Last week I celebrated my first full year at Half Off Depot. It has been a pretty amazing first year. Some of the stuff we have accomplished, purposely partially masked through statistics.
We raised $7 million via venture capital and $1.5 via venture debt.
Subscribers have grown by 450%. Over 200% in 2011 and over 150% YTD in 2012.
We expanded from two MSAs in which we are actively marketing local deals to nine today. We also extended into national product deals.
Revenues doubled in 2011 from 2010 and are a pretty solid growth path for 2012.
Employees went from 21 then to forty something. The employee growth was not smooth. I fired a founder, an interesting experience. Our VP of Marketng and CTO left the team and I had to step in to lead those groups directly. Truth be told I terminated more people in the last year than in the previous ten. Startups are not all fun.
Half Off Depot turned cash flow positive. A heroic feat if you saw our financials in the fall of 2011.
Began a pretty large scale technology transition.
Made two asset acquisitions. One for a company called Dealster and one that has yet to be announced. There is a good path here for a well funded cash flow positive company.
So money in the bank, a rapidly growing member base, which brings about big revenue increases, employee growth, and a healthy bottom line in a mode to play consolidator.
Before I go any further I want to give some kudos to Facebook. More than half the people in the United States use the social network. I think the number something is like 900 million worldwide. Facebook is an important consideration for any marketer. And you have to give it to Zuck. Despite donning a hoodie at inappropriate times he has matured as a business leader. He is completely in control of Facebook. And a billionaire before 30.
So great job to all the good folks that work at Facebook, their investors, and the founders. At 11:00am today Facebook is going to go public and their life will change forever. Congratulations.
With that said, Facebook is going public at $38 a share. That $38 puts the company's market cap at $104 billon. That is the biggest IPO valuation ever by an American company. It will make Facebook the 23rd largest US company by market cap (larger than Amazon) while being beyond the 900 mark in terms of annual revenue.
Last year Facebook had $3.7 billion in revenue and generated an even $1 billion in earnings. The valuation is 28x revenue and 104x income. The P/E is 106 compared to Google's 18. The stock may pop today in a frenzy, driving these multiples and ratios even higher. Seems a little rich.
"Dealster marks the first acquisition for Half Off Depot. In addition to its membership base, Dealster’s value to Half Off Depot lies in its proprietary platform, which includes social elements for customers and merchants as well as other features currently on the Half Off Depot product roadmap."
The key word being first.
One of the big outcomes of Groupon mishandling its IPO process was that the financial community lost interest in the entire online deal space. As I wrote at the time, "(the) Groupon IPO is good for Half Off Depot as it will make it harder for smaller underfunded companies to remain viable and they validated the market in which we participate."
At Half Off Depot we decided we needed to do two things.
The first was to get cash flow positive. We did this back in March and can continue to operate the business with a healthy bottom line while still growing at a nice pace.
The second was to go out and find smaller companies whose access to capital has been cut off but need more money to survive. Dealster was one of these companies. There are lots of companies like Dealster and I am spending lots of time talking to them. I believe that Half Off Depot will be able to efficiently grow its member base, and in turn revenues via acquisitions. We are going down that path. It will be interesting to see where it leads.
So the big news is that Facebook acquired Instagram for a cool $1 billion dollars (I can't even type that without thinking about Dr. Evil). A billion dollars is a lot. It's big. To put it in context here is how it stacks up with other photo acquisitions over the years.
I mean it is big. And it is big because the future of social is mobile and the essence of Facebook is sharing pictures. Regardless of the price I can see why they did the deal.
Insta was becoming a threat to Facebook. I first noticed this during a trip to my nieces Bat Matzvah two months ago. Insta was becoming the social network of choice among the 13 year old crowd. My 12 year old picked it up. My 13 year old declared "Facebook is boring."
And it was moving up the age stream real fast. Abby, my wife of a certain age, was using Insta. It is actually the first social network that she ever actively used. Insta moved her beyond the necessity of LinkedIn and her voyeurism on Facebook to actually engaging and posting on a social network. Upon learning about the deal via a Facebook post by me she actually made a rare Facebook comment "Say it isn't true! They'll ruin it."
I don't know if they will ruin it or not. I hope not, as Insta is one of my two favorite social networks at the moment (the other being Foursquare).
I do know this. A billion is a big. I hope Facebook makes it work for itself and for the Insta users.
One of my favorite bloggers is Fred Wilson. I don't have tons of time to read blogs these days but I still try to make my way to A VC once or twice a week. Some time ago Fred started a series called MBA Mondays. There are about 100 articles in the series now.
As a guy with an MBA and a bit of startup experience I found much of the early content not very interesting (though I suspect it is highly interesting to someone with no formal business education). More recently Fred has been writing about the management team during various stages of startup growth. The last post was on management while building the business. There is a great quote in there:
"The people side of the business is harder and way more complicated than building a product is."
It is. People are messy. But not many entrepreneurs think about this. Perhaps because few get to the growth stage. At Half Off Depot I am right in it. After revenue it is the most important thing I do every day.
