Category Archives: start-ups

Sharing is Caring – Living on Collaborative Consumption

I don’t know how many posts I’ll write on this topic, but I want to share a bit about my current research on collaborative consumption (I’m using this term broadly).

I signed up for Lyft, SideCar, TaskRabbit, Instacart, and Exec. I am fascinated with share economy, peer-to-peer services, and collaborative consumption. I am convinced that there is a generational trend among Americans in their 20s-30s, especially the urbanites, to shift from ownership and fixed-schedule to sharing and flexibilty.

220px-Lyft_logo[1] 203940v4-max-250x250[1] logo[1] sidecar-logo[1]

When I told my parents about what I was doing, their initial reaction was, “Uhh… you are giving rides and delivering groceries to random people? Isn’t that dangerous?” But once I explained to them how everything worked, they had an ah-ha moment. My parents aren’t up-to-date on the latest apps or web-based services, but even they see the value of what companies like SideCar, Instacart, and TaskRabbit are. doing.

We, young professionals, are transient. We may live in New York for two years and then move to San Francisco before settling in Chicago 10 years later to raise a family there. On top of that, even if one decided to stay put in one place, he or she is likely way too busy with life to run all their personal errands. Wait for the bus when you are running 10 minutes late? Try to find a cab during rush hour? Forget about it! Let someone else pick up your groceries and dry cleaning and pick you up when you need to get from point A to point B!

So how has it been working out for me? Here are the results by the numbers. I will write more about my experience with each of the companies in my next post.

After two weeks of driving around 82 people through SideCar, I have earned $847.20 in donations. Just a side note: If you take SideCar, please tip your  drivers! Please do not pay less than the suggested amount, especially if you get a car late at night or make multiple stops.

From Instacart, I have earned $209.20 after 12 deliveries. I suck at getting groceries for myself because I never know what to get. After seeing what others buy, I now have a much better idea of what to get for myself! Killing two birds with one stone!

Kill 2 birds 3

After hopping around the Bay Area to complete six tasks on TaskRabbit, I have made $203.  I’ll write more about some of the tasks I’ve run in my next post, but here is a picture of a task that required me to pack lunches for 40 school-aged kids. In the process of writing this, I got assigned to this task again, except that this time I need to pack for 70 kids! Naturally, I am being paid more for the task. Score!

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So, after having worked part-time for 13 days, I have made $1259.40.

I have not been fully approved for Lyft yet and have not finished my application process for Exec. I intend to sign up for Getaround as well. I am basically doing everything related to collaborative consumption, except for AirBnB since I live in a studio.

lyft

(I want my own pink mustache!)

Now, I am not doing random tasks and driving people around SF only to make a few dollars. If I wanted to make money, I would probably start playing poker again, as my average hourly profit at a casino is about $50.  Or, I could just teach GMAT for $80-$100 an hour. After all, I did relatively well on the GMAT and have an MBA from a top 10 school to prove it. But I wouldn’t learn anything useful doing those things.

This is a great way for me to learn how these companies in the collaborative consumption space and peer-to-peer services operate from the ground-up. In a way, I am investing in myself through this experience.

I have learned a lot already and have suggestions for improvement for all three companies. I also have thoughts on how one making a living through these services could maximize his or her profit. More on that in my next post…

If you need help with some errands, look me up on TaskRabbit: www.taskrabbit.com/jonathanlee00! Unfortunately, you can’t ask for me specifically on Instacart, but I generally work during the day on weekdays. Tips are of course appreciated, and don’t worry I won’t blog about what weird things you may order. I’ll just laugh at you. 🙂 As for requesting me on SideCar, well, you can’t do that either, but I’m sure I’ll run into you if you are a frequent user in San Francisco.

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(Aspiring to be the best dressed SideCar driver. See that Foursquare badge?)

There is an entrepreneurial spirit in all of us. The platform the aforementioned companies have provided is great for micro-entrepreneurs. Trust me on this, this is already big and it’s about to get ginormous!

Be on the look out for my next post. I have some interesting stories to share from my rides and deliveries!

By: Jonathan Lee
Twitter:  @hi5at5

Opportunities that will enable Square to significantly grow Pay with Square

I’ve written about online and mobile payments before. It’s a young industry with still a lot of room for growth. I came across a few articles about Pay with Square. Based on my personal experience, I am bullish on this new way to pay. Some people believe Pay with Square is ahead of its time, but I think it has the potential to fundamentally change how we pay at the cash register. To me, that’s super exciting. Anything that can reshape culture or established norms gets me excited.

If I were on the team at Square running the Pay with Square (“PWS”) program, here are a few things I would do to ensure that it is a mega hit and goes mainstream.

1. Increase the size of merchant base through strategic partnerships.

Handshake

Square has many fans (and I am one of them), but the chief complaint I’ve heard is that not that many merchants give customers the ability to use Pay with Square. To address that issue, Square should form strategic relationship that will quickly bring on board thousands of merchants.

