Cooleaf

Challenges of a Two-Sided Market Business

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chicken-or-egg

I regularly meet other entrepreneurs at startup community events such as Startup Village, which is a once a month event where a handful of companies pitch their business to a crowd of around 200 people.

Lately, several entrepreneurs that I have met with have all pitched me their business concept that falls into the category of a two-sided market, which naturally creates the classic chicken & egg problem. Usually this involves some form of an aggregator or marketplace product where buyers of a particular industry have easier or discounted access to multiple suppliers in that industry. The typical business model involves a transaction fee or revenue share when the buyer makes a purchase through the marketplace product.

The problem is that this model requires double the work for a startup! First you have to partner with enough suppliers so that the marketplace is attractive to buyers and then you have to attract enough buyers to make the marketplace viable to the suppliers and to earn sustainable revenue for your business.

Based on my own personal experience at Cooleaf with our first product, I discovered a full set of challenges with this model.  A big challenge that I found was the amount of time spent on maintaining the supplier side of the marketplace. Issues such as keeping data or supplier information current, suppliers not being happy with the amount of business they are receiving, turnover at the supplier and them forgetting they even have an agreement in place, growing the number of suppliers into new markets which will make people question the scalability of your model (big issue for investors), and more.

An issue on the buyer side is that you need a enough budget to put behind promoting your marketplace to change the behavior of a large number of buyers. I get feedback from entrepreneurs that they are going to leverage social media to do this. My response, good luck with that! Getting likes on Facebook is a far road from getting loyal customers.

Another issue with buyers is them going directly to the supplier once they establish the relationship and cut your marketplace out. I’ve found buyers in this model to have very little loyalty to the marketplace product and more often than not, it comes down to price which is a ‘race to the bottom’ business.

My suggestion when I meet entrepreneurs who are going down this road is to focus on building the technology to solve the problem that they see for buyers in the market, but just sell it directly to suppliers as a product. This may be branded for the supplier and licensed to them which creates a recurring revenue business model (investors love this!). This allows the entrepreneur to focus on building a product company as opposed to a marketing company. I think it’s really hard to be great at both. Plus, by just focusing on building and selling to the suppliers in the market, you are able to dedicate all your scares resources and attention. I believe this is critical for any startup to be successful.

Celebrating the Small Wins

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I really believe in the value of taking the time to feel good about the results that you have been able to achieve as a team.

We’ve been absolutely busting our ass at Cooleaf to grow the company. Recently we took 10 minutes on a Friday afternoon to celebrate a couple small wins and bang the crap out of a gong that is located in our office building at the Atlanta Tech Village.

I think part of building a culture is experiencing both ups and downs in your company and how you deal with them. Don’t forget to celebrate the small wins so your team can take a breath, smile, and feel happy about the crazy and awesome train that they are riding on.

Cooleaf Gong Hit

TAG Business Launch Competition Finale

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On May 5th I will be pitching my company, Cooleaf at the TAG Business Launch Competition final event.

The event is put on by the Technology Association of Georgia (TAG), the Metro Atlanta Chamber, and Venture Atlanta.

There were approx. 100 companies that applied. 18 were selected for a semi-final pitch off event and the list was then narrowed down to 8 companies for the final competition. I’m excited to say we’re 1 of the 8 finalist!

At the end of the event, a panel of judges will announce the winner of the grand prize for 50K + a ton of free services. It should be a great event and a good opportunity to meet some really connected folks in Atlanta. Below is a link to sign up to attend and a discount code for 50% off the registration fee.

Register Here

Discount code: BLFIN2014

Here is a Cooleaf  video that TAG made for us as being a finalist.

B2B Selling using LinkedIn

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LinkedIn is an amazing sales tool. There is no reason why you can’t be able to get a conversation set up with any company you’re trying to sell into, regardless of industry or location.  Once you have your prospect, you can drill into strategies to close that organization as a new client. Here are a few thoughts on how I approach B2B sales using LinkedIn.

Once you pick out the prospect company you want to target, use LinkedIn to review your network for connections inside the company. A simple search will give you a list of people that you have 1st,  2nd, and 3rd connections with.

Review the 2nd connections you have and find individuals as part of the executive team if possible. I’m looking for a decision maker, preferably at the VP level or C-suite.

