers to her Twitter account. Some of the brands that we are going to be working with have a much smaller following than Minkoff, so adding 2000 followers is a big deal to them. So we are trying to create a revenue model that makes sense in that type of value.

GIANG BISCAN: So I am curious in term of the return for the brand. For example one of my past clients is a luxury jewelry, Italian jewelry, and one of the thing I noticed is that even though you may be getting a very large audience who are engaged with the brand, in the sense that they love the products and they want to be able to be a part of the brand but they can’t afford to buy it. So even though you’re growing this following, how many of them actually converts into actually buying more bags than they otherwise would have beforehand?

MICHAEL LAROQUE: Right, we actually do gather the data on that, the analytics as far as the traffic, versus participants, versus the people that are going on to engaging in a shopping experience. Obviously you only get access to the discount that is offering through that promotion period. So we do gather that data and give it to the client, as far as here’s the leads that we deliver then if there were any purchases from that, we determine the conversion rate.

GIANG BISCAN: So you mentioned for example you grew 20% of the followers for Rebecca, what did you do to grow this audience?

MICHAEL LAROQUE: Well, one of the most striking thing we learn with launching TweetMyBag is to complimented twitter and facebook with a grassroots uprising, if you will, so the way it spreads is whether it’s a Retweet, or it’s a comment, looking at our analytics we see that some people have very small interest in handbag or fashion, but they still participate to share with their followers and their friends who would then engage in the promotion themselves. So a lot of our traffic and followers growing came from the grassroots viral words of mouth. And then what happened is a lot of blogs that cover fashion would cover the TweetMyBag offers, so this is a really interesting interplay in the community that are passionate about bags and fashion.

One of the thing that we try to do early on with developing the technology is to reach out to kinda of the loyal core user base, for this instance, that would be the fashion style bloggers. So I work and developing relationship with these bloggers and get their insight in term what they want our site to do, what they like to see. And they were very helpful in term of orchestrating the campaign with Rebecca Minkoff.

So one of the things we did specifically with that promotion is we work with Rebecca to create a theme. So each day there would be a different look and we would feature a bag, So we coordinate with the bloggers we have relationship with, getting these bags to them so they can sort of do one of these cool style look. It wasn’t a gift or a prize for the competition but more as a sample from the designer. So they would use the samples and put together a look, and when that day came, they would post on their blog, and they would upload the pictures of Rebecca Minkoff bag to our site.

GIANG BISCAN: So you and your wife work together starting this company, right? Are there anyone else?

MICHAEL LAROQUE: Well, there are a couple of other contract developers, not full time. I am doing it full time. My wife and I started this actually in 2008 and it shifted dramatically from where it started. My background is… the short version is I was at Lehman Brothers at the turn of the millennium, and left that to start an interactive theatre company in Vermont. And then I built that company by doing development and internet marketing as a consultant.

Then 2008 I moved back to New York city, I was hired by ?.com, a radio internet social site. And we grew their registered members based from 1 millions to 2.5 millions just over a period of 6 months. Then I left to start Bubble Bee School. We initially started a niche news aggregation platform, and for whatever the reason, it just didn’t move the right direction. And I wanted the company to move to where my interest is rather than just a technical company.

GIANG BISCAN: So did you guys have background in the fashion world?

MICHAEL LAROQUE: My wife has experience in fashion, she is more like my co-founding, or my sounding board. As far as fashion specifically, as a consultant, I worked with a clothing company.

GIANG BISCAN: Something that I thought really interesting was what you guys did recently was the launch of TweetMySmile.com, would you talk a little more about this campaign?

MICHAEL LAROQUE: Yes, and I am glad you actually brought that up because that something that early on I always wanted to make sure that, having started 2 businesses, I want to make sure that I had a social conscious or charitable aspect and a contribution that we make from the company and being a startup and pulling all the resources that I have, I can’t make huge donations and a lot of money to non-profit, so one of the things I want to make sure is that I stay socially responsible with the company.

I always have this spot in my heart for the SmileTrain charity. Their donation is what I view as the perfect birthday or Christmas gift for friends and family when you don’t know what to get. I would give donation in their name then give them the certificate as the Christmas gift. So I started thinking given what I’m trying to do with the new company, how can I work on providing a social promotion…

GIANG BISCAN: I’m sorry for interrupting you, for people that don’t know what SmileTrain is, would you explain a bit more about what SmileTrain before we move on to talk about TweetMySmile?

MICHAEL LAROQUE: Yes absolutely, I’m sorry, so SmileTrain is a charity organization where they raise money and then give 100% of the money raised to surgeries for children with cleft lips and palates in developing nations. It’s just under $250 for a full surgery. So they have a number of offices around the world and they work with staff centers on site at different countries that do the surgery and as I mentioned before, they donate all the money they receive directly to benefit the children.

GIANG BISCAN: Which is amazing, right? Small amount of money, $250, and it saves a child life, I meant it changes the child’s life literally.

MICHAEL LAROQUE: Yes, and to me it’s a charity, a cause that you see it and it’s long lasting and it changes their lives and it’s so visual, and if you give a donation, they ended sending the picture of the child that you helped. So it’s forever lasting and it strikes you visually, so you can’t deny that you change someone’s life. So with TweetMySmile, we launch it with the idea of getting companies to pledge based on $1 per photo uploaded to the site.

So what that means is anyone with a picture, you would log on the site and upload the picture and we would have a daily sponsor, whether it was ALDO, or whether it was Thread Social, they would donate $1 per every photo that uploaded that day. So we raised just under $2000 over the period of 5 days. So a lot of people uploading pictures and one of the spin off is not just the donation that we raised but also a lot of people becomes aware of the charity, and they were able to engage in something exciting and interesting to contribute whether they were making donation themselves or uploading the photos.

So they were able to engage and help out SmileTrain. And we also have some generous sponsors and advertise that provide us product donations as prizes that help create the buzz. So we did random raffle to those that participate. For instance one company donates an iPod Touch for us to give away. So people who upload a picture not only have a chance to win the iPod but also helping to raise money for SmileTrain.

GIANG BISCAN: That is great. I think that is a good traction for a 5 day promotion and it wasn’t a long time and you raised $2000 dollars. So good luck with that and I really appreciate you coming along today to do the interview and keep us posted with your progress.

MICHAEL LAROQUE: Thank you and I am glad to be on your program.

Giang Biscan: Hi there, it’s Giang Biscan from AsAble.com, a website to empower startup entrepreneurs. Today I have with me Edward Dekeratry from Vokle. Edward, how are you?

Edward Dekeratry: I’m good. How are you?

Giang Biscan: I’m good. What’s Vokle?

Edward Dekeratry: Vokle is an online town-hall platform where any hosts can basically broadcast their audio and video to a virtual auditorium of viewers and they can actually take live video calls or text questions from anyone in the audience. And the entire platform can actually be embedded in any site, just like an youtube video with a single line of code. And that’s basically what Vokle is.