Square has grown tremendously over the last 1-2 years. Its current strength is with local small to medium sized merchants, but there’s no reason why it couldn’t pursue opportunities on a regional or national level. Square may have to lower its rate slightly in order to work with large retailers that have higher ticket items, but its 2.75% fee is very competitive for lower-ticket items, such as donuts, coffees, most goods at convenience stores, etc.

I lived in Boston for nearly 10 years. One thing it’s known for is Dunkin’ Donuts. They are everywhere. In fact, there are about 2,000 Dunkin’ Donuts in the Boston metro area. What’s interesting is that a lot of these are kiosks inside the T or Commuter Rail stations. I remember missing the T during a morning commute once because I had to wait for the cashier to print a receipt I had to sign. Square should partner with Dunkin’ Donuts and enable its patrons to Pay with Square.

Bottom line: Square should accelerate merchant acquisition by developing strategic relationships with a network of retail stores or franchises, such as Dunkin’ Donuts. I am sure there are plenty of other examples, but I think I am in the mood for doughnuts right now so that’s what came to my mind first. I think where Square can really shine is high-traffic, quick turnover retail shops with simple menus.

2. Provide incentives to merchants to promote Pay with Square to their customers.

Square must use both push and pull strategies to drive adoption. Once it acquires merchants through partnerships, Square must keep them accepting Pay with Square. To do this, the PWS team should work with the Marketing team to design a marketing program that incentivizes merchants to promote PWS to their customers. For example, Square might consider reducing its fees for merchants that meet a minimum PWS transaction volume each month or create attractive loyalty programs for PWS users. The reduced fees give merchants a monetary incentive to promote PWS to their customers. I talked to a few merchants who use Square and they didn’t seem to really care to promote PWS to their customers. Of course, the PWS team would need to run the numbers with the Marketing team to figure out what’s optimal from a financial perspective.

Now, here are some ideas for what I think Square should to do continue to grow its users.

3. Partner with mobile device manufacturers to get the Pay with Square app pre-installed on phones.

This partnership could take some time to put in place, but it would be a fantastic way for Square to accelerate user adoption. My guess is that Square is already looking into this. It should target Apple, Samsung, LG, etc to get the PWS app pre-installed on mobile devices.

The basic pitch here is that consumers are buying a phone that has “money” in it in the form of bonus credits from Square. Square should give a generous amount like $20 to a new user who signs up through the pre-loaded app. So if you buy a $200 phone, it would actually cost only $180 because you are getting $20 from Square. At the time of setting up their phone, users would be prompted to sign up for an account to activate their app to redeem their bonus.

To convince the OEMs to get on board, Square should do a rev share on the transactions from the pre-loaded app. Users will want to link their info with the app to claim their bonus credit and OEMs will push the users to register because they’ll want to get a cut of the transactions. Obviously, Square would need to run the numbers to figure out the optimal approach (i.e. rev share amount, bonus cost, potential cannibalization, etc.).

4. Work with the Product team to build features that will encourage more frequent usage.

Getting new users isn’t enough. Square needs to get them to use the app frequently. One product feature I would like to see is the ability to add multiple credit cards and other payment methods, such as gift cards or coupons. This would give users a reason to use PWS everyday because they would truly be able to leave their wallets at home. By allowing users to load the PWS app with additional credit cards, coupons, gift cards, etc. Square can become a true “e-wallet.” In fact, this feature might be necessary if Square wants to work with a national retailer and allow them to accept coupons or their branded gift cards (e.g. Dunkin’ Donuts gift card). This may be slightly outside the scope of PWS team’s job description, but it’s a feature I’m sure they would love to talk to merchants about.

By: Jonathan Lee
Twitter: @hi5at5

Should I attend business school or go work at a start-up?

I recently had the opportunity to talk to a smart, friendly guy who’s working at a well-known investment advisory firm. He wanted my advice on whether he should go to business school or take the risk of working for a start-up.

This person had recently been admitted to a top 10 business school in the Northeast. He’s already told his employer that he would be leaving this summer, but hasn’t made up his mind about what to do. Given his background, he eventually wants to work in venture capital and invest in start-ups. He felt that he was more of an investor than an operator.

Network vs Experience

Being part of an elite network could give you access to top executives. It could certainly help you close large deals. It could even help you find a job if you get laid off. MBA is a great networking tool. It will certainly help you build your LinkedIn connections. There’s a reason a lot of the partners at top venture capital firms have MBAs, although that’s not necessarily the case with some of the younger partners at newer VCs.