Once I find the person that I want to reach out to, I write them a message similar to below. This may vary depending on the role they have in the company, how you’re connected to them, and what is relevant to them. I’m usually looking to learn about how they are building a strong culture inside of their company and share about how we (Cooleaf) are working with clients to see if there is a fit for us to work with them as a client.

__

Hi ____,

We’re connected through ______. I’m the founder of a company based in Atlanta called, Cooleaf.

I would really value getting your feedback about how you approach building a strong, innovative and collaborative culture at your company. I would also be happy to share what we’ve seen from other organizations on how they approach reducing turnover and attracting the best talent.

I would really appreciate you connecting with me.

-John

__

If they connect with me, I follow up with a thank you e-mail for connecting and asking if we can set up a phone call or time to meet over coffee or lunch. You would be surprised how effective this is. After all, you are only asking for feedback.

You won’t always get a response but if you take some time to research how and why to connect with someone, you have a decent shot. After that, it’s a numbers game. I believe timing plays a big role in making these connections. You will never make any connections unless you reach out to people in a meaningful way.

Should you change your company name?

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Our business model had completely changed. We were no longer about health and wellness for individuals but now were focused on helping organizations build a strong culture as a top workplace. We had just completed an angel round of funding for $375K. It was natural to question if we should move on from where we were as a company and start over with a new name, design, and logo.

We wanted to be bold and start telling a new story about who we are as a company and felt a change was needed.  We went through an internal exercise of creating a brand book that spoke to our vision of Cooleaf as authentic as possible, who we were as a company. Along with the brand book, we debated whether or not to change the name of our company.

Reasoning to change the company name:

  • Literally we had our own investors and advisors who would get our name wrong. It was pretty common to see an e-mail come in with the name Coolleaf instead of Cooleaf. There is only one L!
  • The name Cooleaf tells you absolutely nothing about what we do
  • It’s hard to be cool when you have the word Cool in your name
  • By all purposes, we were a new company and did not want to be held back with a perception of who we were in the past

Reasons to keep our name:

  • We are still a young company and will probably continue to make pivots in our direction and business model
  • There was plenty of positive feedback from people about our name. It’s like the old saying, the grass is always greener
  • It would have cost us probably around $10K to change our name. When you ‘peel back the onion’, you start to realize that your company’s name is everywhere. In our technology platform, business services, accounts, customers, marketing material, etc…

We went back and forth for about 6 weeks. When it was all said and done we decided to keep the name but redesign our logo and website. Things are constantly changing and I can’t say for sure that we won’t every change our company’s name in the future but for now, we feel good about keeping the name Cooleaf and look forward to building our brand.

Here is a look at our new logo and old logo. You be the judge of what you like better.

New Logo

Cooleaf Logo

Old LogoCooleaf Logo

The Real Value of Startup Pitch Events & Competitions

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As we (Cooleaf) have continued to grow as a company, we have come across more opportunities to pitch and compete for recognition and cash. On the surface, these types of events may seem appealing and attractive to spend time on. For example, thinking about the PR (Public Relations) that we may get from winning a pitch competition among other startup companies is attractive. The reality is though that there is only one winner and the odds aren’t in your favor. Even if you did win, you could question the real ROI from the press that you would get anyway.

I’m not knocking pitch events. They keep the blood flowing in the startup community. We participate in them and will continue to do so. However, there is another purpose for spending time on these events.

I would like to suggest that the real value is the spark and sense of urgency that comes from getting ready for a big pitch event. For example, Cooleaf entered into the Tech Cocktail startup pitch competition. We ended up winning the Atlanta event and got invited to compete at the national conference in Las Vegas. This gave us the push to get several things done such as a rebranding of our logo, website, and new product demo.

We had less than two weeks to get a new marketing home page designed, developed, and implemented, a new logo, shirts made, business cards, and a pitch of the new product that we had been designing. We got it all done. I don’t think it would have happened unless we had a hard deadline to get it done by.

The value of a pitch competition has the potential of some great PR but regardless, there is the drive to get things done in preparation for the event which is the biggest value you can get.

Below is a video of the pitch competition we participated in at Vegas for the Tech Cocktail conference. We didn’t win but we got a lot done!

