From Henry Ford to Steve Jobs and Bill Gates, entrepreneurs create technology that changes how we live. Ford, Apple and Microsoft are part of the 31 percent of startups that last. Most don’t.
What’s at Stake:
Creating a digital company with staying power.
Kathy Savitt was an entrepreneur in her own right, before she became chief marketing officer at Yahoo in 2012. In 2009, she founded Lockerz, a social commerce website.
Savitt learned some lessons, such as the importance of maintaining control over core competencies, the hard way. In the rush to get more users for their services, Lockerz outsourced software design to engineers in Belarus and India.
“It undermined what we [Lockerz] could do,” says Savitt.
As an entrepreneur, she realized something was missing. “Execution is usually the thing that undermines the entrepreneurs,” Savitt said at Cornell’s Entrepreneurship Summit in New York City earlier this month.
Yext’s co-founder and president Brian Distelburger agrees. The company, which offers large and small entrepreneurs a “local marketing cloud” around their businesses, started with a bang. It launched a Web site called gymticket.com in 2006 and offered lead generation to local businesses. The team knew it lacked domain expertise, and learned that it’s crucial to seek help where it’s needed.
“We wanted to build a local data cloud, work with 200 businesses…,” says Distelburger who addressed a roomful of would-be entrepreneurs at the summit.
Getting to that point was a “maze,” according to him. After meeting dead ends both on the management level and in funding, Yext got its break three years ago.
The company expanded its services with pay-per-call technology for business that was targeted to get higher quality leads. “The next step was to build a local data cloud for businesses large and small,’’ says Distelburger.
This helped them launch PowerListings, which lets businesses directly control their listings on the Yext cloud in real time. This includes, syncing information, geodata and local content related to the company.
Building a health care bridge:
“The healthcare reform gives everyone insurance, but it doesn’t provide access. We bridge that gap,” says Cheryl Swirnow, co-founder and COO of SHERPAA, a healthcare mobile app service that connects patients, insurance agents and doctors.
SHERPAA focusses on making healthcare more accessible and affordable.
Swirnow has no medical background. A Cornell Hotel School alum, she brought to the table her expertise in recruitment, insurance and human resources. Today, SHERPAA has helped 55 companies save almost $2 million on health insurance since last year, when it launched.
Today, without SHERPAA it takes 24 days to get an appointment with a primary care doctor according to details on their website. According to their statistics a patients gets 18 seconds before a doctor interrupts and it’s all but seven minutes of actual time with the doctor.
With SHERPAA, they promise a 24/7 service.
There are no call centers running the business, its real doctors talking to patients and providing care or treatment options.
The mobile app that the company has developed contains questions for patients to answer such as what the symptoms are, time period, any other medical conditions and the like. This builds a case history which the doctor can read. The next step to this is referral to a specialist in the case of a serious medical condition. According to Swirnow, the patient, doctor and insurance agent all stand to win.
Entrepreneurs need to be adaptable, persistent, and flexible. And the need to take some crucial steps to succeed.
- Run with the right people: Yext got the founder of the International Health Racket and Sports Association, IHRSA to sit on their board and help the team understand the market, the business and the area of expertise.
- Technology reduces time and costs: SHERPAA’s mobile app solves 70 percent of cases in-house and the 30 percent is referred to the company’s own specialists. This reduces waiting time in the ER, doctors’ consults, patients’ needs and overall medical expenditure. If you’re going to build a digital business, you have to give customers a digital edge.
- Don’t outsource core competencies: Lockerz outsourced the creation of its algorithms. This put the company on the losers’ bench for giving up the opportunity to develop its own expertise locally. Yahoo had been outsourcing the development of its advertising platform, its core competency that generated almost all its revenue. From 85 percent outsourcing it’s changed to 72 percent onshore in the U.S to 90 percent this year.
- Diversity of Perspective: Get two different views of the same project. A venture capitalist of the business who has no role in the daily operations can help you understand the market, metrics and competitors. The other perspective comes from ‘former entrepreneurs, ex-executives in an industry,’ says Brian Distelburger, the co-founder of Yext.
- There are no handbooks: The best teacher is you. Don’t rely on other people to tell you about the company. The approach by VC’s to have a VP of sales didn’t match what SHERPAA was looking to do. “It should reflect you,” says Cheryl Swirnow, Co-founder of SHERPAA, a startup focusing on healthcare services, who didn’t take the VC’s suggestion.
- Build the framework for success: SHERPAA pays its staff higher than other startups according to Swirnow. Kathy Savitt, founder of Lockerz realized people wanted to work with the company for the wrong reasons, like working for the names on the board or choosing the company because it was well funded. Instead of marketing the pedigree of the company for hiring, find hires who can do the job. “Focus on people and then products. I promise you, traffic and revenue will follow,” says Savitt.
- Go Social: ShakeShack, the American fast food joint has a strong social presence. The popularity of this takeout hotspot means waiting times of 3-4 hours. The “Shack Cam” is a camera installation at the shack which relays in real time, the number of people waiting in line. This helps customers check ahead of time if they want to visit the shack and how long it will take to get their order. This tool is marketing genius because it shows the popularity of the place in real time.
- Break conventional rules: ShakeShack knows how to do this. From using repurposed bowling lane wood for their tables to collaborating with artists, think out of the box. The ‘Before I Die’ installation which was a blank wall with the line “before I die…” gave passersby and customers a chance to complete the line with their own thoughts. This was a good marketing strategy that attracted attention but was also a good way to get people talking about the brand.
According to a study by the Harvard Business School, ‘first-time entrepreneurs have only 18 percent chance of succeeding.’ To get the most of out of an opportunity use resources that are readily available. SHERPAA for instance has developed their mobile app to include the ability to upload multimedia by a patient so a doctor can refer to the attachment and determine if the patient needs a physical examination or surgery. This saves consultation, waiting and undue expenses.
While starting up a business from nothing, it is also crucial to know the market timing. Shake Shack, an ‘incredible accident’ fast food chain has gone global in part because of market timing but also because of investment by the right people into the business at the right time. Their locations abroad in Turkey, Dubai and Kuwait stemmed from unexpected meetings with Arab businessmen who envisioned success in the global venture.
“It’s about the experience of people coming together,” said Randy Garutti, co-founder of the company, at a recent summit.
Emphasizing a local flavor helps too. While competitors were rooting for all natural burgers, ShakeShack tweaked that message further by collaborating with small farms, promoting their organic meat in the recipes.
Instead of industrial level production, the team chose to do things manually. The signature “frozen custards” are freshly spun every day, as are the hand-cut fries.
Getting investment is by far the most important factor in running a successful startup. Neal Goldman who founded Relationship Science, RelSci, an information and research company for individuals and organizations had to face rejection from venture capitalists every day for three years.
Every investor from S& P’s Capital IQ had said no to Goldman. But, no didn’t mean never. According to Harvard Business School’s study, first-time entrepreneurs have a 20.9 percent chance of success when they are funded by experienced venture capital firms.
When asked about what it feels like to be an entrepreneur the response Goldman gives is, “It’s like getting hit in the face every day.”
Dipti Kumar is a writer and reporter for CruxialCIO. The piece of technology she hopes to own in the future is a 3D printer that produces multi-cuisine food. She worked as a news anchor, reporter and producer with NDTV-HINDU, a news organization in India, before moving to New York in 2012. She is pursuing a post-graduate degree in health and science reporting.