After he wrapped up his last post in the subject Fred did something that was brilliant. He had a series of guest posts on management. They are really good, with nuggets of wisdom throughout. Below is a favorite thought from each guest blogger. Something that I personally believe. Anyone that aspires to lead or be a part of a successful startup should take the time to read these guest posts. Because after you build the product and initial user base it really is all about management.
Jerry Colonna "Surrendering to the demons that torment your organization does not mean abdicating your responsibilities to manage. You are still responsible for dealing with the reality of what is. In some cases, the demon is the wrong vision for the company. In others, it might be that you’ve hired the wrong people. In still others, it might be your own failings—like an inability to admit that you’re wrong."
Joel Spolsky "Stop thinking of the management team at the top of the organization. Start thinking of the software developers, the designers, the product managers, and the front line sales people as the top of the organization."
Phil Sugar "I go on as many sales calls and customer visits as I can. I’ve been told that once I hire a Head of Sales, I should stay out of the process. I totally disagree. I am not going to be the one managing the process, but I want to hear what the market is saying directly."
JLM "Bad news --- your generation did not invent sex. It does not have to invent the crafting of companies either. Someone else has also done this before."
Matt Blumberg “Management teams never scale intact as you grow the business. Someone always breaks.”
The other day I wrote about the partnership that Half Off Depot and Google had entered. It's a big deal, but perhaps even more important then the deal itself was what it signified. Half Off Depot has grown to the point where it can do some partnership marketing.
As a company grows and starts to gain a little traction in the marketplace a wealth of partnership marketing opportunities can be pursued. These are business development channel type deals that can get a small but growing company much broader distribution and market credibility by associating with larger brand names if the right partners are chosen.
The key point being the last sentence. Once you reach a certain scale a small technology company needs to focus on continuing to grow by pursuing deals with larger companies that can give them more credibility and reach.
This week was pretty exciting at Half Off Depot. Google announced that they were expanding their Offers program to include more cities and more deal partners. Half Off became one of 30 Google Offer partners. We have long considered ourselves to be a top ten participant in the online deal market so this in some way validates our position. And given the number of deal companies out there that puts us in pretty elite company.
But the same response from almost everyone that I talk to about the deal is this. "Google Offers is a competitor, why do you want to work with them? Aren't you worried about Google stealing your customers or merchants?"
The answer to the latter is not really. The Google folks seem ernest and well intentioned. They are very professional and responsive. They care more about the customer experience then about money.
The answer to the former is that it seems to be a really good fit. Half Off Depot has a sales team that is second to none backed by a behind the scenes service offering that is really interesting to merchants and a unique approach to the space. This enables us to secure great local deals. Google is Google. They have unsurpassed reach on the Internet. A vast audience. When you combine our great local deals with Google's vast reach I think there is a way there is a way for us to work together to help both of our causes.
So we did the deal. It has great promise. Sometimes doing a deal with a competitor is the right thing to do.
Beyond the potential of the Google partnership itself the deal signals something even greater. Half Off Depot has grown to the point where there are a number of logical partnership opportunities. Time to pursue them.
So about a week ago I posted an article about the eight qualities of remarkable employees. It was inspired by an article by Jeff Haden and he is back at it again with the five qualities of remarkable bosses. I try to live by some of the qualities that Jeff points out like never asking an employee to do something that I would not do myself. But his last point really hit home.
Always remember where you came from.
To some of your employees, especially new employees, you are at least slightly famous. You’re in charge. You’re the boss.
That's why an employee who wants to talk about something that seems inconsequential may just want to spend a few moments with you.
When that happens, you have a choice. You can blow the employee off... or you can see the moment for its true importance: A chance to inspire, reassure, motivate, and even give someone hope for greater things in their life. The higher you rise the greater the impact you can make—and the greater your responsibility to make that impact.
In the eyes of his or her employees, a remarkable boss is a star.
The pressures of trying to grow a startup make it is so so easy to blow off an employee that wants to chat for a few minutes. A manager's most important job is to help their employee's do theirs. Doing that means being available for them when they need you, not just when it is convenient for you.
Over on the Nebo blog Kevin Howarth is doing a series of interviews that feature marketing thought leaders both locally and nationally. Kevin was gracious to ask me to participate and we had a fun conversation about interactive marketing. Kevin's interview, with much better graphics than FoG, is being republished here with permission.
What do you feel is the most important aspect of how interactive marketing has developed over the last few years?
Interactive marketing has transitioned from command and control to a more user-generated focus. For any online marketer to be successful, they have to embrace user-generated content and online communities. That means empowering communities to help them spread the word about a company’s products and services. This kind of focus has led to a heavier emphasis on customer service. If you don’t have happy customers, then they’re not going to talk about you. Or they’re going to say bad things. The vast majority of good marketers understand that they are no longer 100% in control. Five years ago, people really didn’t understand this lack of control but I think they understand it now.
How is search and interactive marketing impacting how companies start up their businesses today?
