WeFeedBack – Charity in Web 2.0

I decided to analyze interesting initiative that uses internet and social networks not to create a profit, but raise awareness about serious global issue and get people engage into solution. Wefeedback is a new initiative of the UN World Food Program (WFP) that started its public beta in March 2011. Its mission is to “Enlist your help and the help of your social networks in the fight against the chronic hunger that burdens families all over the world.” To start from the theoretical framework, successful fund raising for charity should take care of three main critical success factors:

1. The value of giving
2. The impact of social factors
3. The role of emotions

The value of giving should lower the costs of giving and increase the benefits in the eyes of the donor. The social factors are important in strengthening or weakening the pressure to donate. Our thoughts about expected behavior of others impact our donations. Despite the preceding factors, eventually, emotions drive the donation decision. Establishing pro-giving / spending emotions is key for any charity and any advertising. Let me analyze, how this three critical success factor have been implemented at Wefeedback.

The main idea behind the site is to make people share with their social network which food they like and how many underprivileged children have they fed by donating the price of the food to WFP. Desired user behavior on the site follows three steps:

1. User utilizes Feedback Calculator to estimate how much children can be fed by her favorite food
2. User donates the price of the food to WFP by PayPal or Credit Card
3. User shares the information with her social networks

Idea of the Feedback Calculator removes typical donation mental barrier of “how my money can make a difference” or “only large sum of money is needed to make a difference”. In fact, the calculator uses simple equation that every $10 feeds 40 children no matter which type of food you choose. However, choosing the particular food is important to activate user’s imagination of how many children in the third world could eat it she would sacrifice monetary value of her meal. Additionally, the type of food plays important role when sharing the message in social networks. In general, the Feedback Calculator explains the value of the donation and marginalize its costs. The value of donation are the content children and the costs are represented by one favorite meal instead of money.

Second step consist of sending the donation via PayPal or credit card charge to WFP. Immediately after the donation, user home page is updated with information about number of children fed and pre-edited message to be shared on social networks.

Ultimately, sharing information about the donation on social networks has many effects. It serves as a peer-pressure for friends to donate as well, distribute the message of how high relative value of our favorite meals have in the third world, and ultimately brings traffic to the Wefeedback site. The typical pre-edited social network message looks in following way “feeding 40 hungry children with the cost of my favorite meal. How many can YOU feed? #wefeedback http://tinyurl.com/3uxr7no” is spreading the “guilt message” how well do we live and how easy it is to help the less fortunate ones. Every user also has a public web page with information about her donations, which increases donors visibility even more. It also fulfils the second success factor of a charity fund raising campaign, building up the impression that giving is socially desirable esp. when both the costs and rewards are so tangible as in this case.

Last but not least, the emotional part is present at Wefeedback by the short one minute videos showing the children together with WFP activist in a Wefeedback T-Shirt, who is explaining how the donation is used. User gets emotional bond with the children and also understand global reach of the WFP.

Wefeedback also re-used some ideas from other internet projects like badges well known from the X-Box Live or FourSquare. And what is the behavior Wefeedback rewards with badges? Obviously these are donations, but also sharing information on social networks and donations by the referees from the user.

Hence, Wefeedback aims to create viral campaign at social networks that attracts as much users to the community. The users can donate money immediately to existing WFP program so that unlike many other internet projects, this one creates positive cash flow from the day one. The results so far seem to be promising. In more than a month of existence, Wefeedback converted web traffic to 6,925 registered users that already donated $27,000. Moreover, 3,186 people like Wefeedback on Facebook and 528 follows it on Twitter. Based on the data from iSpionage, Wefeedback spent between $1,029 to $1,608 on on-line advertising generating between 1,988 to 2,473 clicks.

According to Alexa, it current site visitors are highly educated users under the age of 35 who have more than one child. Prevailing groups are women between 18 to 24. Approx. 17% of the traffic is coming from the USA.

Chart 1 – Alexa Daily Reach (% of global internet users)

However, judging from the Chart 1, it still unclear whether traffic to the site and consequently number of registrations will start exponential growth. Also, the bounce rate of 65% is typical for PPC campaigns of sites without customized landing page. It seems that Wefeedback is yet to reach the critical mass of users that will fuel the future growth.