Finding Your Core as a Startup Company

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Cooleaf is constantly evolving. We are learning everyday from customers. I truly believe in that as part of survival. I also believe there should be fundamental principles at your core as a company that guide you. These principles can be difficult to learn and I think we are just now starting to really understand them. I think you really don’t know what you stand for until you have stood for a little while. Because then you get tested, rejected, and ignored. That’s when you really see what you believe in.

Here is our story at Cooleaf to finding our core.

The initial product launch for Cooleaf was a web app. that allowed consumers to pick and choose fitness classes from health clubs and studios without having to be a member of the gym. Our idea was to give people more flexibility, get a discount, and earn rewards for signing up for healthy classes. We got some traction but it wasn’t sustainable.

We found that what we thought was our target market, active people who liked getting fit, actually didn’t really need our product because they already felt good about the gym or studio they were in. They were fine with their current routine. We weren’t solving a critical problem for them. There was also a segment of the market that did like trying new things and not being locked down into a membership but at the same time they were getting e-mails from Groupon and Living Social with deep discounts that we couldn’t offer.

We started evolving into the corporate space by allowing the HR Director for example to offer all their employees a corporate discount to the Cooleaf partner network based on a corporate rate we negotiated with health clubs and studios. We started to get more traction because the communication was going through a trusted source, being the company a person works for. We found this as a much more efficient marketing strategy for acquiring new users to our platform. However, it still didn’t change the fact that we were not solving a problem for people.

Around the same time as we were starting to work with employers for distributing the ‘corporate perk’ we called it, or employee discounts, we started organizing group events open to anyone to join. The first one we did was a IMG_0304kickboxing class at Atlanta Kick back in April of 2012. We promoted the event to our user base where we charged $5 for the class and then set up a happy hour afterwards. We figured we might as well have fun with this. People started showing up and bringing their friends. I remember thinking, ‘where did these people come from?’. It was a cool feeling to see people showing up to our event and having a good time.

We found that doing things as a group made more sense for people to try something new. Even if the class wasn’t great, at least they were with friends to have a good time. It became more about having a fun or good experience as opposed to just a fitness session. We got feedback that people liked the idea of being able to meet others who also shared their passion.

As we continued with the group events, we started testing the idea of setting up group events that are private to the employees of a company. This meant for example, bringing in a chef to do a cooking demo at a company’s office, onsite yoga classes, or taking groups of employees to rock climbing outings. We found that employees loved it and employers were willing to pay for it. Based on the traction we were getting, we started focusing on offering awesome group experiences for employees at our employer clients.

IMG_0427Alere Pilates1IMG_0681

Typically the conversation with an employer client would start around offering a wellness program that their employees would actually want to participate in because it was based on fun activities that employees gave feedback on that they wanted to do. We  would also get feedback from company leaders that they would use our program as part of their new employee onboarding process to get new hires introduced into the organization and start meeting others. The idea of organizing awesome group outings become much more about team building and making the company a better place to work rather than trying to improve the health of employees. People getting healthy was more of a byproduct of what we did.

We believe the best way to have a strong, innovative culture for a company is by creating an environment that fosters employees to have authentic relationships with one another. We help make this happen for a company by organizing fun group activities that allow employees to connect with other employees based on common interest and having fun.

By no means do we have it all figured out. We’re not even close. We are still constantly evolving how we position ourselves and what we can offer to maximize the value to a customer based on understanding and solving their problems. From all of this customer discovery and self discovery, we have come to put a stake in the ground on the following core guiding principles.

  • Enabling people to connect with others through fun, active experiences resulting in authentic relationships based on common interests, goals, and affiliations.
  • Creating more fun, collaborative, authentic, and positive cultures in organizations through engaging experiences for people.

How it Started – a look back at where my journey with entrepreneurship began.

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I’m guessing that a good place to start is in the beginning. This is a story about how I have come to find myself now, with a start-up company showing some signs of survival, finding an identity, and still not sure what the future entails.

I don’t think many people growing up think, ‘I want to start a company’. I didn’t at least. I got my first taste of entrepreneurship working for a start-up company, called Football Fanatics. It was an online retailer back when the idea of buying sports apparel and clothing online was starting to get some traction, in the 2002 time frame.

I was a student at the University of North Florida. My baseball ‘career’ as a catcher had just ended after two years at Brevard Community College. I started at UNF and decided to focus my energy and work ethic on establishing myself a professional career now that I didn’t have baseball to pour countless hours into anymore.  I joined a business fraternity called, Delta Sigma Pi (still love those guys/gals) and met a buddy of mine with a similar passion for business named Jon Roy. We both were in the Coggin College of Business together and were looking for an internship and came across Football Fanatics.