It’s where they start. When a company begins, all they have are themselves and some word of mouth elements. An online presence via social is the least expensive way to amplify what you’re trying to do. SEO and SEM are obviously very important as core aspects to any technology company’s marketing. For example, at Half Off Depot we’ve seen that the way local merchants used to go to market has gone away. The Yellow Pages, local magazines and newspapers are gone or in steep decline, and merchants need a way to market online. We help them with the online piece so that they stay in front of their customers face-to-face.
Companies also have to figure out where “home” resides. Home might be their webpage, or it might be a Facebook page. Either way, companies really have to integrate social from the start while building this “home” presence. Website design has really started to emerge as a competitive advantage. For example,Fab.com is a beautifully designed site, and they actually used design to demonstrate how they’re going to be different from competitors. I don’t think people talk enough about the importance of good design or take into consideration how it can really impact the customer experience. In turn, customer experience can impact word of mouth and viral marketing.
What’s your current assessment of the Atlanta marketing community?
In my opinion, Atlanta is very strong from a technology marketing perspective. But we do a bad job letting the world know about it. We have established well-known companies like MailChimp and WhatCounts, and there are a number of email service providers like Silverpop. There are also quite a few companies starting to play in the social space, and we still have a strong cluster of traditional interactive marketing companies. Atlanta marketers have such deep domain knowledge of interactive marketing that it’s inevitable that they’re starting to apply that knowledge into different verticals and new emerging areas. At its core though, Atlanta is best at B2B. Even the more well-known consumer-focused companies have a heavy B2B bent, and a lot of Atlanta’s marketing companies direct their energies toward that demand.
You’ve mentioned social quite a few times. Why is social so important in today’s marketing climate?
The opportunity for social is understated. Everything is eventually going to be that way. Today, my teenage children cannot imagine a world without the Internet, and they are part of a demographic completely immersed in social. I think marketing is eventually going to become all social, and social is going to be one of the primary marketing drivers as other traditional mediums continue to fragment.
And how does mobile play into the mix?
Social is big, but mobile is the future. Anything that you wanted to do on a computer five years ago, you can now do on a three by six inch device. Today, I think it’s still a little bit difficult to do ecommerce on a mobile device, but that’s quickly going away. Behaviorally, people are not afraid to buy things on a device. It’s just hard to do sometimes because of the initial set up and ease of use, but that’s all going to get solved. For example, Square is making it easier for phones to accept credit cards, and local Atlanta startups such asWhisper Communications are also emerging into this space to help make B2B mobile transactions easier and more secure.
What are your thoughts about how marketing measurement has changed over the years?
If you look at one of the primary drivers of why interactive marketing is growing so quickly, it’s because people are spending more and more time online. That’s half of the equation. The other half is that interactive marketing is much more efficient than traditional marketing from a structural perspective. Not only is it less expensive online versus offline, but you can very accurately measure the effectiveness of what you’re doing in real dollars and cents. More and more companies are demanding that kind of measurement, and I see that trend continuing as audiences fragment and spend more time online.
How does content strategy fall into the marketing mix?
Content is king again, but it’s not necessarily because the content is truly unique. It’s because it will drive traffic to your site. You need good, strong, consistent, and deep content in order to effectively drive traffic. You’ve got to give people the content they want, in the format they want, at the price they’re willing to pay, and when they want it. There are many different variables, but the people who are successful at putting those things together are really good at getting people to buy their products and services.
What marketing trends do you feel will have the most impact in 2012?
Marketing spend will continue to follow people. People are spending much more time on the Internet than they did in the past, and marketing dollars have yet to completely follow that trend. Marketing dollars will continue to go where the people go. Right now, people are on social and I see that trend continuing for the foreseeable future until the next “social” emerges. I often talk about how there were the PC wars, the browser wars, the search engine wars, and the social wars. We had winners in each one of those categories. I don’t know what the next war is. But there is going to be something that pops up that’s truly disruptive and that no one’s really thought about. Consumers will interact with technologies in ways that we can’t even think about right now.
I recently had a meeting with one of my long-term financial advisors Rusty Holcombe. He has his own firm, Holcombe Financial. As always the meeting was thought provoking. To say Rusty is a contrarian is quite the understatement.
As we we leaving Rusty gave us a few books. One on top grading sales, finding good employees, and how to unlock business profits. He also gave us a book of his own. You Should Only Have to Get Rich Once. It is bascially completely counter to any advice you have ever received from the finance industry, or what Rusty refers to as toxic financial advice.
The starting blocks to financial health according to Rusty are:
Don't pay fixed bills with variable money.
Build your saftey net.
Invest for cash flow.
Enjoy life.
Not a bad list though I am not sure that I totally agree that point number three applies to most people.
One of the more interesting things about Rusty is how he is marketing his book. His goal is to give away a thousand copies this year. I thought I would help him out.
The link was sent to me by one of Half Off Depot's investors. The note simply said "this describes you." First time I ever took being a bit quirky as a compliment.
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DISCLAIMER
The opinions expressed here are mine and mine alone (with the exception of comments by others of course). They do not represent the opinion or position of any other person or entity. All postings adhere to my personal values.