Giang Biscan: OK, so it’s a little bit more interactive than, say, Skype, or some other broadcasting platform.

Edward Dekeratry: Right, absolutely. So for some perspectives, Skype is basically more of a one on one for the most parts. You may have some other products that are conference calls. They approach the internet more like an internet telephone. And if there is an internet telephone, we are more like a townhall. Something closer maybe… you know there are other platforms out there that can basically stream out their audio and videos, to a virtual auditorium, you know and there’s like ustream or Justin.tv, with live stream.

What we do is we basically said what I that host can not only broadcast but can take video from audience to have an engage dialog. And we took that one step further and say what if they can have multiple co-hosts, to have several to many streams going out and take video calls from the audience, all while being able to be embedded on third party sites.

Giang Biscan: So is this a technology that you guys develop in-house or did you outsource?

Edward Dekeratry: Yes, so we actually built this all in house. So, the way the company started was that my partner Robert and I, Robert came up with the idea, started to put the project together, and he asked me to put the team together with the initial financing. After raising the seed round, we went out started to look for local team engineers that we thought that were interested in changing the future in the way people interact in the near future online. And we did it all in-house.

Giang Biscan: So to run the site now, in term of technology, is there a large infrastructure cost for you?

Edward Dekeratry: So it’s interesting that ever since thanksfully literally to YouTube we’v seen the cost for video archiving and streaming go down substantially as far as by cost per Giang Biscant. Most of people think if there is a large amount of bandwidth. The answer is Yes and No, obviously it’s a major portion of what we do, but the costs aren’t excessively high. They are manageable as far as pulling a good amount of advertising and other revenue streams to offset that.

Giang Biscan: So you mentioned that you had a seed round and you recently got close some more funding, right? Is that 2 separate rounds?

Edward Dekeratry: So yes, the seed round allowed us to pay the initial engineering, to build the prototype and to the current product that we have. That was our seed round, just to take an idea proving that we can build something with value. Now what we’ve done is we’ve taken a small angel round that we are about to close right now to push us towards some key revenue models that we are building out and some essential features that will lead us into the following round, the VC round.

Giang Biscan: And when are you looking at raising the VC round?

Edward Dekeratry: We are looking at the time frame pretty rough right now, I’d say we are looking at about 6 to 9 months.

Giang Biscan: So I assume that there are some specific milestones, what are you trying to achieve by then?

Edward Dekeratry: Yeah, we’ve got a lot of our publishers actually doing the recording themselves, as far as the video, the recording functionality. So that’s something that we are very excited to be finishing up right now. So it’s just finishing that up. Milestone is definitely recording. Also looking at the changing as couple of things as far as the flow as far as changing the ways that help promoting the events online. We are also looking few key revenue models that we are thinking that are key to help monetize the site.

Giang Biscan: So what’s your current revenue model and what are you looking to change it to?

Edward Dekeratry: So right now our current revenue model is basically we would be bringing in revenue from video advertisement. So it’s like a video roll, each viewer comes into the room will see and the host every 30mins will have another video roll. Much like Hulu where you have the video advertisement plays. So that’s what we are currently doing for the revenue model. As far as the other revenue model, it’s still kinda in the work. There is nothing too specific about how we are going to go about it but we do have a couple of options that we are exploring.

Giang Biscan: So I noticed you guys got into the finalist list of Vator competition where you mentioned about ticketed events as one of the revenue model. Is that still something that you are considering?

Edward Dekeratry: It’s something we are exploring as far as how we may be able to integrate that into the types of events that we are doing. So we still look closely into that as well as some other models that may work better.

Giang Biscan: And you guys went on private beta for a long time before launch, right? Almost 2 years, is that correct?

Edward Dekeratry: Yes so we were on private beta for over a year and half. And we’ve been building the prototype for quite a while. Trying to sort out the concept. And we actually present the concept at the Demo conference in March of ’09. We got good feedback for some of our early clients and early adopters. And we went on with that private beta through ’09 until we release the platform in December.

Giang Biscan: And what’s the decision, why did you choose to do a private beta instead of public? Is going to Demo one of the factor in choosing private beta?

Edward Dekeratry: Yeah so the purpose behind doing private beta because we wanted to have a control environment where we knew who the publishers were and we were working closely with them. So they were broadcasting out to the virtual auditoriums. So we were working closely with them so we can see behind the scene what happened at the high level when a high traffic comes in. It was kinda a private public beta in the sense that anybody in the public participate in the event, they can video call in, they can ask a question, they can text chat. But not everyone can be the host on a Vokle event at that time.

So everyone can participate and have the Vokle experience, but at the same time, we were private in a sense that we would only select the hosts that are testing out. So we wanted to make sure, we didn’t have too many events, we just want to have the specific case studies that we can learn from and figure out what need to change, what happened here, this is what we can do there. So I would call that a private-public beta.

Giang Biscan: That makes sense then, you have a smaller group where you can get direct feedback. So what did you learn through that period, and how did your product and technology change from that period?

Edward Dekeratry: So we started realizing that some of the flow of how you call in and ask questions and taking questions, and we started to see that a natural process formed where we were thinking “OK…” so even something simple as copy to the location of the buttons. Or something more elaborated like maybe an additional feature that we haven’t thought of like “umm this may help simplify the process”.

Giang Biscan: What are you doing now in term of your marketing effort to drive in the traffic, the users?

Edward Dekeratry: The most important thing to us is that we work with the most compelling speakers on the platform, as far as you know, educators that we think are educational at their core, but there is also a fun and entertainment opportunity there. So whether it’s a musician or an author that we think that can have the opportunity to engage with the audience back and forth. So we just focus on individuals that we think we would like to see or have the opportunity to talk to in the real world that we may never have the opportunity to do so, based on their travel schedule or location. And based on the positive experience that they have with us, we kinda see the effect of words of mouth recommendations that have the further outreach that brings additional publishers and speakers to the platform. That’s primarily what we are doing right now. ,

Giang Biscan: So you are reaching these people individually and these are influencers that you are selecting?

Edward Dekeratry: Correct, so that’s one way that we are going. And the other way is we are trying to figure out how we can help our community that are forming reaching out to people that they are interested in. So they can say “Hey, I want to see you on Vokle.com”, so we are building that type of tools that help them bring the people they like to see to the platform.

Giang Biscan: How did you meet Robert, your co-founder?

Edward Dekeratry: Good question. So we actually met at a transfer session. We actually both transferred into USC film school here in Los Angeles. That actually was the first time I met him. He was there, very creative talented guy. Very interested in business and physically directing side of projects other than more just the producing side. It was a natural chemistry that formed between us. It was like “Hey I like to tally up the financing and team, you like to watch the vision and culture and the final products. So it was a very natural synergy between us.

Giang Biscan: How many people do you have right now?
Edward Dekeratry: We currently have 5.