I believe that Wefeedback is doing a lot of things right, but there is still room for improvement in its on-line presence strategy. I would recommend to undertake following measures:

• Attract more attention of influential bloggers
• Optimize the “Deal Flow” by reducing number of clicks from site entry to donation
• Create customized landing page for the PPC campaign (it should halve the bounce rate)
• Lighten the site front page to reduce page load (it will improve the SEO)

In conclusion, Wefeedback is one of the first charities to completely embrace web 2.0 concept. Despite minor drawbacks in the design of the site, the main elements of the idea are set correctly while keeping in mind critical success factors for fund raising.

Notes from live meeting between VC and Entrepreneur

In this blog post, I will write about the investment analysis procedure by the venture capitalist (VC). We had a tremendous opportunity to observe a meeting between an experienced VC, Rodolfo Carpintier from DaD and promising young entrepreneur Parisa Louie pitching the WatchFit project. I won’t give out much specifics of the WatchFit not to breach confidentiality, but will walk readers through the VC questioning process. Hopefully, this information will help entrepreneurs to prepare better for meetings with the VCs.

Investment analysis

1. Project Sales for next 5 years
2. How many employees you need?
• How many now and in 5 years
• What is the shareholding among current employees / founders

3. How many countries you need to be?

4. Describe the business model in shortest possible way

• (Do not use the word platform or technological terms when pitching to investors)

5. How long will it take to bring the product to customers?

6. How much money you need to start?

7. What are the customer acquisition costs?

• Consequently, how much will you be spending in marketing?

8. How many customers will you have in the first year?

• Who are the customers? Are they the same profile (advisable to be)?
• What is the conversion rate from registered user to frequent user and paying customer?

9. When do you start billing? What will you bill?

• (It is very difficult to get money from advertising unless you have 800k or more users. Do not assume more than 15% revenues from advertising)

10. What profit will you make and when will you breakeven?

Evaluation criteria

1. Entrepreneur’s knowledge of the market
2. Entrepreneur’s knowledge of her business
3. Numbers are reasonable (VC will run her own calculations and challenge you with them)
• Visualize the business plan in a simple single spread sheet
• Test the assumption about the market at the social network or perform a pilot

In general, VC see dozens if not hundreds of project per year. Most of the projects are viable, it means that business model makes sense, there is a market and good entrepreneurial team. Being viable is necessary, but not sufficient condition to receive an investment. Actually, most of the viable projects are not interesting to investors either due to lack of scalability and / or lack of real need of investor’s money to set up the business. What the VCs are looking for are investable projects, which have interesting growth potential and good future valuation in order for investor to get her required multiples on the money invested.

Interestingly enough, valuation of the company will vary based on the country, where the business carried out or starts. The reason behind is that VCs want first to try the product in their country. The market potential of countries differs greatly. For instance, valuations in the UK are approx. 2x higher than in Spain, France is in the middle, Germany 80% of UK, and USA 3x of Spain. Concluding from that when you are in a small country, the valuation will be also smaller.

Additionally, VCs like entrepreneurs to be focused on their product and market. Diverse product portfolio creates suspicion especially if the product targets both enterprises and consumers. For conducting B2B business, the team’s skill set is rather different than being in B2C.

We shortly discussed if there is a bubble growing around the recent valuation of internet businesses. Rodolfo suggested that despite being in the 21st century, 95% of the companies behave as if we still were in 19th or 20th century. In particular, today’s E-commerce is just copying the old business models at the internet (except Amazon, E-Bay, …). Hence, e-commerce has to be completely re-done and there are more examples like that. Consequently, internet business is to be taken seriously among other also in financial valuations.

Entrepreneurship with Pablo Larguía

Today we had a workshop at IE with Pablo Larguía, serial tech entrepreneur and owner of three theaters in Madrid. Pablo moved to Madrid after selling his venture Bumeran.com, leading job search site in Latin America to Terra / Telefonica in 2000. After staying in the company for compulsory 18 months after the sale, Pablo moved to entertainment industry producing successful movies and theater shows. On top of that, Pablo organizes already third annual conference on tech entrepreneurship La Red Innova. I will focus on two topics in this blog post, advices about tech entrepreneurship from Pablo and how it is to organize a top Spanish Tech Business conference.

