A Myriad of Decisions for Internet Startups

I continually get questions from students and startups such as: Which
email solution provider should I use? What is the best affiliate
program to launch? What about payment processing? What is the best
low-cost or free web analytics software?

These are tough questions for anyone to answer because most of us, even
internet veterans, have tried only a handful of solutions in each
category (email, affiliate, analytics, payment processing, etc.) and
often have deep experience with only one.

And today there are literally hundreds of available solutions, from
high-end enterprise solutions to entry-level solutions, including some
free services, and many, many open source solutions that are evolving

In the 90s I used to rely heavily on Dr. Ralph Wilson of WilsonWeb.com.
Since 1995 he has been reviewing solutions continually and he has
helped hundreds of thousands of people find possible answers to these

Another resource that was first published in 2005 is a *must have* for
any serious internet entrepreneur, particularly one in the ecommerce
space. It’s the 2005 Guide to E-Retailing Resources published by Internet Retailer.

This guide book lists 378 retailing solutions in the following
categories: affiliate marketing, content management,
consulting/research, customer service, delivery services, e-commerce
systems, email marketing, fulfillment services, order management,
payments processing, search marketing, site search solutions, supply
chain solutions, returns processing, web analytics, web design/hosting,
and web monitoring.

It still won’t be easy to decide which solutions to try, but the Guide
often indicates how many employees or customers a particular company
has, and who some of their key customers are.

It is still hard to integrate some of these solutions, but at least you know what many of your best options are.

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Angel Investors

There are now 421 angel investors on FundingUniverse.com and several more are joining every day. When I spoke at the NASVF
conference last week in Philadelphia I told the audience that I think
about 10% of our registered angels are members of organized angel
investor groups, but 90% are independent. I based my estimate on what I
know about the angel investors on the Utah site.

But this week we started asking every new angel investor which
organized angel group(s) they belong to, if any. So my 10% guess will
turn into a pretty good estimate soon.

Last time I checked we were signing up more than 4 angel investors each
day, about 40 entrepreneurs, and getting about 17 new business plans
submitted every day. If you annualize those numbers, you get more than
1,300 new investors, 14,000 entrepreneurs and 6,205 new business plans
per year. But our momentum is actually increasing, so I think we’ll
have substantially better numbers than that in the next twelve months.
I think we’ll get 20,000 to 30,000 new entrepreneurs and more than
10,000 business plans in the next year.

Our company key goal and metric is the national unemployment rate.
Since small businesses account for most job creation in the country,
and angel-backed ventures are often high-growth companies, we think
FundingUniverse.com will help create new jobs all over the country. We
are going to reduce it to 4% over the next five years.

Just kidding!

But wouldn’t it be nice if a web site could help change the economy in
a fundamental way. We really do hope to have a positive impact on local
economies, but that "key goal and metric" stuff is just silly–but hey,
I’m in a great mood this morning. I ran 5 miles this morning and get to
watch BYU beat New Mexico on TV tonight. (Admittedly, I’m an optimist.)

But here is a serious statistic:

One excellent presentation at the Philadelphia conference reported that
about 500,000 new businesses are formed each year in the U.S. About 1
in 10 of these new companies is funded by an angel investor (including
friends and family), but only 1 in 1000 is funded by venture capital.

Here is a link to an article that says 26,000 startups got angel funding in the first half of 2006.

If you are a first-time entrepreneur, you should really meet as many
angel investors as you can, because the chances of getting venture
capital for your first company are very, very, very slim.

One way to find organized angel groups in the United States is on the Angel Wiki, a collaborative site that is sponsored by FundingUniverse.com.

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Seth Godin Live

Last Thursday in New York I heard Seth Godin
in person for the first time. I’ve been learning from him for many
years, ever since I read “Permission Marketing,” which is still my
favorite Seth Godin book — a must read for anyone doing business in
the age of web sites and email.

I like a lot of things about Seth. For one, he is a family man. A
friend of mine tried to get him to speak at a Utah convention, but he
rarely travels west of the Mississippi — it takes him away from his
family for too long. I really enjoyed his presentation.