The job actually started out as just what I call, cheap labor. It was the holidays and they needed help boxing up all the orders they were getting in from the website. We worked in a small room behind the Football Fanatics retail store in the Orange Park Mall in Jacksonville, Fl. It was actually a great setup for the online business because they were able to leverage the existing store business and operations to support the online retail startup. Things like inventory, corporate buying, and overall tactical things like payroll were already up and running. Brent Trager ran the operations and was the visionary behind the business. To this day, I give him credit for my personal inspiration and the beginning of my love affair with entrepreneurship.

A personal friend of mine, named Ross Kirchman (much more on Ross to come because mark my words, he is going to be a rock star in his professional career and he is a big influence on me) and I were recently talking at one of our BC (Breakfast Club – like I said, much more to come on Ross) sessions about what it means to be a real player. To give proper context, we were talking about my recent experience closing our seed investment round for Cooleaf and all of the investors and so called investors or what I like to say people who like to talk a lot. I told him that I met some real players, some of which invested in my company, Cooleaf. He asked me how I defined a real player. My response… someone who is smart enough to recognize an opportunity and has the balls (courage that is) to act on it. I’m digressing from my story so I’ll go back to it now.

I stayed with Football Fanatics for roughly a year. During that time I got my first experience truly solving problems. I remember Brent coming to Jon Roy and myself saying, ‘guys, we need to set up a shipping department, can you do it?’. We literally were able to start something from scratch and get it up and running. I remember the awesome feeling of satisfaction of actually thinking about coming up with a strategy and implementing it and then seeing the results immediately in real life. I think that is the essence of being an entrepreneur – getting great satisfaction out of creating something new.  It was a great ride while at Football Fanatics. Brent, thank you again for giving me the chance and believing in me.

From Football Fanatics I took a job with a healthcare IT company called, Availity in October of 2003. This was a totally different world for me. It was a small company where I was the 37th employee. However, the company was owned by Blue Cross Blue Shield of Florida so it had a much more big company, corporate feel. I can look back and say that at Availity is where I grew up as a professional. I met some great people and learned so much.  I knew very little about healthcare or technology but I was willing to work hard. I started in the Finance Department, working for the CFO Margaret Gomez. I will write more about my time at Availity because it literally launched my professional career. It is a great company and I wish it the best of success. I met some lifelong friends at the company and mentors. Great people like Mike Neeley and Mary Kelley will always be a huge influence on me as I’ve learned so much from what we have been through together.

For this story, I will get to where I met an important person in my journey to starting a company, Sarwar Bhuiyan. I was a Product Manager at Availity at the time and Sarwar was working as a Project Manager. We happened to get paired on a couple projects together. We hit it off right away. I was a young, passionate employee working hard and wanting to get things done. We complimented each other very well.  We were able to implement several successful products together. We not only had success working on these projects but we enjoyed working together. This is where we started with conversations about starting a company. During lunches and coffee, Sarwar and I would talk about things we could do better at the company and the industry overall. We would talk about lots of ideas. Most of the time the conversations were related to the company and within the industry. We even came up with what I’ll call a ‘white paper’ outlining several ideas that we could pursue and presented it to a mentor of mine, Mike Neeley (much more on Neeley to come as well). Of course being classic Neeley, he shot down all of our ideas! We probably owe him a thank you for that though.

All in all, Sarwar and I had fun talking about new business ideas but never got serious enough to take that next step to actually starting something on our own. He left Availity and joined a company called Relay Health which is a division within McKesson.  That is where he met who was going to be our co-founding partner of Cooleaf, Prem Bhatia. Sarwar and Prem apparently hit it off just like Sarwar and I did. Being the fatherly figure or connector, Sarwar brought us three together.

Prem, Sarwar, and I first all met in December of 2008 for a dinner in Atlanta. I remember it was the SEC Championship football weekend. I was actually with Ross for the Gator game at the time (fun times!). This was somewhat of a ‘feeling each other out’ type of meeting. We decided to set up a weekly call where we would discuss different ideas. Sometimes we would have research that we would come back to the group with. We did this casually for a few months. I think we all had an internal desire to start a new venture which I think we all felt in each other as well but we weren’t settled on one particular idea. We began the process of pitching different business concepts.