Giang Biscan: So how did you bring in other people?
Edward Dekeratry: So the important thing for me in a startup is not necessarily the label who is hiring. The important thing for me is are you bringing in the team someone that they can excel in something that they are doing and most importantly do you get along with them. And can you guys collaborate on things together, right? The way that we went about it was… and it goes for anyone in a startup, is that you’ve got to try to go grass root with it. You can’t just say “hey, mum or dad, do you know anybody that is studying coding?” or go to your facebook and goes “hmm, which one of my friends graduate from the engineering school.

The best thing to go about it is doing a little bit of research on what you want to do, as far as the technology you want to use and need for your company. What do you need, like do you need css, or do you need C++, or do you need ruby, or do you need java, or whatever maybe. And then what we did is we went through all the local universities here in Los Angeles area. We’ve got the course list and we went through every single computer science or computer engineering course that we are looking for. We find out who the professors were that were teaching those classes.

And then we set up meetings with those professors. Basically “hey, we are a startup, we’ve got funding, who are your best students, we would love to have them because we have really cool projects and we would love to work with them.” And that’s how we went about finding the original people.

Giang Biscan: Wow, it seems like you did a lot of homework in the effort of building this team. How long did you spend on that?

Edward Dekeratry: I did that over the course of the summer actually. At the point, we weren’t in the process of coding, we were more focused on the individuals that are going to be with us. So I dedicated a good portion of time and we spent a couple of weeks, we had our meetings set up and we were meeting different individuals. And once we find a couple of key individuals that were willing to go out with you and start building then you were on a good track because they can help you from that point on and to help you find other people. So it’s a very pragmatic approach in building a team.

Giang Biscan: And you guys are out a lot right? I noticed you are at a lot of networking events.

Edward Dekeratry: Yeah, the way that works is… and that is a really good point. Originally when we were in private beta, I didn’t get out very much, but I do want to do is I want to find… I wanted to be closer to the tech scene here in Los Angeles. So that’s what I did, I started to go out and meet individuals because there is a ton of people out there doing really cool stuff.

And it doesn’t matter what your products are, you never know what may be a synergy later and working together and who they may know that you can help them and how they can help you. So it’s really important to get out. It also gives you a perspective on what you’re doing. You know when you’re inside your bubble, building your company, always important to go out and say, hey what do you think of this. And then get the outside perspectives. And then you can do the same for what they are doing.

Giang Biscan: You have done basically twice the fund raising activities. What did you do? How did you raise the money, especially it seems that it’s your first time raising money, right?

Edward Dekeratry: Yes, it’s my first time raising money, and the way that we go about… once again, a very different approach… so we basically found an attorneys hat we knew that either family or friends, and they have clients that are in the technology space. And we would get some face time with them, pitching the product or idea and ask “do you have any clients that may be interested in this?”. And they would hook us up to some meetings and those people would know some other people. And that would lead to more meetings and meetings and meetings.

And eventually we started to boil it down to like what we did with the engineers and down to who fit what the deal that is on the table, OK this guy understands the vision but this is the deal here, or this guy understands better… we started to weight different options. This was of course before the economic slump that happened in 2008 and that was basically how we went about it.

Giang Biscan: What about all the events that you went on, I noticed that you went to Tech Coast Angels where you pitched at, you went to Demo, or Vator, were they helpful?

Edward Dekeratry: Were they helpful? That’s a great question. If there is one thing I would say to be careful is you have to always be careful of venues or events that you think that there is a great opportunity to meet individuals and that. You’re only going to get as much out of it as you put in. So it doesn’t matter if you’re going to be presenting, or if you’re going to be attending, or it may be even a local mixer at a local restaurant or a local meetup. You’ll only going to get as much as you put in.

So if you really want to meet with some people, you follow up with them, you see the contacts and see if you can help them, and how they can help you, and you figure your way out. That can get you somewhere. If you just go somewhere and expect something to happen, and you will learn a lesson, and whether you pay for it, and general for an event, you have to pay, right, some type of fee for the entrance or ticket. So I would say to be careful where you spend your money because the internet is making it easier and easier for you to market at a lower cost but there is nothing that can beat real world interactions.

Giang Biscan: The face to face.

Edward Dekeratry: Face to face.

Giang Biscan: So far what is the biggest obstacle for you?

Edward Dekeratry: The biggest obstacle is probably… Umm… there have been a lot of obstacles. I think that goes for any startup. I think the biggest obstacle for me, and this is a personal one, is trying to find the right lense. So everybody is talking about the startup life, right, which is you guys get together, you work all the time, and the obstacle for me is where is that work life separation. Is there a separation, and what I came to realize for me is like there is no work-life separation. Everything is revolving around work, one way or another. It just happens organically.

So if you have never done a startup before and you want to a startup, you have to be willing to sacrifice absolutely everything. And like you said we have doing this for 2 years, raising this current round of early angel financing. You have to be willing to give it your all because for the 90% of the companies that are out there that fail, it’s just because you got to want it. So the obstacle for me was I thought that there maybe some type of separation… I enjoy everything I do, does it always have to be involved around work? Yes. I mean we are having this conversation at 9pm on a Sunday. And I appreciate you making it at 9pm but that’s the way it is. You know.

Giang Biscan: Right. Do you always know, do you ever have any doubt about this idea? Did you start out this way or did it change over some period before you get to this idea?

Edward Dekeratry: Oh yeah, it definitely changed. If you have a look at what we presented at Demo, that was kinda a prototype. We knew the sort of the direction that we wanted to go. But we didn’t get into until we get the outside perspectives from individuals, in this case it was Demo and some of our early adopters. That outside perspectives that say “well, they don’t see the value in this but they see the value in this”, and we were thinking about doing this but they like this more, so we started to change, and then kinda head to that direction you know. You can’t necessarily control the ship but you can definitely steer it in a certain direction. You can lightly change the direction of where you wanted it to go, and that can have a lot of influences. It wasn’t absolutely solidified when we went on this journey, but we kinda found our place.

Giang Biscan: That’s great. Thank you. I really appreciate that you come on today, like you said it’s 9pm on a Sunday night. So for the last question, what about the biggest lesson learned?

Edward Dekeratry: Biggest lesson learned? How about a big lesson learned? There are a lot of lessons learned, biggest I’m not sure. A big lesson learned is there is never going to be many people, doesn’t matter how brilliant your idea, how amazing your marketing strategy, there will never going to be as many people as you think, that are interested. And that’s not necessarily a bad thing. Even if you land the cover of the LA Times, and you can go “Oh my god, that’s crazy”, you can’t expect that to have a real impact necessarily, so it’s kinda interesting because you see everybody talks about media online and get picked up by the media but it just doesn’t have… it has a tail effect but doesn’t have a crazy impact, so you can’t expect that changes the world over night. You’ve got to continue working, don’t let it have your hope up so high, to the end of the day then it’s like “Oh man, I wished that was it”. Don’t let it holds you back. I think that’s important.

Giang Biscan: So I guessed it’s like you said it, you have to want it badly to keep going with it.