He told a story about playing with a bathtub toy to entertain his kids.
It was one of those suction toys you stick on the sides of the bathtub.
But he decided to stick it to his bald head and wiggle his head around
to entertain his kids. They loved it, but when he took it off his wife
noticed a big red circle on his head, and he realized that the suction
from the toy burst all the blood vessels in his head. He said the mark
took months before it went away.

Then he warned the advertising industry that they will all leave a
permanent ugly red mark on their careers if they don’t stop spamming
and interrupting potential customers — they need to enter the era of
permission marketing and grassroots spreading of ideas.

So his talk was basically about how to spread ideas in this century. In
the past, buying TV was the key to success for many brands. For
example, Charles Revlon bought TV ads starting in 1946 — the first
cosmetics company to do so — and it led to distribution and to
billions in revenue.

But he says the TV-Industrial complex is ending. The era of
interruption advertising is coming to a close. Seth wants the
advertising industry to change before it dies.

Today, 83% of people with a Tivo skip *every* commercial. Anyone who wants to ignore you (an advertiser or marketer) can.

He says advertisers are spammers, poking people over and over and over
again, trying to get our attention in a world increasingly full of

He said every major brand that has launched in the past five years has not relied on television
to build their brand. Instead, they have done something remarkable,
something to get customers to make remarks about them, something
noteworthy and different and better.

He mentioned JetBlue. Their customer satisfaction and word of mouth
advertising is unprecedented in the airline industry. They keep adding
more planes and filling them up (with a greater than 77% load factor)
while the bankrupt airline companies just keep doing TV ads.

Why? TV in every seat helps. So does their snack policy. Other airlines
cut the freebies to save money, but JetBlue invests more in snacks. [I
can vouch for this: I took my first JetBlue flight to NYC last week and
I jokingly asked the stewardess for “one of each” — they had about 7-8
different kinds of snacks — and she said “sure.” Of course I really
only took one, but the fact that they were willing to be generous
impressed me.]
Seth said humans hunted for thousands of years but would have gone
extinct if it weren’t for farming. Today advertisers need to stop
“targeting” users, which is a hunting term, and instead, “work the
grapevine”, by getting everyone talking about their products.

He gave lots of examples of companies that are built by word of mouth,
and by getting their ideas to spread. The Atkins diet got people
talking. OFoto (photo sharing) got people sharing with each other. He
said the iPod won because everyone saw the white headphones and it
marketed itself.

Today, marketing tools are more powerful than ever before, but what
marketers have to do is tell a story, an authentic story, that gets
everyone talking about and sharing their ideas with others.

He calls this the Fashion-Permission Complex (which will replace the
TV-Industrial Complex). He said tell your story to your best sneezers
(people who love your products or services) and make it easy for them
to share you story with everyone else.

Here’s a great example.

In 1990 a man named Don ran Hallmark card and gift stores. Heavy card
users would buy about 50 cards a year. Don came up with an idea to sell
“collectible Christmas ornaments in July” — their slowest month. They
priced them at $10 each.

Hallmark got permission from customers who bought ornaments the first
year to notify them next year when the ornaments were available. Year
after year the permission base grew.

In 1999, the Wall Street Journal wrote an article about this Hallmark
success story. That year Hallmark made $100 million in Christmas
ornament revenue without spending any money on advertising. All they
did was send an anticipated, relevant, personalized postcard to all the collectors.

After Seth’s speech he took some questions from the audience.

During Q&A I learned that he personally answers every email that he receives. Very cool.

Also, he said he gets tons of email from Turkey. A woman in the
audience who was from Turkey wants him to go there to speak. Clearly,
his ideaviruses are spreading all over the world.

He also told advertisers to work with engineering and not just to take
a finished product and try to advertise it. He said, “go upstream,”
talk to the chemists, help them create a product that is worth talking
about. Engineering is marketing.

He said the role of agencies will become consulting with R&D so
they can give you a remarkable product that will be easy to market.

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