Category Archives: Forbes

How This Former Internet Entrepreneur Is Building A Wine Empire

This post originally appeared on Forbes.com.

In 2008 Michael Dorf opened his first combination music and wine venue in NYC called City Winery. In 2013 the brand generated over $1 million in profits for his investors. Compared to his previous media and technology company called Knit Media, parent company of the Knitting Factory, Michael generated more profit with City Winery in the first year than all of his years combined at his internet company. The business now has locations in NYC, Chicago, and Napa. This fall will see the opening of the fourth location in Nashville with more expansions to be announced by the end of 2014.

Here are some lessons from a former technology entrepreneur on how to build a rapidly growing business in the old fashion world of food and hospitality, using technology as a catalyst for growth.

You can’t digitize wine, but you can music. Marc Andreessen famously said “software is eating the world” however there are just some things that will never go digital. Food, wine, and live music are just a few examples. So when Michael looked at his business, he asked himself “what is impossible to copy?” For him, live music was at the top of this list because as he said, “even the best high def surround sound Imax films can’t capture the magic of a musician performing live.”  Thus, the opportunity around the live concert business was the side of the music industry he wanted to focus on. Michael isn’t the only one to capitalize on this opportunity. From 2009 to 2013 “the rock band Phish has generated over $120 million in ticket sales, handily surpassing more well known artists like Radiohead, The Black Keys, and One Direction.” Michael and Phish focused on live music as their point of difference.

User Interface (UI) is not only important for computer screens. It’s also important for physical space. In the world of software, User Interface (UI) and User Experience (UX) are both critically important. It is how a customer navigates a website, what they see when they enter, how they are greeted, treated and ultimately served. A physical room is no different so when Michael designed his first venue, he strongly considered the material choices and the design elements of what a customer can touch and feel. Danny Meyer calls it “enlightened hospitality” to look at all of these elements. With the mindset of user interface, you can improve customer experience by thinking about the various movements in the physical spaces of your store, restaurant or office.

Technology is a tool to make your simple tasks, even simpler. Michael wanted a ticketing system that could allow his customers to pick their seat at a particular table, visualize it on a map, and see who was where in their 300 seat room. This capability would enable City Winery to perfectly scale the room with different pricing options and configurations. This solution however did not exist, so they spent some resources to build a custom ticketing solution for their business. Now, people can show up an hour before an event or 20 minutes late and they will still have their seats available. This created a much more luxurious approach to seating and tickets thereby creating a much better overall experience. According to Michael, “this in fact, gives people back a little time, something that has gotten more scarce and valuable in an overly digitized, super fragmented, and fast paced high tech world.”

Direct Marketing is cheaper today. Years ago, marketers would have to send a piece of snail mail to their customers. Today, emails and social media enables real time, cost efficient marketing. Sending direct emails that get through junk filters and to the radar of City Winery’s customers is a tremendously inexpensive way to stay in close touch with their community. By combining this with social media platforms, Michael and his team are able to get the attention they need in an overly saturated world of media.

Know who your customers are by measuring and analyzing data. In a larger scale organization, the ability to have a maître-de remember everyone who walks in and what their favorite wine is, simply will not work. However, by using a membership program which is tied to a POS system, Michael is able to track what kind of wine people are consuming and is therefore able to see patterns in their consumption. Their “virtual sommelier” can send suggested wines for the customers to try on their next visit. Like great sommelier with a tremendous memory, this is terrific service perk, especially the more regular a customer is. As Michael said, “this was a classic old world dining trick which we used new technology to reapply in a tangible way. If it was purely a digital suggestion box, it would not work as effectively.” When you think about your business, think about how you are keeping track of who your customers are and what they like. There are newer tools out there that can help you do this more efficiently then pen and paper.

City Winery is not just using technology, but the best of the new media’s thinking, in delivering a unique, profitable and real world experience. Besides locations around the globe, if anyone is going to be able to digitize wine, chances are good that it will be Michael.

The Band
The Band (Photo credit: tr.robinson)

Do You Hate Your Job? 5 Tips To Change That

This post originally appeared on Forbes.com.

“I knew I had to quit when I couldn’t get out of bed in the morning to go to work.”

Those words stuck with me. I heard them from a successful entrepreneur and I think about them almost every day. It’s a quick gut check against the happiness and balance in your professional and personal life.

