Zelkova Ventures

Crimson Hexagon & Zach Hofer-Shall of Forrester recently hosted a webinar, focusing on social media data behaviors. Below is a summary of what was discussed.

Zach talked about the need to shift from monitoring social media data to proactively using the information, which he calls social intelligence. Businesses need to decipher the difference between monitoring and the term social intelligence. The social media ecosystem, as he sees it, resembles a ladder with creators at the top rung, followed by the conversationalists, critics, collectors, joiners, spectators and, at the bottom, the inactives,–which represent 16% of U.S. residents. Businesses must evaluate the relationship and interactions between these sub groups to evaluate people’s interactions with brands.

It appears businesses do not take advantage of the valuable information social media sites provide. While 78% of businesses collect customer data or look at feedback, a very low number of those people actually use the data–only half of that 78% actually use the data for a competitive advantage. Zach used the metaphor of the online world as a pile of garbage and one must find a needle in a haystack in terms of gathering relevant data to help one’s business. Everyday people interact with brands and share their opinions, but many businesses miss out on these key conversations with consumers. Businesses need to decipher the difference between monitoring and the term social intelligence.

The first step to analyzing social media data is monitoring the information. After, marketers must act on their findings and use their insights to discover. Thanks to the immediacy of social media, this can be achieved in real time, which means a brand’s strategy can be constantly altered.

In order to successfully execute social intelligence, Hofer-Shall listed the four Ps of social intelligence: people, purpose, platform and process. In terms of people, internal resources must be evaluated to decipher who will take charge of social media. Responsibilities and skill sets must be assigned to the team in charge of social media. The purpose is defined as having social intelligence goals parallel business goals. Social media goals, which are the business achievements that social media can help attain, also must be set. The third p, platform is really about technology: does your business have the technological dashboard to service the team? Lastly, the process, which is to allocate each goal with an insight and decide, which roles will achieve which goal.

Hofer-Shall recommends the four Ps be handled in the following ways: for people, evaluate their roles and assign appropriate responsibilities. For the purpose, determine the business and social goals. For the platform, start to return data with a potential partnership with a listening platform. Lastly, for the process, one should establish a “reactive monitoring practice, than plan for a proactive insight.”

Dear First Time Entrepreneurs,

Investors hate surprises, both good and bad, so communication is key. The benefit of keeping your investors in the loop is far greater than the opportunity cost of not doing so. If it resembles a chore, you have the wrong investors.

If you don’t engage your investors and get more than money from them, you sold yourself short. In other words: you got jipped.

Keeping your investors engaged is important because it should help grow your business, make the re-investment decision quicker and easier, get you introductions to other investors, and it may eventually help you sell your company, among other reasons.

I haven’t met an investor who is not willing to help, especially in the angel / seed community. Many of them do so in order to be involved and see returns. The issue we seem to run into is the entrepreneurs don’t ask for help. In my experience this is for a few reasons:

1)   They are afraid to
2)   They don’t know how to
3)   They are too busy to
4)   They think it will be distracting

So here are some tips on engaging your investors in a way that is beneficial and not hurtful to your company.

1)   Keep them Updated: Send out regular e-mail updates with what’s going on. These should briefly cover all aspects of the business (sales, marketing, operations, product development, etc.) These letters should also have an “ask”. The companies that I have seen do this best generally come through programs like TechStars, where this is ingrained in them.

2)   Give Your Investors Direction and Things to Do: Ask your investors to do things for you and be specific. For example, don’t just ask them to make intros to leads, give them a list of leads you are working on and ask them who they know and how they can help.

3)   Be Picky: Not every investor can be involved in helping you in every aspect of the business, nor should they (For instance, we tend to be very product-focused and are called on in that area). Know what your investors are best at, leverage that, and be open about this to them.

4)   Big Important Scary Decisions: When it comes to make important decisions (i.e. raising more money, selling the company, shutting down, large pivots,) your goal should be to get as much feedback as possible, synthesize it and then get the buy-in of each investor ahead of the “official” communication or sign-off. This can be accomplished by group e-mails, group calls and/or individual calls. My advice is to do a few of these things.  Start with a casual e-mail to the investors letting them know what’s going on (see example below), then do one-on-one calls, and then do a group call if everyone isn’t on the same page. Once you have sent the official e-mail, the document reviews will all just be a formality.