Entrepreneurship

Founding a start-up is pretty much like a personal relationship with someone. The start-up is your partner. Therefore, Pablo sees three key qualities in your entrepreneurial attitude:

• You must be proud of what you are doing
• Have a strength to maintain the core value of the business over time and despite pressures
• Have a respect to your team, customers, and competitors

About the business idea itself, Pablo believes that If you need more than one sentence to describe your project, you have a problem. Clearly, simplicity of the idea helps in communication with customers and investors. Also, simple ideas are probably much easier to implement. To be an entrepreneur it is like to be a salesperson 24/7. You must constantly sell your ideas!

Particularly, I liked Pablo’s attitude towards seeing the bigger picture in the business and his impact on a society, typical for Latin American entrepreneurs. Every entrepreneur should have a higher purpose, big idea behind the business that benefits the community. In case of Bumeran.com, the big idea was to increase efficiency of the Latin American job market.

La Red Innova Conference

La Red Innova aims to be an exciting meeting platform for entrepreneurs, investors, and developers. Pablo prepared three streams running in parallel:

• Inspirational speakers
• Technical workshops – on business models, technologies
• Start-up competition

Technical workshop attracts developers, which boosts ticket sales. Start-up competition attracts both entrepreneurs and venture capitalists, which results in self-reinforcing increase in ticket sales. The more entrepreneurs come to the conference, the venture capitalists come and vice versa. Inspirational speakers gives the conference visibility. There is a matchmaking tool behind the conference web site that facilitates networking among participants e.g. linking people with interest into same technology.

However, conference is about creating an energy. Therefore, Pablo also invites stars from the entertainment industry like singer of Ace of Base and other artists to get the fun and glamour factor. Anyway, at the end, people value quality of the conference based on the party at night.

.

Internet from Venture Capitalist’s Perspective

With experience from direct investment from 1995 and 20 completed investment with average IRR 25%, Roberto Saint-Malo became a legend in Spanish Venture Capital community. Recently, Roberto founded a new venture capital company Kibo Ventures specialized in internet business models with regional focus on Spain and Latin America.

Roberto’s point of view as a VC nicely contrasted with those of RJ Friedlander from ReviewPRO, who prefers to keep company under his control without VC interference and Jorge Mata that does not believe in other value of VC than providing the funding, practically denying the “smart money” concept. Although, Roberto is an example that certain type of VC can add non-monetary value in three distinctive ways:

1. Shaping / generating the idea

2. Facilitating the business planning

3. Utilizing personal network for further investments into venture

Apart from evaluating entrepreneurial ideas, Roberto has a vision about the future of internet business and actual ideas where internet business models can change the way we do things today. Therefore, apart from funding, Roberto can also “assign” an idea to the promising team of entrepreneurs. Good business planning is often the shortcoming of many new ventures due to the inexperience of the founders. Good VC does not reject the business plan, because of its shortcomings, but use her expertise to improve it together with the entrepreneur. Finally, should the business grow beyond funding possibilities of Kibo ventures or become “too mature”, Roberto can help to attract other Angels or VCs to invest thanks to his personal network.

Moreover, typical Kibo ventures investment cycle takes only 8 weeks in comparison to 4-6 months in the VC industry. There are three types of investment Kibo engages into:

1. Proven model optimization

2. Early stage investments

3. International opportunities

In proven model optimization, Roberto invests either to a regional copy-cat of proven idea that successfully works elsewhere or to optimized version of existing idea. Early stage investment, comprise of investing into a brand new idea. In this type of investment, Roberto wants to be involved as early as possible typically providing seed investment with option of further funding. International opportunities consist of co-investments with other VCs to ventures they revealed while keeping the personal network alive, which later helps make them invest to Roberto’s projects.