Edward Dekeratry: You’ve got to keep going with it because what happens is you’re going to have this incredible thing happens and it’s a roller coaster. Startup is a roller coaster. You have some really high-high, and you’ve got some really low low, but at the end of the day you’ve got to want it and you’ve got to realize there is no separation and you’ve got to be all in. The founders and the early team is the company and the company is the team. And that becomes the community that uses the product. And all becomes one. And the separation line becomes blurred.

Giang Biscan: Thank you so much. Really appreciate that.

Edward Dekeratry: Absolutely.

Giang Biscan: Hi there, it’s Giang Biscan from AsAble.com, a website to empower entrepreneurs.  I have a surprised guest today, someone that many of you would probably have known, the man behind Los Angeles biggest technology event that combines a showcase for innovation, a platform for thought leaders and an audience of entrepreneurs, media and investors.  I am talking about Twiistup and the guest today is Francisco Dao, also known as @TheMan on Twitter.  Francisco, how are you?

Francisco Dao: I’m doing fine, thank you.

Giang Biscan: I hear you’re on the train today?

Francisco Dao: I was, actually, first time ever on Cal Train, which is very nice but it’s kinda slow, so my whole day is running late unfortunately.  But just up here in San Francisco, going to talk to a few people.

Giang Biscan:  That is cool.  So for the people that are used to events that are full of sessions, keynote speeches, and speakers, it seems that you have a surprise for us.  What is The Retreat?

Francisco Dao: Well I hope the Retreat is not a surprise, but the Retreat it’s a 3 day, I guess you can call it a conference, except that there is no conference.  So there is no speakers.  There is no sessions.  It’s very selective.  People apply in order to get chosen because you know when you go to most conferences or events whatever it is, it’s not about networking but it’s about networking with the right people.  So we thought if we could have a really selective group where everybody is legit, where every conversations you have and every person you meet is someone who you can have an interesting conversation with, that would be a wonderful thing. 

So we came up with the idea of The Retreat, it’s very similar to David Hornik’s The Lobby, some of you may know that.  It’s 85 selected people, 3 days, at a resort, just hanging out, talking, having a good time, and having a conversation that is really productive.

Giang Biscan: I saw the photos on your site and it’s a luxurious 5 star resort, it’s amazing.

Francisco Dao: It is… yes, it’s a very nice place.  A very nice place.

Giang Biscan: Yes.  So who should we expect to be there:

Francisco Dao: Well I mentioned David Hornik’s The Lobby, David Hornik is a Venture Capitalist at AugustCapital.  And he does an event every year called The Lobby in Hawaii.  And The Lobby is by invitation.  I asked David Hornik to co-host this event, so David will be there as a co-host.  And Andy Sack is the head of Founders’ Co-op angel fund in Seattle.  Om Malik of Gigaom.  We got just… the kind of people that applied are so high quality, and amazing.  So for example the CTO of the National Football League of the NFL applied to come, and executive of Digital Media of Paramount, and I’ve got VC from New York, from Germany… Actually a VC from Germany just applied and I’ll extend the invitation to him. 

I’ve got entrepreneurs from Boston, from Toronto, obviously from San Francisco, so this is just…  I really hope to bring together, and I mean there is no reason why I say I hope to but the applications are coming in and we are going to have this group here of entrepreneurs from across the country, and even some from out of the country.  And VCs, not just entrepreneurs but everyone from VCs to entrepreneurs to the guys with larger companies… You know CTO, or strategy role or Biz Dev, just all there together.  A very intimate setting.  I was telling someone today that the goal here is I want everyone there want to be friends with everyone else, so to create a really comfortable environment.

Giang Biscan:  That is awesome, very special.  So what would be the selection process?  So I notice that you have an application online where people can come in and apply for it…

Francisco Dao: Yeah, so the application is online, and I encourage people to apply.  As far as the selection process, well, there is no particular set criteria.  I look for certain…  So I mentioned Boston, there is a guy in Boston, his name is Brian, and he applied.  And Brian in Boston is a co-founder of a company, it’s a funded company and you know that’s great.  That’s all good and fine but what made Brian really interesting and why I extended my invitation to him is he is very active in Boston.  He actually, outside of the company that he cofounded and work for now, he also helps started the first co-working space. 

You know he is very active in the Boston community, so there is someone who doesn’t just show up to say this is my company, this is what I am doing but he shows up and can actually tell people, hey this is what’s going on in Boston.  These are the kinds of companies, these are the kind of people that you are going to meet there.  So there is no hard and fast rules of you have to be of this company and do this kind of work but it’s more “do you bring an added element, can you bring an interesting conversation to the group.

Giang Biscan: And I assume it’s going to be very selective because there is only 85 people and you already talked some amazing people that you have already extended the invitation to…

Francisco Dao: Yes, it’s limited to 85 people because the bigger the group,…  Bigger is not always better, you know with the smaller group you have just the opportunity to have the real conversation.  There is one thing this is not like meeting people and getting business cards.  You can do that anywhere.  You can do that at many mixers, conference and many events.  This is about building actual relationships, like I said, my goal is I wanted to be friends, if I’m not already friends, I wanted to be friends with the people that are coming here.  And I wanted everyone coming to feel that way. 

So recently there is someone who applied, who I thought on paper was qualified, but I talked to few people about him and they thought that he was…  Well, let’s just say he didn’t have the best personal reputation.  And so for me, I said no, I’m not going to give an invitation to this guy because, like I said, my goal is to have an environment where people can feel that they can really build relationships.  And if someone doesn’t have the best reputation, I don’t want them there.  Just not the kind of persons I want there.
Giang Biscan: So you’re looking beyond the application that you received, you actually talk to other people to get feedback.

Francisco Dao: Absolutely, sure.

Giang Biscan: So it’s interesting, you talk about forming relationships and you have written this ebook about social influence.  So when it boils down to it, what is the book about?

Francisco Dao: Well, I think people network the wrong way.  You know I think a lot of people go out, they look for the richest guy in the room, or they all about business and they don’t build the relationship.  And you know for the most part, most people don’t like networking.  Networking kinda sucks.  I don’t know anyone who actually likes to network.  Before I have written the ebook, I actually have a paper, a real book on Amazon called Killer Attitude, it’s about confidence.  I enjoy and I fancy myself as someone who understands social psychology. 

So I was sitting there one day and just generally annoyed at the ways people talking to each other and the ways people network and the way people thought they were building relationships.  So I just wrote this ebook called Business Cards Don’t Matter and Other Secrets of Social Influence.  And the title of Business Cards Don’t Matter is because I don’t believe that they do matter.  They are good for getting a phone number or whatever, but just because you gave me a business card, or I gave you a business card doesn’t mean that you’re going to call me, and it doesn’t mean that you’re going to do business with me and it doesn’t mean that you will come to my conference or I’m going to refer you to somebody. 

So this ebook is about really what I think – and you know some people may disagree – but it’s really about the way I think relationships should be built and how people should be handled and how you can make them feel comfortable and things like that.

