Tips for Tech Entrepreneurs: Moving out of the Coffee Shop

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At the inaugural SF East Bay New Tech Meetup last week, Lawrence Coburn, the founder and CEO of Rate It All, gave aspiring entrepreneurs some valuable tips for “getting out of the coffee shop” and getting VC funding. Coburn’s venture – Rate It All, an online distributed consumer rating company, that allows users to find, share and solicit opinions on any topic, completed a $1.4M raise in September 2008.

Here are 4 key elements, according to Coburn, that a venture needs in order to get funding:

Solid Team: When Coburn initially kicked off his venture, he had meetings with many VCs who liked his business plan but weren’t ready to invest in his company because he was a one-person operation. The reality is that it’s risky for VCs to fund solo operations because if the entrepreneur got “hit by a truck” tomorrow, the venture and their investment would go down the drain. So Coburn made the point that VCs are most likely to fund a venture with a solid team and a clear game plan for succession to keep things going if anything goes wrong.

Product: A key point that Coburn brought to everyone’s attention was that VCs will no longer fund business plans  or concepts, so the venture needs to have a solid product or service that’s marketable. Given the competition for the VC funds, having a plan is just not enough as the funding will go to an existing product or service with a clear marketing strategy because that translates into lower risk for the VCs.

Traffic: Even when Coburn was working out of a coffee shop, Rate it All was revenue generating, making over $200K and yet, he couldn’t get funding right away. So, while revenue-generation is great, but it’s still not a guarantee that your venture will get funded. Having a revolutionary product or service is a good first step but to get funding, entrepreneurs need to make sure they’re focused on generating traffic right away (and revenue would be nice too).

Comfort level and Trustworthiness: Last but not the least, VCs want to fund someone they trust and are comfortable working with. This was a very insightful tip by Coburn and that was VCs need to have a certain level of comfort doing business with you - the entrepreneur. It also helps to be known in the industry and connecting with influencers who can help your cause. Some ways of making those connections and increasing your visibility is through speaking engagements and attending networking mixers where you have the opportunity to meet some of the influencers. He also said that inviting some of these influencers as advisors on your firm’s board will also add credibility to your new venture.

Overall, it was a brilliant talk by one of Silicon Valley’s best and brightest entrepreneurs. Coburn also went on to list several key technologies that are revolutionizing the online space including – Facebook Connect,Posterous, and the very well-known micro-blogging site - Twitter. Despite all the new technologies on the market today, Coburn reiterated that email still remains widely popular and is the primary way folks share online content today. He also pointed out that 90% of Rate It All’s 1.3million traffic comes from natural search so businesses shouldn’t underestimate the power of SEO either.

Why Social Media ROI is Still Elusive

eMarketer reported yesterday that marketers still aren’t measuring the investment on their social media investments,

Despite widespread adoption of social media, measurement still lags. Only 16% of those polled said they currently measured ROI for their social media programs.

Lately, it’s become very fashionable to talk about the ROI on social media. You hear the dreaded term everywhere – at conferences, in meetings, on research reports, at your child’s daycare (no kidding) so the question begs to be asked and answered - Why is social media ROI so elusive?

So, here are my top reasons (and please feel free to add your own below in the comments):

#1 This report and many others are making a very flawed assumption – these reports assume social media is a “program” and it needs to be justified like any other short-term program or campaign. Newsflash: Social media is not just a program, it’s a fundamental shift in way your customers and employees consume information and communicate. Social media is fast becoming as ubiquitous as email and when’s the last time your IT department did a ROI analysis on your email network?

#2 Should you measure, track the results on your social media activity? Absolutely! However, you’ll find that with any new channel, the “I” will always be substantially higher because you’re still making investments in this new media and may not have realized any of the efficiencies yet, so any ROI analysis on the new media is skewed. 

#3 In many cases, it doesn’t even make sense to do the financial analysis on some social media activities because it’s pretty much, the cost of doing business. Here’s an example: Adding social sharing tags to your email so your customers can share your marketing email with their friends and family on some social network is a no-brainer and as essential as providing an URL link to your website. It doesn’t justify a ROI analysis, although I would recommend analyzing the click-through/share rate. This is something you should do in any case, regardless of whether or not, any social tag is included.

#4 Having a blog or Twitter account is not a social media strategy. Social media success is dependent on the sum of different parts. Just like you wouldn’t utilize just one traditional channel to market your product or services, it’s ridiculous to think that one Twitter account or a blog by itself is somehow going to generate ROI overnight. That’s why it’s essential to remember that not everything that’s important in business (and in life) can be measured and just because  you can measure it, doesn’t make it important or relevant.

#5 I’ve blogged about this before, but social media will not solve your pre-existing business problems.

A guy goes to the doctor with a broken arm and asks, “Doc, can I play the piano once my arm has healed.”

The doc says, “Of course, you can!” 

The guy says, “Great, I never knew how to play (the piano) before.”

Bottom line, if you weren’t able to accurately track the results from your traditional marketing activities because of your internal tracking/lead management issues, you’re not magically going to start doing it just because you’re using social media.

One reality that most ROI proponents gloss over is that even the most traditional, established media activities don’t have a clear defined ROI. Not to pick on events but let’s look at event sponsorships like Golf tournaments etc.?  How on earth do companies measure the ROI on those or even television ads for that matter?!

Attribution was an issue with traditional media and it will continue to remain an issue, no matter which media you choose.

Trying to assign a specific dollar amount to any social media marketing activity is an exercise in futility because individually these activities are weak but done in coordination, these can move the needle. That’s also why marketing is still part science and part art.

Rather than looking at ROI on specific social media activities, marketers should be looking at their key business objectives, selecting/incorporating the right social media elements to meet those objectives, and then evaluating the overall results. Ultimately, what matters is not whether the social media activity was a success but whether the business objectives were met.

Why Social Media Won't Save Your Business

So I’ve moved again..sixth time in six years (don’t ask). Two weeks after the move, I am still living with unfinished hardwood floors, wrong door, and a brand spanking new refrigerator with a non-functioning in-door water dispenser.  So I’ve complained, threatened and even tried to cajole the responsible parties into action, many of which are national brands, but haven’t made much progress.

I’m often asked by business owners, marketers, product  managers whether they should use social media and have heard many social media “experts” extoll the virtues of social networking sites. Here’s the brutal truth for anyone who’s still grappling with the same question: When your product doesn’t work and your customer support sucks, no amount of “tweeting” is going to save your business. Period.

Zappos (now acquired by Amazon) is the poster child for using social media for business and their brilliant use of Twitteris the stuff of legends. However, what many people conveniently overlook is that Zappos is a company with stellar customer service that happens to tweet.

If your products don’t work, customer support is unresponsive, and your returns policy is lousy, who cares how fancy your Facebook page is?! AT&T is a great example of a company who uses Twitter to spew uni-directional messages instead of engaging unhappy customers because there are so many of them. In such case, I am baffled as to why bother having a social media presence  at all? All you’re doing is giving your unhappy customer base another avenue to vent but not really solving their problems.

Yes, social media is powerful but it’s not going to solve fundamental business problems and precious business resources are better spent on fixing those problems than tweeting at your audience. Your customers deserve better.