5)   You should manage the type and level of help from your investors. Don’t let your investors get to into the weeds and wind up managing you. It will only frustrate you, your team, and your other investors. We invest and believe in your abilities and give you enough rope. If you hang yourself with that rope, it was a risk we took.

A Few Disclaimers:

1)   Remember you are the leader and there will be times that not everyone agrees. It is your responsibility to make the best possible decision based on sound reason, analysis, and input. If this is done, people should not fault you if you’re wrong.

2)   Make sure you manage the process right, and solicit feedback from the right investors in the right areas. Too Many Cooks Spoil the Broth.

3)   This post is targeted to companies that have raised seed rounds from many investors. Some of the process changes as your investor group grows and matures.

Example letter:

Investor,

As you know, we have been in fundraising mode and we have received a term sheet. The broad strokes of the offer are $4m preferred on a $12m pre money valuation, a 1x participating preferred and the expansion of the board to include members for the lead, XYZ Venture Firm.

I’d like to set up some time for us to speak within the next few days to get your thoughts on the terms, ask for your advice on how to proceed, and discuss any questions you may have. I have attached the term sheet for your review, obviously to be kept confidential. Send me some times that work for you to talk.

This weekend I tried out two of the recent Gilt City deals, Bar Basque and Aspen Social Club. Both deals turned out to be absolute failures for the merchants as none of us would return to the establishments.  The shame of it is that if the restaurants would have been a bit smarter about how they serviced the new customers they were trying to win over we probably would have went back to both places and the offering would have been a success to the merchants.

Bar Basque
Great spot in Chelsea with an interesting concept, new chefs every few months.  They went wrong with a few things:

• They put all the Gilt City customers in the semi-outdoor auxiliary room, which was cold and loud
• The Gilt City ‘room’ was understaffed and causing atrocious service.  We had the tasting menu and items came out of order and were skipped totally. We ordered wine (outside of the deal) and it took 20 minutes to arrive.
• The wait stuff was clueless to how the deal worked

Aspen Social Club
We had the 10 apps and 10 cocktail deal, the big mistake here was that they was the put a $12 cap on the cocktails included in the deal, only issue here was that there were very few cocktails available under $12.  They did allow you to do cocktails over $12 but it would count as two.  They did redeem themselves partially as the food was decent.  Also, the wait staff was clueless to how the deals worked.

Retailers are using Gilt City to attract new customers and Gilt is doing a good job at that, but restaurants are treating them as 2^nd class citizens, which is counter-intuitive to what the should be doing if they want the Gilt deals to pay off in the long term.

Attendees battled wind and rain to make it to The Brandery’s Demo Day recently, hosted by DogPatch Labs. The Brandery, an incubation program, prides itself as “the seed stage consumer marketing venture accelerator.” Six companies take part in its three-month mentorship and participate in several demo days, one of which was at DogPatch. Unfortunately due to the closing of LaGuardia Airport, three teams could not make it to the demo.

The incubation program takes place in Cincinnati because of its brand-building DNA, which has been firmly entrenched in the roots of the city. Cincinnati might not resonate as a “tech” city, but is recognized as one of the world’s top five consumer marketing regions. Iconic and successful brands like Macy’s and Procter & Gamble both call Cincinnati hometown! While Silicon Valley and Silicon Alley (NYC) have large early- stage tech company portfolios, The Brandery promises Cincinnati is “a better place to be based,” if the start up is consumer-faced. In addition to its location, the program offers mentorship, $20,000 in seed funding and opportunities to pitch angel and venture capitalists.

In return for mentorship, seed funding and all other intangible assets associated with the program, The Brandery receives a 6% equity stake in the companies, and receives common stock, “founders stock.” That the word “brand” is found in the program’s title underscores the program’s focus on branding start-ups. If consumers are the focus, then you must build a brand identity like Proctor & Gamble would do for Tide detergent.

Attendees heard pitches from three companies: ideaRally, giftiki and venturepax. IdeaRally, founded by Senay Semere and Matthew Veryser, links companies with questions to students with answers and propositions. Companies like Converse post problems, challenging students to come up with solutions in return for payment, jobs or internships. Students can also voice their own opinions/suggestions for brands on ideaRally. The site can be seen as a global platform for collaboration. The founders believe the amount of participation is directly proportional to the quality produced by ideaRally.