Giang Biscan: That is true because when you do business you want to do business with people that you like, you know, right? And people that you trust.

Francisco Dao: That’s what I do.  Not everybody agrees but that’s what I do.

Giang Biscan:  So, on your book I noticed that you left your phone number and your email address.  Aren’t you worry?

Francisco Dao: No, I am not worried at all.  There is no reason to be.  You know Robert Scoble @scobelizer tweet out his phone number all the time.  And he’s got… I don’t know how many he’s got, he’s got like 200,000 followers and have a much much higher profile than I do, so if people aren’t blowing up Robert Scoble phone, they are probably not going to blow up my phone and it has not been a problem at all.

Giang Biscan: So the last question before you go, I have a question from the audience, someone who is a friend of yours, someone that I am not allowed to say who it is.  So the question is “I hear you are abnormally connected to the Norms restaurant.  Can you tell us what your affinity to cheap dinner food is all about?”

Francisco Dao: (laughed) There is a… I actually like it.  I am a low brow, I am a very regular guy who does not take himself seriously at all.  And I don’t believe in…. well, not that I don’t believe in, I like good food, but I don’t like good food just for the fancy part of it.  If we can go out for steak, I am always happy to go out for steaks, but there are too many fancy restaurants, where you go and it’s just like “well, what’s the point of that” that sandwich was horrible, and I don’t really get it, so I eat at Norms, because I like it.  And there is no… I am not on Norms payroll in anyway shapes or forms, I do like it.

Giang Biscan: Thank you, thank you for coming on and talk to me about The Retreat today and about your ebook.  Really appreciate that.

Francisco Dao: Thank you for having me.

Giang Biscan: Hi there, it’s Giang Biscan from AsAble.com, a website to empower startup entrepreneurs. I have today with me David Lifson, David is the founder of Postling. They have recently closed a round of angels and it was really amazing how they closed that round in 6 days at SXSW. I invited David to come here to talk about Postling as well as how he raised the money. David, how are you?

David Lifson: I’m doing great. Thank you.

Giang Biscan: So what is Postling?

David Lifson: Postling is a dashboard for local businesses through which they will be able to do everything they need to do online, ranging from their social media management to tracking their latest yelp reviews for their businesses to eventually checking into the store, foursquare, publishing deals, to Groupon… Generally speaking there are hundreds of tools out there that could be useful to local businesses, if only they knew about them. So we are going to use the best ones, and using their API, and integrated them together into a single dashboard.

So the primary problem we’re solving is “I don’t know what tools to use, please help me with that”. But then effectively the problem that we are also going to solve is “now that you have all these tools in front of me, I have no idea how to use them effectively.” So we have this strong education component to Postling that we’re working on where we’re going to suggest things that you can do, and also providing you access to a community of people just like you. A community of local business owners who can help you by sharing tips and advices, successes.

I know that technology can really level the playing field, in term of what people can do on a small budget versus what corporations can do on large budget, so what we’re going to do is to say “How can we with technology help small businesses drive more people through the door?”

Giang Biscan: That is great. And with this target group of users, the problem I think with small businesses is that they are very fragmented, how are you going to target them?

David Lifson: Yes, that is always a tricky question, so we are doing it in 2 ways. One is your very standard channel partnership, so we’re reaching out to Chamber of Commerces, Small Business Associations, Great Unions, and larger partners like Yellow pages, so that they can help us market to their customers. And that is sort of a top down approach.

And then the bottom up approach is through community. So I don’t know if you know this but my co-founders were the co-founders of Etsy.com which is the handmade marketplace where you can buy and sell jewelries, and potteries, yarns and you know all these handmade sort of things. And Etsy has this fantastic community, 5M members and they make million of dollars, and Etsy has these sellers’ communities, and I don’t know the exact number but I’m guessing it’s like 400 world wide, and each of these communities serve a specific region. For example Seattle has this great Etsy team.

Or they are sliced by verticals, so you know, there’s a team for people who make potteries… And these are sellers on the site who were getting together monthly either in person or virtually, and sharing tips and ideas, and business strategy across marketing and packaging to social media customer relation… And they also benefit from the economy of the scale, because they all pull their money together to buy a bigger booth at a craft show, or produce a higher print catalog and mail it to their customers. That’s really amazing, right? And so what we are trying to do is to re-create the same community of business owners, but instead of focus on handmade, we’re doing it for brick and mortal businesses.

Giang Biscan: Right, and you used to work there too right?

David Lifson: That’s right, yes, so I was only there for 6 months, but they hired me to run the product team. And that’s where I learned a lot about how they became successful.

Giang Biscan: That’s excellent. And you mentioned about the channels, like SBA or Yellow Pages, so what are the incentives for the partners to help you, to partner up with you?

David Lifson: Yes, so for separate reasons. The Yellow Pages and Chambers of Commerce are sort of dying businesses. Right? In the sense that their memberships are expensive, I think, and dwindling, and I think that because the internet has, specifically Google has, opened up to all of their members access to information that they couldn’t get before the internet. Right? That’s why you join these things, because you want to network, you want to meet with other people, you want to have access to seminar that can teach you about new technology and regulations and whatever they might be. Or the case of Yellow Pages, you’re buying an ad in the Yellow Pages because that was the only way that anyone ever gets to hear about you.

But now, because of the internet, for a lot of businesses it has become a lot and lot unnecessary and so they are very interested in looking for ways to sort of freshen up their offerings. So if they can say “In addition to buying a year long subscription to Yellow Pages, we’re also going offer you this great technology tool called Postling.” Or “If you become a Chamber of Commerce member, you’re going to be able to get a discount on this great tool called Postling”. So it sorts of make them, for their sale people, to get their foot in the door and make it more relevant. And the conversation started filled with subject matter that is of interest and something that is new to their potential customers.

Giang Biscan: That is great because you help bringing them to today technology, so they make perfect partners. And you mentioned about education, so what exactly are you doing in building that community?

David Lifson: Yes so it takes time, you know, but it will definitely pay off. So what we are doing is we started something we call Sidewalk Collective, and you can find it at sidewalkcollective.com and it is a monthly event for local business owners to get together and share tips and success stories and strategy. And we’re doing it in partnership with a friend of ours called Scoop St, another startup in New York city that does group buying, a lot like Groupon and Living Social and a couple of places that you’ve heard of. And we’re having our very first meet-up the week from tomorrow, Monday the 21st in New York city.

We reached out to 100 local businesses in New York city who we believe will become the nucleus of this community. So what we have done is identifying these businesses that are already on Twitter or on Facebook in someway. You know there is a point at which you can take things for granted, like they know what Twitter is, they know what a username is. If we can bring them into a room, and if they have really positive interactions with each others where they actually learn something, and they go home at the end of the day and thought “wow this was really worth it”, they’re going bring their friends to the next month meetings, who will bring their friends to the one after that. And so it will just grow organically.