Now is time to reveal the secret. What are the criteria Roberto uses to evaluate investment opportunities? Here they are:

• Right DNA / character / drive of the entrepreneur
• Great team
• Low capital intensity at the beginning
• Short-term value path + large market opportunity
• Proven / clear business model

Apart of that, bias to action is vital. At the end, it is not about what you think, but what you do. Entrepreneur’s track record is often mentioned as key criterion, however examples like Mike Zuckerberg are strong cases against the track record. Therefore, it is possible and increasingly common to invest to 22 year old entrepreneur, who has the right character qualities and drive. Interestingly enough, doing an MBA or working in big companies might distract you from developing the entrepreneurial skills. Roberto recommends not to put your dreams on hold. Act now!

Reputation Management On-Line

Today IE hosted a workshop with RJ Friedlander, CEO of ReviewPRO, highly technological social media research company focused on reputation management in hospitality industry. According to their advertising leaflet, they cover more than 70 million reviews - in 8 languages – from thousands of sources, including 60 of the most important Online Travel Agencies. So how the product actually works? If you are a hotel, you choose in one of the three price plans with regular payments. What you get in return is a web based software resembling Google Analytics, but all about reviews of your hotel’s and your competitor’s services and in social media. The results are presented in the form of sophisticated graphs, where you see how your Global Review Index (GRI^TM) evolves over time and where you stand in comparison with your competitors. You can receive an alert when your GRI is deteriorating or a negative review has been recently posted. To handle the negative review, proportion of which is surprisingly small with 14.7% in average, ReviewPRO offers workflow that helps hotel’s management to investigate the issue and implement corrective measures. The software works in real time, hence is more effective than traditional mystery shopping, which captures only static picture of a given day. The greatest competition up today is Radian6, recently acquired by Salesforce.com. There are other products that focus vertically on hotels like ReviewAnalyst, but none of them has integrated that many sources and supports industry specific workflow.

Although, I am not entitled to share specific numbers, I can say that ReviewPRO has been very successful in past 18 months expecting to break even in summer 2011. I believe that key to the success are two obsessions RJ Friedlander suffers. First obsession is to develop the product to perfection. ReviewPRO had spent surprisingly large sum of money to make their product best in its class to get some head start with their competitors. Second obsession is related to clients. ReviewPRO sales force is persistent in hunting down clients constantly coming up with different proposals in case of refusal. The result is rapidly growing customer base with almost 0% churn rate.

The advantage of focusing vertically on hotel industry is two-fold. Firstly, hotel industry is globally very large and fragmented with a long tail. Although, in the USA, 70% of hotels are co-branded, in Europe it is the other way around. Hence, there is a place for 5-6 reputation management software, while all of them can get reasonable revenue volume. Additionally, there is a plenty of exit strategies incl. variety of potential acquirers. Secondly, hotels are critically dependent on their reputation and bookings are largely driven by recommendations. On top of that, performing semantic analysis of the reviews is far easier, when you restrict yourself to one industry or topic as you analyse less variations of words and their combinations.

Who would think about a business like that back in 2007? On-line booking changed the travel industry. Lets’ see how far the social aspect of choosing the products will go. In the meanwhile, companies will need social media monitoring tools to at least know what is going on with their brand.

Alberto Torron and drilling

IE hosted a workshop with entrepreneur Alberto Torron Rodriguez, who opened a series of vertical e-shops for professional equipment. I know from my experience that vertical e-shops work very well due to their simplicity and deep expertise in the product. I recall an entrepreneur from the Czech Republic, who owns a price comparison product search engine, where he mines the data about products people are searching. As soon as he spots a new trend that is not covered at the Czech market, he immediately opens another vertical e-shop and lists it at his product search engine.According to my knowledge, he already owns more than five such e-shops.

Alberto currently owns fours e-shops, which he and his partner manage as a part time job.

• http://www.herramientassincable.com/
• http://www.todotaladros.com/
• http://todoauriculares.com/
• http://jardinprofesional.com/

The visit to sale ratio is 1 sale for every 300 visitor with €230 average ticket price. The daily sales are €1000. Focus on one single product category enables Alberto to be profitable even with lower volumes (Nader thanks for this facts). Additionally, Alberto focuses on quick and friendly customer service and minimal operational costs as the e-shop are run on open source software. Alberto keeps his eyes open on other opportunities at vertical sales in Spain, but at the same time deliberately keeps the growth slow.