Giftiki, founded by Justin Stanislaw and Bryan Jowers, provides the ability to give your friends Facebook-type gifts that are worth real money. Cash gifts are gifted via computers and mobile devices. The gift giver can purchase a virtual gift valued at any amount, which the receiver can cash out. You can receive $5 to purchase an actual beer verses receive a picture of one via facebook virtual gifts. The process is entertaining and extremely viral. The company believes they have a large market due to the $75 million per year spent on worthless virtual facebook gifts.

The third company to present was VenturePax, founded by Danny Stull, who describes his site as a “Yelp for the outdoors…with gaming mechanics like Foursquare.” Danny believes society’s cure for stress is “getting outside.” The blend of technology and nature can enable users to share their experiences, find out about destinations, and purchase outdoor gear. Danny believes people using his site will influence others to become a part of their outdoor community.

Click here http://brandery.org/companies/ to read about the other 3 companies LifeBlinx, turboBOTZ, and VenueAgent as well as the three mentioned above.

Ideas, Innovation, Entrepreneurs, GE and Venture Capitalists = the potential for a greener tomorrow.

At the ecomagination Challenge conference, two panels discussed the benefits of crowdsourcing. Through capital and proper advising, companies can generate great products, which not only benefit the environment but also produce a profit. Jeffrey Immelt, Chairman & CEO of General Electric, defined ecomagination Challenge and its progress.

The Challenge consists of a platform where businesses, entrepreneurs, students and innovators can propose ideas about how to “build the next-generation power grid,” and have the chance to get funded. This experimental Challenge costs a whopping $200 million–100 million of which was funded by GE; the other 100 million by four venture capitalists. GE used this Challenge to learn about innovations with the potential to reduce energy usage, greenhouse emissions, carbon emissions but also to produce a profit.

With the $200 million investment, GE is using the power of the Internet to seek ideas from people on a global scale. GE has made 12 major investments, five grants and a University Challenge. The 12 investments are worth $55 million and consist of five in the energy grid arena, five on the energy-efficient side, one investment in solar energy powered air-conditioners and one with common wealth and Columbia University to research electric vehicles. GE also will be giving out three early innovation grants to very early stage ideas. Partnerships with universities will help promote material science technology.

The first panel focused on the incredible speed and audacity that characterize GE and helped the company process 4,000 ideas and choose five in a relatively short timeframe. While GE has been known to be one power, which engages in a great initiative, this Challenge illustrates openness to bringing outside ideas to the table. On a macro level, a challenge of this magnitude takes a large amount of people coming together to bring the most efficient technology forward.

Immelt said that people outside the GE community are capable of things he cannot achieve, but what the GE community does have is a team of 45,000 salespeople and 45,000 engineers. With thousands of talented GE employees, Immelt can “drive innovation [at a] scale” others probably could never accomplish. With partnerships between GE, small businesses and individual entrepreneurs, a tremendous amount of innovation and production can be accomplished. Innovations produced by smaller companies have a greater chance at success and adoption when backed by large corporation like GE.

CEO of Joulex, Thomas Noonan, said while capital is necessary, it is not sufficient in building innovation, a comment also mentioned by venture capitalists. Noonan applauded GE for merging great ideas with their big commitment. Currently, companies in capital markets face extreme challenges, which can be overcome with the help of large corporations like GE. Now, more then ever, corporations must step up to invest because others are apprehensive due to the instability of the economy and the previous recession. General partner at RockPort Capital, Chuck McDermott, said corporations must assume certain roles due to the difficulties in raising money. He also mentioned how people are apprehensive to invest without credibility.

This conference illustrated the power of what a large company can do by financing innovations by smaller businesses or individuals. The panels portrayed a new generation of companies, which consist of enabling, innovating and positively affecting society. We are moving from a consumption-based society to a collaborative one, as Rachel Botsman pointed out in her “Collaborative Consumption.”

I have high hopes for a 180 degree turn in this world and people thinking about the environment and preparing for future generations. Hopefully, our society will no longer be characterized by instant gratification and over consumption, as it was during the 20^th century.