But we know that there are a couple of things that we learned from doing it at Etsy, one of the most important I think is that the leader of the group is a volunteer. It’s a member of the group, not us. Because if the leader of the group is the peer of the group, then the interaction will be much more authentic. The last thing that we want is for this to turn into some sort of a sale pitch. Like “Come by a timeshare in Hawaii” you know. So what we have done is we have the social media director of the Roger Smith hotel, Adam, is going to be moderating the conversation. And because the Roger Smith is a family own business, he understands the day to day challenges that everyone else in the room experiences, it’s going to be so much stronger connections and a better conversation.

So we’re doing it in New York first, and once we get all the execution related details down, we’ll be expanding to other cities. Next will be LA, then after that similar other cities. And the thought is that I want to have a community manager in each city, someone who lives there and can walk into a café, and be the person that café owner know and will have the relationship with.

We already have someone in LA and when we enter other cities, I’ll be looking for people in other cities. Because I feel like these brick and mortal businesses, their whole businesses are around personal relationships with their customers, right? And so they need, I think what they really want is to have a personal relationship with our community manager. So we need to have someone on the ground, so they can call when they have questions, or whatever it may be.

I have a community manager in New York city and she is great, her name is Sarah Cooley, and she’s a friend of mine and Sarah is handling New York, and I have a friend named Jen Rubio who is in LA, and we’ll keep looking for most cities for people who can help us.

Giang Biscan: And you mentioned in one of your blog posts that said that you actually changed the direction in term of your target user group, would you talk a little bit about what it was before and why you made the change?

David Lifson: Absolutely, so this is actually our third pivots and our second business. So I’ll explain. We started a company called Waffl.com, which is a community marketplace for Bed and Breakfasts. The idea is that if you own a Bed and Breakfasts, you’re a fragmented market, you don’t really understand the technology very well and you don’t really have a large technology budget, so you generally speaking would have a terrible website with minimum functionalities. So wouldn’t it be great if we could have an Etsy for Bed and Breakfasts where you upload some photos and some descriptions, and at the click of a button, boom, you have this beautifully looking website and travelers can come to your site and book a room in real time. So that’s what we built.

And we built it so that all of these individual websites that we built would be tied together in a searchable directory, so that travelers could find a place that is right for them. So we built the site and we launched it, and this was in early 2009. After a couple of months, we have several hundreds properties on the site and we’re ready to build the revenue generation portion of the site, which was this reservation technology, thinking that we would take a reasonable commission on any bookings that came through the site.

As we tried to plan it out, we realized that we wouldn’t know if the room would be available to be rented unless if the Inc manager were using some sort of inventory management technology that we provided them, to keep track of which rooms were vacant and which rooms were not. And selling them this technology was something that we thought was impossible. Right? They’re 60 years old, they live in the wood, they don’t like technology to begin with. And we would have to call each one individually, and beg them to stop using pencils and papers, which works great when you have only 5 rooms, to use our technology. This makes no sense. So we didn’t even try, we just say that this business is dead. Let’s think of something new.

And we remember that when we actually launched Waffl at a tradeshow at Alanta, Georgia, which is the largest B&B show of the year. And there was a lot of fun because we actually brought waffle irons with us, and we made fresh waffles at our tradeshow booth. The smell as you can imagine went everywhere and of course all these Inc people were like who are these young people, cooking foods at the tradeshow. And it was funny because we got a fair number of questions where people thought that we were selling the waffle irons. It was like “Oh how many waffles does it make” and “what does it make off” and all of the sudden it was like “No no, we’re a technology company…”.

One question that we asked them was what problem do you have that we can solve with technology, and one that we heard a couple of times were “people kept telling us about social media, and the idea of how to use all these different websites is a little overwhelming to us. So if you could just put it all in one place, and we don’t have to learn your site, we’ll pay for that. So in the middle of June, this was around June 15th last year, we remember that conversation and said you know, let’s go back.

So we built postling in about 6 weeks. It was the first version of postling. We launched it August 1st. And it was a very simple $9 per month, 30 days free trial, and you can manage all your social media account in one place. And we launched it, and we got a little bit of press, and we got a couple hundreds of users, but a lot of people weren’t paying. You know they do the free trial, but they wouldn’t pay. And we talked to them and they say you know I think about social media as something I do in my free time and I’m not willing to pay for a tool that optimizes my free time. Because it’s free.

But there were some companies that were doing social media as a core part of their business, like agency, PR firm, some media companies, it’s something that is the core strategic part of their business. And they were willing to pay a lot more than $9 per month, if only there was a tool that they can manage multiple brands, across multiple people on a team. And so we thought yeah we can build that. So we went and built it then said between brands and users, you can have up 10, it’ll be $250 per month. And we did this for about 4 months or so.

And I have raised up to $350,000 that we raised in angel funding, I’ve raised about $130,000 on this vision of this enterprise tool. Multiple users managing multiple accounts. But what we found is that we didn’t know how to do enterprise sales. And the market was commoditizing very quickly. And VCs were realizing that were not interested because they didn’t understand what the differentiator was. So between customer feedback and market feedback, investor feedback, everyone was saying “we don’t see where you’re going with it”.

So I said we’ve got to do something else. The sale cycle was taking 4 months, and we didn’t have the money in the bank to survive 4 month sale cycle. So we said great, what else can we do. That’s when I happen upon this idea of saying instead of social media enterprising tool for businesses, let’s try to focus back onto local businesses that we started with, but this time thinks broadly beyond just social media to how can we help them with everything that they need in one place. So when I happen upon that idea, that’s when the whole thing kick-started and I raised $200,000 in 6 days.

Giang Biscan: That is amazing. I want to touch a little bit more on what you said earlier, which I thought was really interesting, about how the market was changing really fast and there were a lot of people trying to do the same thing about enterprising tool, would you talk a little bit more about it, you know, who was in the marketplace and what was happening?

David Lifson: Yes, sure, so what I found was that… so there were a lot of companies that were trying to build social media tools, because this is such a hot topic right now. So you’ve got Cotweet, Hootsuite, Buddy Media, and you’ve got Spredfast just raised $1.6M, and then you got all the free tools like TweetDeck. And then on the flip side you’ve got Radian 6, Social Engine, etc. So you’ve got all of these tools, and if you think about the space of businesses, I think it’s kinda like a pyramid where you’ve got maybe 5% of the businesses at the top of the pyramid who have probably said we are looking to pay the money for a social media tool that works for our business. And then you’ve got everyone else in the business that are like “you know these free tools are good enough for us, we’ll stick with that”.

And so you now have these dozen of companies who all built social media tools, focusing their energy and their sale budget on the top 5% of the companies. That puts the top 5% of the companies in a great position to demand all sort of customizations because one of these companies is going to be hungry enough to say “You know, we’ll do it, we’ll adjust our product to match your custom work flow.” And that’s what I was hearing. And another thing I was hearing was “Yeah, postling definitely does something that nobody else does, but I need to have feature A, B, C and D that these other tools have, otherwise I’m still using 2 to 3 different tools to solve my problem so why should I switch? So anyway, that’s basically it.