For right or wrong, our idea generation stage went on for a few months. We started to hone in on the concept that Prem brought up which was the idea that employers were investing in programs for employee wellness programs but the types of programs in the market weren’t really that good, meaning the participation and utilization of employees was really low. I think more than anything we were all fixated on the idea of starting a new company rather than solving a particular problem (first big mistake by the way). We slowly started to define in more detail what we believed to be a problem in the market and a solution that we could provide. We got more and more serious to the point where we actually formally incorporated Cooleaf in July of 2009.

All of us were working full-time jobs so things continued to progressed slowly. We were all committed to the new venture but we all had unique personal responsibilities which meant continuing with the corporate job. We started narrowing in on a MVP (minimum viable product), or what we thought was an MVP. We started to get into the details on what our product and service was going to be, business model, marketing and distribution strategy, etc… At this point the theory/concepts discussion changed  into the ‘ok, what can we really get done with our budget’ discussion. The answer to that was not nearly as much as we would have liked but even the MVP took us much longer and cost much more than expected.

We defined our MVP as the idea of building a health and wellness marketplace made up of a network of health clubs and fitness studio partners and opening up their inventory of classes and programs for people to book individually as opposed to having to be a member of one particular gym. The network included everything from a traditional health clubs, yoga studios, massage studios, to rock climbing facilities. The user would get discounts off of the retail rate and earn rewards, similar to a credit card rewards program where as you enrolled into classes you earned points redeemable for a catalog of items such as an iPod, gift cards to local running stores, and charitable donations.

I think that people who have never been in product/software development think that coming up with an idea and building it is much easier than it really is. It may seem like such a simple concept such as showing a list of classes and let people sign up. Well, you can easily get lost in the details of design, user navigation, and all of the thousands of micro decisions that must be made when building an technology platform.   Around the Spring of 2010 is when we started prototyping the product and going through this process. It took way longer than we thought and much longer than it should have. We would get so caught up in things that really didn’t matter much looking back such as where a button goes or how to design a web page. We would go round and round on some of the most trivial things. I think going through this in the early stages that I now have a better sense of maturity where I have a feel for what is a priority and what is worth spending time on in terms of compromising and making sure you get what you want internally with your partners.

Another big mistake that I believe we made was ‘drinking our own Kool-aid’ when it came to doing customer discovery on whether or not we were solving a real problem.  We did online surveys and we would interview friends and strangers but when it was all said and done I don’t think anything would have stopped us from moving forward. We would drill into the user experience of a web page versus really understanding if we were really solving a critical problem that a person would pay for. Even later after we launched our product I remember people telling us how much they loved our product but then they would never use it. Lesson learned for me is that people will tell you what you want to hear. Solving a true problem for someone and providing real value is when they want or like the product/service enough that they are willing to pay for it in my opinion or spend significant time on it.

We found a development partner in the fall of 2010 and started building the real product. Again, the plan was to take a couple months and it ended up taking about 3 times longer than expected. Looking back that is really what I have found with anything that we have developed. Anything from a small enhancement to a major product feature seems to always take longer and costs more than expected. I would suggest to definitely give yourself some buffer when it comes to timeline and budget.  We ended up going live with www.cooleaf.com on March 21st, 2011 around 2am in the morning.  It was a huge feeling of accomplishment and I remember feeling so proud that something that we have worked for so long has finally happened. The irony though is that we had no idea just how much struggle and hard work was ahead of us.

Me, the night Cooleaf went live! Cooleaf Go-live on March 21st 2011

From our product launch, we have evolved and iterated significantly as a company based on traction and feedback from real customers. I look forward to sharing stories about our journey along the way. This story was to provide the foundation for it all on how it all started. I’ve learned a lot of hard lessons since then but I will say that to this day I still have a great internal passion for creating things that have never been created before and providing value to other people.

I left a great paying job that I actually enjoyed to go full-time on Cooleaf. It was one of the biggest decisions I’ve ever made in my life. To this day I can’t say with certainty that our company will be successful but even with all that being said, there is no other place that I’d rather be right now than figuring it out every day and growing the company towards bigger and better opportunities. It is a roller-coaster of an experience with lots of ups and downs but I’m absolutely enjoying the ride.