All posts filed under “Entrepreneurial

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My newest project (tentatively … IdeaGreenhouse)

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I believe strongly in transparency when starting a business. While some people try to keep their “secrets” locked up, all it really does is lock those entrepreneurs away from valuable feedback. Business is about execution; if you’re working on something you’re passionate about and actually executing, you have nothing to worry about.

So I’d like to explain the project that I’ve been working on for a while more to you here. In a sentence, it’s a business devoted to helping you collect, develop and most importantly implement great new ideas. Tentatively named IdeaGreenhouse, it’s web-based software and optional advising services for companies, clubs, community groups, interest groups and any other organization to use internally to help them do things better.

What does it do?

This software allows anyone with an idea to submit it into the system. Any other user can comment on it or support it through a voting-type system. Most importantly it lets users create and volunteer for micro-tasks to take the idea forward. Instead of relying on a small group of connected people in the heart of a business or organization to evaluate ideas and implement them, it connects the people in the company that are really interested in the idea and that have the skills to make it happen.

I’ve been thinking about the software and sketching it out for quite a while. Earlier this fall I worked with an outsourced developer to get a prototype established, which is now up and running. I’m taking advantage of my MBA class to help get comments and feedback on the prototype by using it to help find ideas that will improve the Cambridge MBA. It’s at the point now where I can clone that initial site fairly easily for new alpha-testers. If you’re interested in becoming an alpha-tester, please contact me!

Who is it for?

Who is an ideal customer? One example is my rowing club in London. The club has several hundred members, and over a hundred active rowing members at any given time. There’s also a lot of excitement around the club’s 150th anniversary next year. A lot of members have tons of great ideas to raise money, make improvements to the facilities, run the clubhouse and rowing program better, etc. But it’s virtually impossible for one person with an idea to press ahead and make it happen. Right now all the ideas come through a small group of volunteers (all overloaded anyway) for evaluation and implementation. It “doesn’t scale.”

Another use? Potentially as an political interest-group tool. While change.gov is great in that you can submit your questions/ideas to government, what you’re really doing is throwing them over a wall and hoping the people on the other side can see what you see. Instead, a group like the Electronic Frontier Foundation (EFF) could establish a site to develop the best policy ideas and marketing ideas to bring about those policy changes. They could connect lawyers, tech stars, business types, video producers and who knows else to work collaboratively to develop the best policies going forward.

The biggest revenue-potential is companies that are looking to constantly improve and innovate. Software like IdeaGreenhouse can connect people across silos in an organization to find solutions to problems, new innovations, or simple better ways of doing things across a business. Instead of relying on approval through a “chain of command,” the people in the company that are passionate about an idea can connect and move it forward themselves.

While the traditional method of “throwing ideas over the wall” for someone else to review and approve is great (it’s not too much work), implementing ideas is about a thousand times better. It’s a heck of a lot harder, but it’s incredibly satisfying when it does. IdeaGreenhouse is a tool that will help get businesses and organizations do that.

Competitors

There are a ton of competitors in the “submit ideas and vote for them” category. Starbucks and Dell have both used SalesForce.com’s ideas application, with lots of publicity. Change.gov uses Google Moderator, and there are more commercial solutions like GetSatisfaction and others.

Where IdeaGreenhouse is different is that it is an internal tool, to use the knowledge and experience of your employees/members/organization. It is NOT a tool to get feedback from your customers. The users don’t just submit ideas, they work to accomplish the ideas, too.

There are some enterprise-level software applications that do this, but they all focus on large companies exclusively. IdeaGreenhouse will scale to work with any size company or organization.

The Team

The team working on this consists of me and Dom Orchard, a PhD student in Computer Science at the University of Cambridge. (Really smart, and a fellow Jesuan.) Dom also drafted the logo above.

Feedback

I’m creating a “landing page” to detail this more soon, and will post that here when I do. I’ve got a few different names I’m going to try out, and will use Google AdWords to hopefully find the best one of the bunch. (See here for more.)

If you have any feedback, please contact me, or submit a comment below. This is what I plan to spend much more time talking about this year, and look forward to any/all of your thoughts.

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Estimating 37signals revenue and general profitability

One of the all-time most popular posts on my blog is my original post where I showed how I modelled the revenue and revenue growth of 37signals. It showed a business that has made quite a bit of money in the past few years; I originally estimated revenue of $3.5million in 2007 and over $5million in 2008.

Well, it’s been nearly a year since I put up that post and based off of feedback I’ve received personally and comments on the post I decided to refine this model. My new estimates are that 37signals had revenue of over $4million in 2007 and over $8million in 2008.

Breaking down 37signals revenue by product

These are my estimates of 2008 revenue, in descending order. (Please read the initial post for more detail on how I created the model.)

  • Basecamp: $4.9million
  • Highrise: $1.9million
  • Backpack: $0.6million
  • Job/Gig Boards: $500k
  • Conferences, workshops, etc: $180k
  • Campfire: $133k
  • The Deck: $60k
  • Getting Real: $45k

Analysis

Basecamp is the 37signals product champion, and a key revenue generator. Highrise seems to be quickly gaining momentum, but facing tougher competition from entrenched CRM products. My figures for Backpack are likely a bit low after their recent multi-user update; I think that sales there have significantly increased. Campfire seems to be a minor product. The ranking of Basecamp/Highrise/Backpack is likely right, as it mirrors how they are promoted in 37signals marketing materials.