On the other hand, there’s nothing that can replace real life experience of working at a start-up. If you want to be able to relate to founders, you must either bring personal operating experience or have experience working with many entrepreneurs. You cannot learn venture capital by taking a class on entrepreneurship or venture capital investing. HBS cases, as good as they may be, do not reflect how difficult it is to fight for deals. They do not help you understand what it’s like to sit across the table from an entrepreneur who has poured every ounce of his energy and his entire life savings into the company and say “no.”

This person is a career switcher, sort of. An MBA is great for that. That’s why people take summer internships. However, if you have the opportunity to do something new now without an MBA, you should definitely take that opportunity. Salespeople says, “Always Be closing.” To those contemplating choosing between an MBA program and a start-up, I say, “Always Be Learning.” Remember that most of the learning in life occurs outside the classroom.

Getting an MBA is safer than working at a start-up

We get health insurance not because we want to get sick, but rather because we want to be able to pay for all medical expenses in case we do get sick. An MBA is a great career insurance, but it’s also an expensive one. Weigh the costs. What is your drag coefficient? Can your tolerate the start-up lifestyle? The chance of achieving monetary success is probably bigger for an MBA than it is for an entrepreneur. Most start-ups fail while most MBAs will steadily climb up the corporate ladder. There’s nothing wrong with climbing the ladder. It’s a good way to make money and your family will appreciate you for it.

However, you also have to consider the cost of missed opportunities. Let’s face it. Life is ridiculously short. One of the top five regrets of the dying is, “I wish I had the courage to live a life true to myself, not the life others expected of me.” Many people have unfilled dreams. Give yourself the freedom to pursue your passion. If everyone played it safe, our history books would be mind-numbing and boring. That said, it’s important to note that the second  most cited regrets is “I wish I hadn’t worked so hard.” Starting a company or working at a start-up is a lot of work and most of that is not glamorous work. Honestly, a lot of it is pure grunt work. It’s a huge time investment.

What matters the most is you. 

It’s not the degree and it’s not where you’ve worked, no matter how “hot” that start-up might have been. If you want to be a venture capital investor, or anything really, you have got to try your best to make the right connections and equip yourself with the right skills. I’ve seen both successful MBAs and entrepreneurs become venture capitalists. I’ve also seen the reverse where mediocre former entrepreneurs and MBAs, despite wanting desperately to become a VC never quite get there. As we’ve all been told byour parents and teachers, we are are responsible for our own actions.

Therefore, whatever path you choose, whether that’s getting MBA, MS in something cool, or joining a start-up, make sure you have the end goal in mind. Go do what you love. Don’t do something because you think it’s the right stepping stone to something else you want.

By: Jonathan Lee
Twitter: @hi5at5

Life at a start-up, one year in

It’s hard to believe, but I’ve already passed the one year mark at Rixty. Holy schnikes! Has it really been over a year? Time sure flies by quickly when you are working your butt off. It’s been a crazy ride so far and I’ve learned a ton.

This is now my fourth, but first full-time, start-up experience. I had a typical pre-MBA path: consulting and finance. I could’ve gone back to that life, but I’m happy I didn’t even though I’m not rolling in Benjamins like my friends in consulting or banking.

Start-up life is not glamorous

An early-stage startup is of course not as established as a Fortune 500 company. For small companies, there’s no formal HR department (which means I can get away with more random BS) or an IT Help Desk (which means you can’t blame anyone when your laptop crashes). When something breaks, you have to roll up your sleeves and fix it. An MBA does not get a special treatment. Titles are meaningless. Everyone is equal. Leave your egos and personal agendas at the door. We all work extremely hard to make things happen and keep our partners and customers smiling from ear to ear.

It always takes longer so expect the unexpected

Building a new product or adding a new feature to an existing product always takes longer than expected. Sure, large companies miss deadlines too, but the impact of a delay is much bigger for a smaller start-up. Whether it’s because you found a bug or you had some external factors that you couldn’t control, delays really suck big fat you-know-what. It doesn’t happen often, but when we are delayed, I’ve learned to not freak out like my head is on fire, but stay calm and work with what I’ve got to close a deal instead of complaining about what I don’t have.

You grow professionally and personally at start-up

I used to believe that strategy consultants and investment bankers, because of the breadth of their work and the long hours they spend working, learned at least twice as much as employees at other companies. That could be true, but I now believe that you have more unique opportunities to acquire new skills and grow as a person at a start-up. When you are building the bridge you are walking on and are wearing multiple hats in a single day there’s no shortage of opportunities to grow. I could be in a new role with new products in new market all in a single day. If you don’t like uncertainties, life at an early-stage start-up is probably not for you. If you want to be challenge until you don’t want to be challenged anymore, then a start-up is the perfect place for you. We only take ambitious, hungry people who want to rock like a rock star on steroids.