Over the past few weeks I’ve heard similar words from countless friends and colleagues.

The lawyer that started a legal career because it was a safe and steady job.

The financier that went to wall street because of the big bonuses.

The doctor that attended medical school because the parents said they should.

The consultant that joined a big named firm because of the prestige associated with it.

To the outside world these jobs are normal. In fact, they are celebrated. But to the individual they can sometimes feel like a cage with no escape. However the good news is that I’ve seen people successfully make the switch from a career they hate to a career they love. In all of these situations, there were at least five common themes that enabled these people to make the leap of faith and recalibrate their life for a happier, more successful career.

Hone in on your transferable skills. A friend recently described his job to me. He does “platform sales to financial institutions and hedge funds.” When I asked him what that meant he said, “I’m basically a waiter. My tables are my clients. My dishes are my financial products. My tips are my commission. And my job, is to basically keep my tables happy and answer any questions that the customers may have.” A waiter on wall street. Pretty simple. But a good waiter must have good people skills and good people skills are transferable to any industry. However, it’s not just people skills that are valuable. Organization, communication, and leadership are also very important. We sometimes take these intangibles for granted, but if you can hone in on your strongest transferable skills then you can figure out where else they might be applied in a setting that you enjoy.

Leverage your transferable knowledge.  Another friend of mine has been working in commercial real estate for the past few years. When he took a sales leadership position at a new technology startup, someone asked me, “what does a commercial real estate broker know about startups?” I said, “not much. But he knows more about real estate sales than anyone I know and for a technology startup that is focused on the real estate market, that’s a pretty big asset to have.” Sometimes a career change isn’t as big of a change as you think it is. If you have deep industry knowledge it’s likely that there are multiple opportunities and jobs that could benefit your experiences.

Try something new. I recently saw a Facebook status that said “Learning how to code. I’m a nerd and I love it.” In a million years I would have never guessed this person to learn to code or to even know what “ruby on rails” means. In school, you’re required to take classes in different disciplines. But just because school is over it doesn’t mean you should stop exploring new horizons. Take chances. Open new doors. Learn something new because you might actually enjoy it and it may very well lead to a new, professional path.

Ask for help. There is absolutely no shame in asking for help when help is needed. Sometimes it’s easy to let pride get in the way but as someone once told me, “ducks that quack get fed.” If you want to make some changes but don’t know how then simply pick up the phone, write an email and share your thoughts with someone. It’s human nature for people to help one another but no one can help you unless they know you are looking for it. So don’t be shy. Ask for help.

Recognize the difference between quitting and recalibrating. I wonder what Bill Gates or Mark Zuckerburg’s parents thought when they decided to drop out of school. Is that considered quitting? If it is then I plan to quit something as often as possible. There is a big difference between giving up and realigning your goals and objectives. Sometimes people are afraid to “quit their job” because it’s viewed as just that, quitting. But the thing is, it’s not. If you have a game plan and a strategy in place then you owe it to yourself to “quit” so that you can recalibrate your path to success and happiness.

Follow me on Twitter at @DanReich.

The Mobile Startup That Almost Shutdown Is Now On Nearly 1 Billion Devices. How Did They Do It?

This post originally appeared on Forbes.com.

For every mobile app valued at over $16B, there are hundreds if not thousands of their failed counter parts. But while some of these apps die off, some of their companies figure out a way to survive and in some cases, create real value by reinventing their businesses. Andrew Levy, Rob Kwok and Jeeyun Kim are one of the best examples of this transformation, and this is how they went from a broken mobile app to a dominant player in the mobile enterprise space. Here is a 6 part breakdown of how they went through that transition and attracted some of the best investors, customers, and ultimately achieved market penetration of nearly 1B devices worldwide (and counting).

Now for some disclosure(s): #1. I am a shareholder of Crittercism. #2. I’ve known Andrew my whole life.

Part 1. The Beginning And The End
In 2010, Andrew, Rob and Jeeyun started out by building their own mobile apps however they quickly realized that those apps had their own set of performance problems. They were slow, they were laggy, and they had a smorgasbord of bad reviews in the app store. Certainly not a great way to start a company. Like any good engineer would do, they problem-solved and asked a simple question: how do we fix and diagnose these issues more easily?

