BusinessWeek: EBay’s Skype Bubble Bursts

There was a lot of skepticism when eBay (Nasdaq: EBAY) announced its mega buyout of Skype (several years ago).  What was the synergy?  Wouldn’t adding VOIP to auctions actually slow things down? 

There’s an excellent article on the topic in BusinessWeek (the author is Olga Kharif).  She also quoted me in the piece.  You can check it out here.

Latest Deals

IPOs:

So far today, Constant Contact’s (Nasdaq: CTCT) stock price is up a whopping $9.39 to $25.39.  Yes, it looks like the IPO market for tech companies is still on track.

Constant Contact develops cool on-demand technologies that allow companies to engage in email marketing.  A big chunk of revenues come from small-to-medium size businesses.  In fact, the average monthly revenue per customer is about $33.  Also, because of the subscription model, Constant Contact has built a nice recurring revenue stream.

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Venture Capital Fundings:

Zilker Labs ($10 million):  Develops Digital-DC power conversion IC products
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Punchbowl (N/A): Operates an event-planning website
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Rubicon Project ($6 million):  Develops technologies for online advertisers.
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Reply.com ($4.5 million):  A performance-based marketing solutions company
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Slam dunk strategies for bootstrapping

Anders Heie is a veteran of the tech world, having worked at mega firms like Nokia (NYSE: NOK).  He even has several patents to his name.

Over the past couple years, he has put together a new software company, called KaDonk.  However, he has forgone the venture capital route.

As a result, he’s had to get creative with spending.

What are some of his strategies for bootstrapping?

According to him:

“For Kadonk, we wanted to find out if we could develop LiveProject to a ‘tipping point’ where it could grow business organically and spread virally. At the tippingpoint, income from sales would be used to further spread things, without additional investments from the founders.
 
“To get to that point, we needed to bootstrap the company using our own resources and time. For example, we found a law firm that was willing to help us out on a line of credit, to be paid back once we became profitable or raised more than $1 million. This allowed us to get incorporated, and work out several legal kinks in the startup process.
 
“We then pooled the founders’ money to handle day-to-day expenses. For a small software company, expenses are surprisingly small. We needed some computers, hosted servers, phones, etc. The real investment comes from hours worked.
 
“Two of the founders decided to quit their full-time jobs, and take half-time contracting positions. This freed up 2 full days per week for KaDonk, plus the implicit evenings, weekends, and nights. For about 2 years, our average workweek has been around 80-90 hours. As an investment, this is roughly equal to $300,000 or so.
 
“For sales, we decided early on to mostly sell online. This works great for smaller businesses, but does not adequately address Enterprises.
 
“Then, early in 2007, we had a brilliant idea: Hire a sales representative in India. Not only are wages more favorable there, but all the major companies around the world are represented in India. Again, pooling our own money, we opened up a position in India, and in September of 07 we hired a great guy. We have the luxury of having many Indian contacts, so the process was relatively simple.

“Selling LiveProject online without a sales rep means it we had to make the product extremely easy to use and install. We decided to use Microsoft Click-Once technology. This not only allows for an almost seamless installation process, it also gives us the ability to upgrade (push) new releases to customers. For customers that prefer zip files (there are always some), an alternative method for installation is also offered.
 
“Finally, to kick-start a viral marketing campaign, we needed something that adds value to a business. Offering LiveProject as a free project viewer was an obvious choice, as our main focus for LiveProject really is collaboration. A free viewer allows customers to get acquainted with the application, while seeing that there are options for ‘more’ features. It’s a back-door into companies, as many employees will download and run it just to try it out.
 
“Mostly for our own sake, we also build support for Bugzilla into LiveProject. Our original thought (and it’s still very much alive), was to add more and more types of viewers and collaboration features. Our bugzilla viewer has turned into a popular download for the open source community, and many of our website visitors are referred from the Mozilla pages were we are listed.
 
“So far we have sold licenses to companies located in the US, Europe, North and South America, and Asia. As sales pick up, we plan to use the revenue to further ramp up our offshore sales approach, and to add people to engineering.”

Latest Deals

IPOs:

Longtop Financial Technologies — develops software for the financial industry in China.

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Venture Capital Fundings:

Vital Therapies ($28.1 million):  Develops human cell-based artificial livers

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Wikinvest ($2.5 million):  wiki for investors

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Agent Video Intelligence ($3 million):  A surveillance software company

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The Art of Viral Marketing

As seen with break-out companies like YouTube, viral marketing can be incredibly powerful.  Basically, your customers/users are taking the time to share your products.  What could be better?

In fact, one of my favorite viral campaigns was the business card giveaway from VistaPrint (Nasdaq: VPRT). 

To get some background on it, I interviewed Trynka Shineman, who is the senior vice president of North American marketing at VistaPrint:
 
“VistaPrint’s free business cards are so successful for several reasons.  First, the small business market was so vastly underserved by local printers who charge hundreds of dollars for business cards, that there was a tremendous need. VistaPrint was able to make a big splash in the market by not only providing the best value in the market – but by actually giving away the business cards. For a market that had been so vastly underserved, ‘free’ was a bold statement that drove adoption and trial. 

“Second, the business card offer is targeted specifically to attract the small office home office customer, VistaPrint’s target audience. Not only are business cards something universally needed by this audience (and typically one of the first products they buy when starting a business), but also they are an expression of the business’ brand identity which can be leveraged to cross-sell matching business identity and marketing products.

“Finally, the line on the back of all the free business cards states, ‘Business cards are FREE at www.vistaprint.com!’ With 250 impressions of that line in every free business card order, it was and is still a fantastic viral marketing tool for the business.

“In fact, our free business cards were so successful, we now offer other free products including one free t-shirt, one free pen, 100 free postcards, 25 free brochures, etc.  By giving away our products people get to see for themselves the high-quality products they can receive from VistaPrint with no risk.”