Tones of competition focus on a really small market that has a lot of money. And we also started in the game late. I mean people were building social media tool since 2007 or 2008, right? And we started half way in 2009. And you’ve got great companies like Buddy Media and Invoke who have been doing it for 2 and half years. You’ve got Cotweet that just got acquired. I’m friend with those guys, they have a great product and they’ve been working on it for a year and half or something like that. So where was this going, right?

We were building something unique, but we would be doing feature catch up for as far as I can see, and there is still so much uncertainty in the customers mind. A lot of people that we talk to they weren’t sure what they wanted. They really need something. This is particularly true around analytics. “Oh we need analytics”. We’re like “great, what analytics do you need? What stats do you track?” “I don’t know but I need a graph that I can show my boss.” I think that’s also why the sale cycle takes so long. They didn’t know what cost center to put it in for their budgeting, they didn’t know what features they wanted, and they needed something…

Giang Biscan: That is very interesting and I totally agree because you look at the marketplace and everybody trying to get into the same space, so it’s an interesting time. So let’s talk a little bit about your fund raising activities, that was amazing to be raising money in 6 days with a stellar group of investors: David Cohen, Gary Vaynerchuk, David McClure, how did you do it?

David Lifson: Sure, so you know I think SXSW got people drunk. I don’t know what it was. (David busted out laughing.) I’m joking. So this is what happened. When we were still building the social enterprise product, I sent my pitch to Nivi. Actually I back up a little bit. Nivi has written a blog post on Venture Hacks that has something to do with social media. And I wanted to leave a comment on his blog that said “Actually Postling is also solving this problem, you may want to try it out” but then I felt that may be considered improper etiquette to leave a comment on his blog just talking about my company. So I emailed him privately and just said “here is the comment I would like to leave”. And he wrote back and said “feel free to leave a comment, and btw, I’m about to launch this thing called the Angellist, here’s the link the application, why don’t you apply”. So I applied, you know it was free. And I got a ton of inbound emails.

I got 8 introductions from Nivi to fantastic VCs. From VCs firms that you’ve heard of. And I also ended up got funding from Chris Yeh, from California who works at PBworks, and from David Rose, who does Rose Tech Ventures in New York city. Nivi couple of months later got back to me and said “hey, that was great, I’m glad you got some funding, I’d like to send you back out on the list again, this time would be with additional social proof of having invested by 2 people that are on Angellist. And I said “Of course, I’ll do that”. And he said “if you happen to have a new pitch, send it along”. And we did, right, we now have this idea for dashboard for local businesses. And I sent that pitch out, and there was a lot of interests.

It started with a call with Tom McInerney, who is an LA based angel who invested in Klout, Mobile Roadie and a couple of others. So Tom and I spoke on the phone a couple of hours before I boarded on my flight to SXSW. We spoke for about 30 minutes, maybe 40 minutes and at the end he was like “Dave, this sounds good, I’m in for $25K.” I was like “Great!” And then he said “I’ll do an email introduction to my friend Paige Craig who is out to SXSW and we co-invest all the time, you guys should meet up. So I flew out to SXSW, the next day I met up with Paige, we spoke at the blogger lounge for 40 minutes and then he said “I’m in, that sounds great”.

And then the following days Venture Hacks was having a sort of informal meet-up at Four Seasons Hotel in the lobby. And Paige was there and Dave McClure was there. And Paige pulled me over to McClure and said “I just invested in these guys, you should check them out.” And Dave said “Alright, let’s go to the balcony because I want to have a cigarette”. So we went out to the balcony, lighted up his cigarette and he talked to me, so I spent the next 10 minute to explain who we were and what we were doing, etc. At the end of the cigarette, he was like “Alright, I’m in.” So he put in some money and he’s actually raising a fund so he’s interested in putting in some more money once his fund is ready.

And once Dave McClure was in, everything was downhill from there. Because he is such a great guy with such a track record, that everyone was like “Oh, Dave McClure’s in? I want to be and I want to be in right now because this is going to fill up right away.” And that’s what happened. So Thomas Korte from Angellist, he’s an ex-Googler, who dubbed his phone call with me in two days, just to make sure that he has his chance. And through a friend who introduced Gary, I already knew Gary but it helps if your investor hear from some people. So Gary and I spoke then he was in. And then David Cohen finished it up.

There was also this young investor in New York city, his name is Kal Vepuri who’s introduced to me through a friend – so I’m friend with a guy who runs SeatGeek.com which is a marketplace for concert ticket. And they were like we just met this guy Kal, he’s amazing, you should talk to him. So through all these different connections, I was able to meet these great investors and all of them like the team, they like the idea, and they said “go for it”. So that’s how all of this came together.

So here is a little trick. I shouldn’t call it a trick, it’s strategy. We have set the term ahead of time. My lawyer was the one who wrote the termsheet. So we didn’t look for a lead to wait for a termsheet. We wrote our own termsheet, with our own price, and our own valuation. So in term of how much money are we raising and what the value it may be and all these various terms. So we started out sending it out to a bunch of… this started out as a friend and family round and a couple of smaller angel investors. And everyone agrees and everyone signs all the documents and what not and then all of this craziness happens.

What I was able to do was to go to these people and said look, here’s how much we are raising, here’s the price, here’s the terms and none of those are negotiable. So it was just like do you like the team, do you like the idea, yes or no? And it has made it very easy for them to make decision on the fly. Most of these people when the wrote me the cheque, or when they wired me the money, they haven’t really used the product, they haven’t really looked into the documentations. Not because they’re off the cuff people. Right? It’s because of the social filtering process happening. Where it’s like Oh you know, if these guys checked this out and thought that it was good, I’m just going to trust them and said yes. And then each of those additional person that goes through that process just makes it even easier for the next person to do the same thing.

Giang Biscan: It’s the power of social proof.

David Lifson: It’s amazing, absolutely. Yes. Like Dave McClure, he was like “Is your lawyer good?” “Yes, man, my lawyer was referred to me from Fred Wilson. He’s great.” OK so documentation is going to be sent to you by tomorrow morning, and he did. Woke up the next morning, and money’s in the bank. It’s amazing.

Giang Biscan: It’s interesting because I also heard Jason Calacanis talked about you should go out and raise money on your own termsheet, with the price already set, not negotiable, you can just go and raise the money but then at the same time especially for people who are raising money for the first time, wouldn’t you come across as you know a little bit cocky or a little bit too much of yourself. So where do you make that decision, where’s the line?

David Lifson: Yes, I’ll be honest; I think that our valuation was conservative. I think that given the team and the traction and the idea, we could probably have gotten a higher valuation than we asked for. And the reason is because we set that valuation 3 month prior. We set it like December 2009 when we were raising money for this enterprise product that has some sale but not a lot and a very crowded space and etc etc. But because we already have existing angel investors signed at that valuation, it wasn’t up to us to change the valuation either. That’s I think what happened. So we went to these investors, they look at the price and they said you know this is a pretty reasonable price and that’s fine.