Part 2. The Pivot
They decided to build a lightweight version of a crash reporting tool that they desperately needed for themselves and after speaking at a few meetups about their new tool, they began to validate their idea with others people in similar shoes. They realized that the lack of transparency for understanding mobile app performance was a very big and far reaching problem.  Although they knew they were on to something, they wanted to be sure they were solving a “hair on fire” problem.

Part 3. Proving The Pivot Is Worth It
In order to prove that this opportunity was really worth their time, they also created a landing page with a beta signup list that attracted a significant number of signups. This validation was important because they were bootstrapping and running out of money. Andrew told me that he literally had a spreadsheet with a list of jobs on it and was contemplating the end of the business altogether.

Part 4. Getting The Right Resources
Once they had a working product, Andrew and the team applied to an incubator called AngelPad, which was founded by a bunch of ex-Googlers. As a result of their quick iterations and early traction, they were able to get into the program. This provided the team with some much needed capital and social proof which helped them focus and lay the foundation for a much bigger business.

Part 5. Focusing
The first version of Crittercism was focused on two things: crash reporting and user feedback (you can think of it like an in-app support forum). They thought this solution was one product but after a closer look, they realized it was actually two separate offerings. The crash reporting side was growing much quicker then the support side, and the fact that Andrew, Rob and Jeeyun come from engineering backgrounds made it even more evident that this is where they should be focusing their time and energy. Again, the team shutdown part of their business and it freed them up to focus on their core strengths.

Part 6. Scaling
By building out a solid crash reporting tool, the team was able to wedge themselves into the mobile enterprise market. But now they are going after a much broader opportunity for mobile app performance management (mobile APM). It was the most visible, relatable problem that every one of their potential customers faced. As a result, the team was able to quickly attract large enterprise customers like Netflix, and parlay those initial use cases into a portfolio of new customers.  Today that portfolio is growing by leaps and bounds. The Crittercism software is now installed on approximately 1 billion devices and analyzes all aspects of a mobile app’s performance.

That’s not bad for a company that almost closed up shop and it serves as a good reminder that not everyone needs to be the next WhatsApp, and that pivoting, if done correctly, can lead to big opportunities.

How Retail Is Evolving In An On-Demand Economy

This post originally appeared on Forbes.com.

It’s been widely discussed that Amazon plans to enter the brick-and-mortar retail game. This is ironic because it is Amazon that put many brick-and-mortar retailers out of business in the first place. Circuit City, Borders and Blockbuster all succumbed to the dynamics of e-commerce and companies like Barnes & Noble, Sears and K-Mart aren’t too far behind. Big box retailers carry fewer product lines and holding inventory presents significant risks. Consider that in the last four years, cumulative sales of brick-and-mortar retailers shrank by $30 billion and as Jeff Jordan rightly points out, “these trends are only accelerating.”

In the past, brands would have to fight for shelf space and customer access and that gave power to the larger retailers.  Today, anyone with a product and a website can build their own sales channel and that is creating enormous shareholder value for the digital players. This creates a new set of challenges for brands and retailers.

On one hand, building an online-only business has cost and distribution advantages. There is no need to invest in large amounts of inventory and you aren’t subjected to retailer buying terms or expensive overhead for rent. This is a large reason why companies like Bonobos and Warby Parker experienced success early on and why many brands looked to copy the online-only model.

On the other hand, having a physical presence has proven to drive sales with meaningful volume and be an effective channel to reach new customers. Take Quirky as an example. The company claims that brick-and-mortar retail partners are key to Quirky’s success, driving 85% of the company’s revenue, with the rest coming from online sales through Quirky.com, Amazon, ThinkGeek, Fab.com and other e-sellers.”

So the challenge becomes this: how do businesses leverage the benefits of a physical store while removing the challenges that are destroying brick-and-mortar retail?

One startup company thinks they’ve solved this problem by taking inspiration from successful businesses with marketplace dynamics like Airbnb. In just nine months, a startup called Storefront has created one of the largest online marketplace for brands, artists and designers that are in need of temporary retail space. This model allows brands to create engaging, physical experiences without taking on the overhead of long term leases that are putting so many retailers out of business. Imagine a future in which Fitbit is sold in gym lobbies across the U.S., IKEA is on college campuses during move-in week, and the hottest Kickstarter campaigns are available for pre-order or purchase at Best Buy.