How to Build an On-Line Community

Today we held a workshop at IE with Pedro Jareño, from Minube.com, ambitious travel site founded in Spain, which recently expanded into France, Italy, Portugal, and China. Pedro is in the travel discovery business inspiring travellers into discovering places to go and things to do there. The biggest representative of this interesting category is tripadvisor.com. The revenue comes mainly from so called “Quality Plan”, a scheme that promotes certain region or city at the web site by creating professional content about the place and placing it at the front page.

90% of the content at Minube.com is user generated with all the pros and cons associated with that. Typically, the greatest cons of such content is lower quality and lack of comprehensiveness. On the other hand, content from users bears a badge of authenticity and personal touch. I believe that users generated content is characterized by the “snowball effect”. The more content you have, the more comments, photos, experiences you get. Therefore, I would suggest Minube.com to generate more of its professional content about various places and encourage users to comment, add videos, maybe even correct some information. By doing that Minube.com will mature in terms of amount and quality of information provided, but without losing the social community aspect of the site.

The whole session was centred around the topic of creating and managing the communities. Here is Pedro’s “manual” how to build a community at Minube.com:

1. Target identification (travellers, bloggers, active users)

a. Look for travel bloggers everywhere (found 2,000 blogs)

b. Wrote to each of them about the minube.com

2. Get users

a. Tell a story what we are and why they are important

b. Contests to attract travelers advertised at other sites or community portals

c. Create a friendly brand - community is about feelings

3. Invite dynamics into the community

a. Let users feel that you are interested in them

b. Every day show some activity

c. Keep conversations going

d. Organize contests to let users participate

e. Users get badges for activity

4. Retain users

a. Increase community loyalty by organizing “off-line” events

b. Send newsletters AND reply to answers you get

5. Public recognition

a. Prizes, gratitude, badges

b. User picture / video / post of the day

There are following key factors in building successful community:

1. Constant innovation

2. Passion is contagious

3. Reveal the human behind the brand (e.g. founders)

4. Be honest, be what you are

5. Focus on your topic e.g. traveling

In conclusion, building your business around a community is always risky, but when you can offer superior product with good community management, feasible. Anyway, in world of today brands and companies do not decide who they are, the people decide.

Idealista.com

On Wednesday we had a workshop with Jesus Encinar, charismatic founder of the largest Spanish real estate web site idealista.com. When Jesus founded Idealista in 2000, the Spanish on-line real estate market seemed to be more than overcrowded with around 30 real estate sites. Jesus decided to differentiate by focusing only on Madrid and getting as much ads as possible. His good “off-line” preparation before actually launching the site brought its fruits so that Idealista had 5,000 adds at the time of the launch, which qualified it to the largest real estate site in Madrid from the day one. Jesus’s team achieved this by placing 25,000 tele-sales calls to both real estate agencies and individuals.

Idealista’s second differentiating feature and competitive advantage at the same time is the simplicity and user friendliness principles applied to the web site design. Both is achieved by continuous improvements employing latest technologies as eye camera and heat maps. However, the most powerful user friendliness tool is proximity of web developers and testers in Jesus’s team. Web developers are invited to come and see the users struggling with their complicated design, which made them correct the mistakes quickly and silently.

However, funding was the issue as costs of establishing a web site back in 2000 was approx. EUR 1m in comparison with EUR 400 per month, deal you can get today. Investors were not eager to step into Jesus’s business as it was only Madrid local preferring scalable international projects. Hence, Jesus hired Andersen Consulting to raise EUR 6m in venture capital. The money were eventually raised after speaking to 150 different investors and using the Andersen’s credibility.

After penetrating major cities in Spain, Idealista went to Portugal and Italy, two markets culturally proximate to Spain. While expansion into Portugal was literally virtual with little local presence and dedicated Portuguese call centre in Spain, expansion to Italy was a different story. Italy appeared to be a hot market, where you had to be so that Jesus decided to follow despite the fact his two main competitors lost EUR 1m and EUR2m respectively while doing business there. Entry to Italy represented challenge as all Idealista’s profits from Spain were invested into Italian market for two consecutive years. Jesus drew important lesson from this experience that it is better to be powerful leader in your market then being diluted in many countries.