Giang Biscan: Right, you already have somebody.

David Lifson: Right, and in term of valuation, how we came up with it was we basically said how much money do we want to raise, so $350,000. OK, how much of the company are we willing to give up to get that money, so we said 20%. And based on those numbers, you can calculate your pre-money valuation. So for our case, it was $1.4M pre-money valuation. And that was it. We raised $350,000K at $1.4M premoney, and figure out other terms. You put in more than $50K, that makes you a major investor, that gives you the following 4 terms: pro-rata, right to first refusal, right to first offer, information right. What do you think?

And when you’re pitching angels, those are the stuffs that you should be able to rattle off right away. So I can give my elevator pitch, I can say who my team is, I can say who my customer is, right? And then when they like all of those things, they will ask you about the term of the deals. You need to be able to spit it out right away. And then they say “great, here’s the cheque”.

Giang Biscan: So you mentioned at one point you guys were thinking of using convertible debt but then you ended up pricing the round for equity. So what was the decision there?

David Lifson: So it came down to 2 things. The most relevant one is that unless if you have a pretty sophisticated angel investor, they don’t really understand convertible debt because they wanted to know “I own X%”. And that’s the concept that they are very comfortable with. And it turns out that convertible debt, I’m actually now have a note, and this note has a discount rate of… and over time, the amount that I have changes and I don’t know what that means. I don’t really know what’s going to happen in the future. It just felt like another obstacle that we have to cross to get the deal done.

And the second thing is if you actually do the math, for a lot of angel size deals, the angels ended up with the worse deal with convertible debt. They ended up with less equity than if you price the round. And I think that some of the people we were talking to understood that so they were like “no, I want to price it”. And there is a sizable difference. When I was doing the math, it was like if we price it, you’ll have 10% equity but with convertible notes and with these sorts of assumptions of what our next round would look like, it would look like 6%. So why would you ever want to take 6%. So those were the 2 reasons. It’s a lot harder to explain unless if we have sophisticated investors who already understood the concept and some of the investors we were talking to believe that they would end up with less equity if we were going with convertible notes.

Giang Biscan: So now that you’ve got the money, what is it for now?

David Lifson: So our goal is 10,000 users with 1000 users paying $30/month. So the money is to get us to that point. So we now 6 employees. We all have salary and health insurance. We don’t get pay a lot. I’m making $30,000, I’m the lowest pay employee in the company. It’s something. It keeps the light on, you know.

If we can get that mile stone of 1000 users paying $30/month and with 10,000 users and a community that is attracting customers, we win. And we win a big way, because how many companies that you can think of that are able to acquire customers that are small businesses without a sale team. In my mind, it’s eBay and etsy. I can’t really think of others. So if we can do that, through building a community, which has great network effect, then we would be looking raising series A at a great valuation and then scale, right. That’s the whole point of series A today.

There used to be that the series A is to get enough money so that you can buy the computers that you are going to run as your data center, and just build your prototype. You know, see what’s happening. But now, it’s like the angel round is where you’re testing. Series A is where you expect you to have product-market fit and you’re ready to scale. So anyway, that’s what we are moving towards, product market fit.

Giang Biscan: And when would that be? When is your target?

David Lifson: So my goal is 6 to 9 months.

Giang Biscan: So you had some experience before, but it seems that it wasn’t in the startup community. You worked at Amazon, you worked at Etsy. Did you always think that you were going to do a startup?

David Lifson: No, not at all. In fact, I remember people telling me “Dave, you’re going to be CEO one day”, and I was like “No, no, that sounds terrible, why would I want to do that.” I would tell them I would much rather be VP of something, then I can focus on only the part of the business that I really care about. You know, who want to do legal and finance and HR, all the craps… Just let me build products.

But then what ended up turning me towards entrepreneurship is that I really love the idea of working for myself and being able to build something that could really… OK, so 2 things, part of it is about working for myself. So I had great managers at Amazon and I absolutely love the company but there is just something to be said about doing exactly what you want to do every single day. Right? Without being beholden into other people’s goals and strategy and politics. So that was the first part of it.

The second part of it was I did an internship in college one summer on Wall Street for ISE, which was International Security Exchange. It was a 100% computer electronic options exchange and by the end of the summer, I just got his overwhelming feeling that all I was doing was making rich people richer. And I couldn’t get behind that, you know. And so what I love about working at Etsy was being able to provide tool, platform, for people to live their dreams. Quit your day job then make yarn for living or whatever the heck they wanted to do, they could do that, and that was really empowering. And so I think the last pitch that we made about focusing on local businesses is everything fell in line.

And I think for most of startup, there is a problem that the startup is built to solve, so part of finding product market fit is finding that problem that your startup is built to solve. So I think we found it with this one because we just love local businesses. We love walking down the street, hop into a café, and talk to the owner, and get instant feedback about what’s going on and what’s their frustrations are. And also that’s part of what we really enjoying doing translating technology, translating strategy at different leverage points that we see into something that they can do for their businesses.

Giang Biscan: So it seems that Venture Hacks was very helpful in making all the introductions for you, but at the same time I noticed that you seem to have a good network. What do you do? Even before you raised angel money, you got referral from Fred Wilson for your lawyer. Are there any tips for other startup entrepreneurs?

David Lifson: Ah… That’s a good question. So how did all that happen. You know I know Fred just because he was on the board of Etsy so me having worked there, there’s some connection there. But I think… there are a couple of different things. One is that I have a blog that people read. I have a Twitter account that people are following. And I don’t have a ton of people following. I have less than 1000 followers, right, it’s not a ton but I’m out there. And actually I’m holding office hour regularly. Every week, I meet with 2 to 5 people a week. And I’m giving them half an hour, an hour of my time, helping them with whatever they are doing. And I do that because I believe it’s good Karma. One of these people is going to be able to help me in some way that I can’t anticipate, so why not.

And the second is I go to a lot of events in New York. And at each event, I’m making friends with people. For whatever reason people I met enjoy talking to me. They like to make introductions. So I meet more people that way. And also I am a connector by nature, so I make a lot of introduction myself between people that I know, and that always helps because when you make connection for people, they reciprocate and make connections for you. And that’s just it.

I don’t know what else to say. Part of it is one I have interesting thing to say because I understand my space really well. And two I’m not shy about meeting people and having interesting conversations with people. And that’s really the core of it, right.

And generally speaking on the internet right, if you have great content, people will find you. If you know what you’re talking about and you talk about it in a way that is friendly and charismatic, and non-threatening, people will want to talk to you and want their friends to talk to you.

Giang Biscan: Well, that was David Lifson from Postling. I really appreciate that you coming on and talk, I took way more than I asked for your time so I really appreciate that and keep us posted with your progress.

David Lifson: Absolutely. Thanks so much.