Don’t take rejections personally

There are days when building something totally new could be a grind. You love what you have helped build, but what if it’s not getting the love you feel it deserves? When that large deal that would have helped the company tremendously doesn’t go through, it could feel worse than kicked between your legs (well, maybe not literally). However, you can’t take rejections personally. Large companies get rejected all the time, although the pain is probably not as great when you have hundreds of million of dollars in the bank and have a thousand other products you can ship to your other partners. Either they are not smart enough to see the value-add of your product or you need to refine your pitch. Or perhaps you need to change your product. Iterate, iterate, iterate, and go do it some more until it’s perfect. Change it up so that it becomes relevant to the party with which you are trying to build a long-lasting partnership. But never take rejections personally. If you are a start-up, most likely, you are building something so new that it’s difficult for some people to immediately understand the value you bring. That’s okay, just keep trying.

Stay hungry. Stay foolish– But be Patient and Smart.

Your company is probably not going to IPO for $10 billion in 10 months. It’s unlikely to get acquired either. Build, scale, sell. Repeat. Do it over and over until that day comes. Stay hungry and foolish, but don’t be delusional. Start-up life is like running a marathon; it’s not a sprint. Success isn’t built over night. At the same time, you have to know when to quit. Don’t listen to the naysayers, but don’t ignore them either. In poker you have to know when to bluff to represent a hand you don’t have, but you also need to know when to fold to minimize your losses. Be hungry, but also be patient and smart. Wait for the right cards, the right moment to go all-in.

By: Jonathan Lee
Twitter: @hi5at5

How to secure an internship at an internet start-up without a technical background

Today (ironically Friday 13th) is my last day as an intern at Get Satisfaction. Working with smart and driven people at the Satisfactory has been a great experience. I’ve learned a lot about what a life at a start-up is like– what an Internet star-up is and isn’t. I took lots of mental notes that I’ll undoubtedly rely on when I start my own company soon.

One question many people asked me at the various networking events and conferences I attended this summer was: How did you end up at Get Satisfaction?

The answer to this question is the main subject of this blog post.

It’s not too difficult to get an internship or a job at a young Internet company if you are an engineer or a rock star/ninja (insert technical role here), but it’s not so easy if you only have a business background. I already blogged about how an MBA’s best fit is at a later-stage start-up with an actual product. Of course, Get Satisfaction fits that description, but it is still very much an early-stage company.

Here are some things to consider if you only have a business background, but want to get in at the ground level of an Internet start-up.

1. Identify the opportunity: Find the company at which you want to work. Don’t just go for the best known company. And no, Facebook and Zynga aren’t really start-ups anymore. Internship is a resume builder (having a great name on your resume could help you stand out), but more important than that is what you can actually learn from your experience and the impact you can have on the company. Ask your self the question, “Where can I learn the most and where can I have the greatest impact?”

2. Love what they do: This is somewhat related to point 1. Do you or would you use their product/service? If you aren’t sold on the idea of what they are doing, they won’t be sold on you either. You have to have a shared vision. Be enthusiastic about the company and be their advocate/evangelist before you start talking to them.

3. Network, network, network: Do you have a friend at the company? Do you have a friend that knows someone at the company? If not, at least a friend of a friend of a friend? You get the point. Get an intro. Schedule a time with the person who can get you in the door. Meet her for coffee. If that’s not possible, try to schedule a 15 minute call. Do whatever it takes to get your foot in the door. Make those contacts. When emailing your contact to set up a call or a meeting, include a link to an article that she might find helpful. It not only shows that you understand the company, but it also gives you something to talk about.

4. Sell, sell, sell: What do you want to do for the company? Do you have an idea for their product that you can help implement? What makes you the ideal candidate to work on this project? In other words, write your own job description. Create your own internship project and then pitch it to the Founder/CEO/Product Manager, etc. They are way too busy to think about babysitting an intern who can’t help them build their core product. Sell them on an idea and own it throughout the summer.

Freestyle Capital, the early-stage VC I worked with during my first year at Duke MBA, is an investor in Get Satisfaction. I really liked Get Satisfaction so I wrote a little blurb about what I’d like to do for the company and asked for an introduction. That’s how I got my interview with the CEO, Wendy Lea, and eventually ended up working at the Satisfactory for the summer.

I’ll be the first to admit that I was lucky to get an introduction to Get Satisfaction, which by the way is doing very well. I emailed several start-ups in the Bay Area and pitched my internship project ideas. I was offered a job some other start-ups, but most of them said, “No. Thank you.” Still, I was able to make valuable contacts, which I’m sure will come in handy someday.

Getting a job at an early-stage Internet start-up takes a lot more work than uploading your resume to a job posting on your career service center’s website, but you’ll get the job you want if you are persistent and can demonstrate that you are a true value-add. Oh, and by the way, start-ups don’t hire months in advance. I secured my internship toward the end of March. Keep that in mind as you pitch yourself to the next Facebook or Google asking for a summer internship.

By: Jonathan Lee
Twitter: @hi5at5