UNIQLO Pop-Up store at Union Square station
UNIQLO Pop-Up store at Union Square station (Photo credit: MTAPhotos)

Nick Roberston, CEO of the fast growing ASOS is thinking along these lines as well. “Being a digital fashion brand, it is important we never lose a digital element to what we’re doing, however based on consumer reaction and participation, I think we will be looking at more new and innovative ways we can get our brand in front of the customer for a physical experience in the future.”

Will a company like ASOS use Storefront? It’s very likely. Hundreds of brands have opened their own store and generated millions in sales revenue. And when you consider that 80% of all economic output takes place in urban areas, it further validates the idea that having a cost-effective physical presence makes a lot of sense.

From the New York Times, “whenever a city doubles in size, every measure of economic activity, from construction spending to the amount of bank deposits, increases by approximately 15 percent per capita. It doesn’t matter how big the city is; the law remains the same.” NYT

That law is quite compelling and Jeff Bezos knows it is. It’s perhaps part of the reason Amazon is opening a distribution warehouse in the densely populated tri-state area and why Jeff is quoted as saying that  “We [Amazon] would love to [do physical retail], but only if we can have a truly differentiated idea.” Being closer to the customer creates better experiences and improves economic efficiencies. In the case of retail, maybe the “differentiated idea” is simply about getting to your customers, quicker, cheaper and more intimately than anyone else and having an on-demand storefront seems like a pretty powerful way to do just that.

Follow me on Twitter at @DanReich.

Bitcoin And The Two Things You Need To Know

The bitcoin logo
The bitcoin logo (Photo credit: Wikipedia)

This post originally appeared on Forbes.com.

The discussions that are happening around Bitcoin feel a lot like those from the early days of the internet. It’s like when my parents asked me about AOL dial-up. “Who is the computer calling? Now the questions are, “what are these Bitcoins and can I see what one looks like?”

I discussed this topic with a handful of Bitcoin entrepreneurs and Bitcoin investors and so I figured it made sense to lay out some high level thoughts on Bitcoin for my own sanity and hopefully yours. To start, I think there are two important ways to think about Bitcoin.

1. Bitcoin as a currency.

2. Bitcoin as a technology.

Bitcoin as a currency.  Like all things throughout history, we know that change is inevitable and currency is no different. Once upon a time forms of money included cattle, salt, shells, and precious metals. As time went on the world evolved and so did the currency that went along with it.

As Thomas Friedman would say, today the world is flat. Our telecommunications make it dead simple to communicate and transact with anyone, anywhere around the world at any moment in time. In short, Bitcoin is a new currency that was designed for this new world. In this video, Eric Vorheese does an excellent job explaining the evolution of money and why the characteristics of Bitcoin, as compared to gold and our dollar, make Bitcoin such an intriguing form of currency for a digital world. That analysis look something like this:

Scarce? Convenient? Secure? Central backing?
Gold Yes,there is only so much of it in the earth. No,it’s very heavy. Kindof, depending on where you store it. No, no single authority owns gold.
US Dollar No, the government can print money, which they often do (inflation). Yes, its lightweight paper. No, it can be counterfeit. Yes, the government provides its full faith and credit to the US dollar.
Bitcoin Yes, only ~21M bitcoins will ever be created. Yes, it’s digital. Yes, it’s secured by math puzzles that only super computers can solve. No, like the internet, it’s not owned or controlled by any single entity.

Only time will tell if Bitcoin can survive as a currency but fundamentally, it makes sense to me that there should be a currency specifically designed for a hyper connected, digital world.

Bitcoin as a technology. To fully understand what Bitcoin can mean as a currency, you must also understand how it works at the technology layer. This video does a nice job explaining the technicalities of Bitcoin, but the core innovation of Bitcoin is that there is a public ledger that is very secure because of some complicated math. Albert Wenger of Union Square Ventures describes it this way:

At the heart of bitcoin is a fundamental innovation: a distributed public ledger. A ledger in accounting is a book that you cannot edit once you have written in it. Instead, if you have made a mistake, the only way to fix it is to add another transaction to the ledger that undoes the error. As we know from accounting fraud, problems arise when people figure out ways to transact without recording it in the ledger or making ex post changes to the ledger (this is why Quickbooks isn’t really an accounting system). The bitcoin ledger is the so-called blockchain which uses the fact that there are many copies of it that are broadly distributed combined with a fair bit of math to ensure that once a transaction has been recorded in the blockchain that transaction can not be changed after the fact. There is no other widely used protocol in the world today that accomplishes this: with bitcoin anyone can make a statement (a transaction) and have this be recorded in a globally visible and fixed ledger.