The other significant revenue source for them is the Job and Gig Boards, which I estimate to be $500k/year. The rest are fairly minor in the grand scheme of things.

Estimates on 37signals costs

37signals seems to be very generous with their 12 employees. (You can be when you’re generating over $600k in revenue per employee!) I’m guessing that between salary, perks, office space (where appropriate), payroll services, equipment, etc. that they average $150k in costs per person. I’m biasing this guess towards an overestimate, so as to be conservative in estimating profits. This is by far the biggest cost at $1.8million per year.

The other biggest cost they have is in servers/storage/etc. In April, their total costs with Amazon S3 were just $2k/month. Being conservative, I’ll guess they’re at $3k/month now, or ~$30k/year.

I believe they use Rackspace for servers. I can’t find any reliable information on Rackspace prices. But I’m going to guess that 37signals pays $30k/month with Rackspace. (If anyone has better numbers or a baseline for this, please let me know and I’ll update this post!) This is a yearly cost of $360k per year.

Guesstimate of 37signals profit

If 37signals is able to make $8million per year, with costs of just over $2million per year, it is a very good business to be in. If my figures are anywhere near correct, they make $6million in profit per year.

I titled this a guesstimate because there are just too many potential sources of error in this analysis. If any readers have any guidance, please leave a comment below or e-mail me directly.

Do you want to challenge my (revenue) assumptions?

You can download the spreadsheet I used by clicking on the icon below.

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Summary

I hope this post is useful to you. Again, if you have any better information or want to challenge my revenue or costs model, please comment below or contact me directly.

While not the biggest business, 37signals does seem to be quite a profitable one.

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True Knowledge – A test

So Google essentially owns the current search market.

The thing is, Google searches based on key words and key phrases. It doesn’t necessarily provide a specific answer to a question.

A local, Cambridge-based company is trying to expand the idea of what a finding answers can and should look like. That company is True Knowledge.

QuizBot is the company’s latest creation. I highly encourage that you go and try it out, if only to see the opportunities of the future. Everything is explained on the page, and it’s pretty cool.

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Meeting Michael van Swaaij, Chairman (and former CEO) of Skype

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On Monday this week our MBA class had the opportunity to hear Michael van Swaaij speak to our class. He is the current Chairman of Skype, having previously served as CEO of Skype and Chief Strategy Officer (amongst other roles) at eBay.

First of all, I have to say that he was a fantastic speaker. I’m always impressed with speakers that don’t need the crutch of PowerPoint slides to make their point, and Michael was a very engaging speaker for 40+ minutes solid. (Before the Q&A.)

I want to quickly paraphrase a few of his top-level points:

  • If your first job isn’t great… don’t worry. Things will happen. To a group of MBA’s that will likely graduate during what will likely be an extended economic downturn, this was encouraging. While we may not be able to do exactly what we want to straight away, I did get the sense we’ll get there in the end. (And probably by a route we had never anticipated.)
  • Don’t focus on the press. Focus on the consumers. The press doesn’t reflect the reality that we need to live if we’re growing and innovating. The press is a lagging indicator of where industries are going. If you keep focused on consumers you’ll rarely go wrong.
  • Great products/services allow people to do something they’ve never been able to do before. Enough said there.
  • In growing a startup, you must hire well ahead of the curve. Companies and roles grow so quickly that the people you’ve got must be able to do the job above them, and likely the one above that. If they can’t they’ll hinder your growth. Unfortunately, few people want to have a job where they’re capable of doing so much more.
  • In high-growth startups, missing an opportunity is much worse than not taking full advantage of the opportunity. I’m not sure I 100% agree with every implication of this, but certainly do agree that you’ve got to grab every opportunity you can.
  • Leadership isn’t about you… it’s about the team. Enough said.

The Q&A portion was also enlightening and quite straightforward; unfortunately the most interesting bits were strictly off the record!

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What’s this photo about? Well, about 15 students have the opportunity to have dinner with the “Leadership Series” speakers after their talk. I was very pleased to have the opportunity to continue discussions with Michael and the Director of Judge Business School, Arnoud De Meyer (also a Fellow at Jesus College) at a beautiful room in Queens’ College.

First of all, I have to say that Michael van Swaaij has to be one of the most down-to-earth senior business leaders I’ve ever met. He’s had a lot of important jobs and done a lot of interesting things, and has come out of it a very wise man.

But what I really feel like looking back on our talks (where I didn’t take any notes) is how inspirational (yet down-to-earth) he was. Whether or not it was what he was saying, I came away with a feeling that we’ll be well-prepared for life post-MBA, and not to be too worried about it. We need to work hard, keep our eyes out for good opportunities and take advantage of them.

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[UPDATE]: The Judge Business School women have posted about this, too. Check it out here.