Years ago, information was controlled and distributed by single entities. This is why media conglomerates and newspaper companies were so powerful. When we talk about how the internet disrupted those companies, we are really saying that new protocols created the disruption. The protocols provided a way to send and receive instantaneous information without anyone’s permission. The protocol behind Bitcoin is providing the same type of disruption only instead of sending information without any third-party involvement, we are now able to send money without any third-party involvement. In essence, we are democratizing money and rewriting the rules for how commerce can be conducted.

This creates a tremendous amount of opportunity. Naval Ravikant, CEO of Angel List published a piece in Wired magazine about the future possibilities of Bitcoin. Here is a clip:

 Just as the web democratized publishing and development, Bitcoin can democratize building new financial services. Contracts can be entered into, verified, and enforced completely electronically, using any third-party that you care to trust, or by the code itself. For free, within minutes, without possibility of forgery or revocation. Any competent programmer has an API to cash, payments, escrow, wills, notaries, lotteries, dividends, micropayments, subscriptions, crowdfunding, and more. While the traditional banks and credit card companies lock down access to their payments infrastructure to a handful of trusted parties, Bitcoin is open to all.

So will this Bitcoin thing work? Is it a good investment? Should you buy some Bitcoins?

I have no idea. But what I do know is that this feels very much like the first time I signed on to AOL and that to me is very exciting.

It’s a new world.

Startup CEO: Would You Max Out Three Credit Cards To Start A Business?

Image representing Alec Lynch as depicted in C...
Image by None via CrunchBase

This post originally appeared on Forbes.com.

Would you max out three credit cards, spend your life savings, and take on loans from family and friends all for some cool website idea? In January 2008 Alec Lynch did just that and started a freelance marketplace in his garage called DesignCrowd.

Today, Alec and his team announced a new round of financing putting the company’s total fundraising to date at $6.3 million. Back in March, I was able to spend some time with Alec to hear about how he took his small garage-based startup from Sydney Australia and $60,000 in debt, to multiple locations worldwide and $1 million per month in revenue.

Dan Reich: What were you doing before DesignCrowd?
Alec Lynch: I studied Bachelor of Information Technology at the University of Technology, Sydney (UTS).  I loved it and did well academically (I was awarded a $36,000 scholarship and the University Medal).  When I graduated from UTS I was 20 and started my first business with a friend from UTS (Adam Arbolino who studied a Bachelor of Science in IT).  Our business was online CRM software and, while it ultimately failed, we learned a lot of good lessons.  After this, I went to work in strategy consulting at Booz & Co where I worked for 2 years.  While I was there I had the idea for DesignCrowd.  In 2007, a few weeks after scoring a promotion, I quit my job at Booz and moved back home to live with my mum and start DesignCrowd.

Reich: What gave you the idea for DesignCrowd?
Lynch: While I was working in strategy consulting at Booz I was constantly looking at different industries.  I had a personal interest in the design industry, as I’d been building websites since I was 14 and I could see three key problems in the traditional design industry: for small businesses buying design it was 1) slow 2) expensive and 3) risky (you never knew what you were going to get back).  One example that highlighted these problems for me was the release of the London Olympics logo in 2007.  It cost £400,000, took one year to make and was absolutely panned by the public and the media.  I thought to myself  “wow, imagine if they had run a global design contest for £40,000 or even £10,000?”.  I knew they would’ve received thousands of designs and ideas from around the world and saved half a million dollars.  At the same time, I could also see a lot of friends graduating with degrees in creative disciplines but struggling to find work.  Essentially, I could see the dynamic for a marketplace that could disrupt the traditional design industry.

So is Alec and his team disrupting the traditional design industry? According to Techcrunch, “the company currently has over 250,000 registered users in 197 countries, including 100,000 designers and says it recently hit $12 million in design projects through its site, a figure that it expects to exceed $20 million in 2014.”

When I asked Alec back in March what his ultimate goals were, he said “our goal is to pioneer crowdsourcing around the world.”

And with the latest round of financing of another $3 million it looks he is one step closer to that goal. Not bad for someone that maxed out three credit cards and moved back home wit his mum to start some nifty website called DesignCrowd.