Forbes – Page 2 – DAN REICH

The Most Unlikely Startup: IAF

This post originally appeared on Forbes.com.

In 1948, at the Henry Hudson Hotel in New York City, the most unlikely startup was created. It’s founding members dropped everything to fly across the country to Manhattan for secret meetings to launch their endeavor.

Just a year before, one of it’s founding members Leon Frankel was already running a highly successful business buying and selling used cars making $100 to $200 a pop on every sale. Not bad when you consider this is 1947.

But then Leon and a few others got a phone call that would change their lives and put them in one of the harshest environments to build a new organization.

As Leon put it, “I just made up my mind and nothing was going to stop me.”

When you’re building any new venture from scratch, that attitude is critical. When you’re building an air force amidst an ongoing war, that attitude is absolutely required.

Today, the Israeli Air Force ranks second to none globally, according to a study conducted by military experts for Business Insider. “Pilot to pilot, airframe to airframe, the Israeli air force is the best in the world,” said Chris Harmer, a senior naval analyst at the Institute for the Study of War.

In a new documentary called Above and Beyond, which debuted in NYC this past weekend, Nancy Spielberg tells the story of how a few young Americans started what is today considered the world’s leading air force.

Nancy Spielberg with Israeli F-15, Hatzor Air Base, Israel

I was able to sit down with Harold Livingston, another founding pilot who also happened to write the screenplay of Star Trek: The Motion Picture, to ask him a few questions about how this highly unlikely organization was formed.

Dan Reich: I can’t imagine the numerous challenges you confronted, but what was the biggest obstacle you faced when building the Air Force?

Harold Livingston: The United States Government who prevented us from taking the aircrafts out of the country. They enforced an embargo against any aircraft weighing over 25,000 pounds being sent without an export license.

Reich: In the beginning, there wasn’t a blueprint or playbook for what you were doing. How did you train and recruit new members?

Livingston: We played it as it was, with what we had. Recruiting was achieved through word of mouth, airline and/or ex-military friends of friends, various Zionist organizations, even to the point of scanning Air Guard rosters for pilots and crewmen with Jewish-sounding names. Training was another matter: everyone had to be thoroughly checked out by the handful of experienced people (obviously airline and military veterans) available. This was why we were always so woefully short of skilled crewmen, and towards the end forced to hire some dozen (non-Jewish) mercenaries.

Reich: In any new venture, partnerships are very important to achieve success. Were there any partnerships that facilitated the growth of the organization?

Livingston: Czechoslovakia of course was essential, without their assistance and cooperation, we would have been in deep trouble. Same for the Panamanians, although they (Panama) were led to believe we truly were establishing a national Panamanian airline. That “franchise” allowed us to fly the airplanes out of the U.S., and on to Israel.

Reich: In hindsight, what steps would you have taken differently in growing and building the organization?

Livingston: No, not even in hindsight could we and probably would we have done anything different. Under the circumstances, there was nothing we could have done differently. We were, as stated, a “start-up” organization, and therefore learned as we went. And, for sure, from our mistakes.

Harold and Leon’s “nothing was going to stop me” attitude continues to permeate throughout the rest of Israel’s high tech institutions today. With nearly $15 billion in exits through mergers and acquisitions and public offerings, 2014 was an all-time record year for the Israeli hi-tech industry, compared with a mere $1.2 billion raised in 2013, according to a PwC report for 2014. The exits were spread out between a variety of tech industries, including Internet, IT, life sciences, communications and semiconductors.

According to Hillel Fuld, CMO of Zula and startup advisor, “Last week there were $910 million in Israeli tech transactions. In one week!” This past week, the Israeli ecosystem continued to deliver with both VCs and startups raising substantial capital. Some of the financing announced include companies and firms like like Vintage, Singulariteam, ClickTale, Addallom and Kaminario. That amount of capital is highly unlikely for any set of companies, and yet, these businesses and others continue to grow despite the many challenges the region faces.

How This Low-Tech Founder Got A High-Tech Startup To House $150M In Transactions

This post originally appeared on Forbes.com.

In a market like this where it’s relatively easy to raise capital at higher valuations, it can be tempting to spend big on customer acquisition. This environment has led to recent conversations around high burn rates and the relationship between “Capital and Success.” But some startups are realizing that overspending on customer acquisition may not lead to the return they are looking for and are instead finding different, more cost-effective growth strategies.

In just two years, Sweeten, a New York City-based virtual matchmaking service for homeowners and renovation experts, hit $150M in projects posted on their marketplace driven by one of the cheapest forms of customer acquisition: content marketing.

Under enormous pressure to post gains in the $12B NYC renovation space, Sweeten CEO and founder, Jean Brownhill Lauer, was initially tempted to spend on obvious advertising purchases. Surely, targeted advertising would bring homeowners looking for hand-selected general contractors and designers to the site. Instead, Lauer has bet big on a different approach: creating in-house content that gets serious traction with zero customer acquisition costs. Adhering to a strict no-paid-advertising model, Lauer’s team is using original content to drive social media activity and partnerships with widely-viewed shelter and design sites, drawing prospective customers to the site more organically.

In-house content over paid advertising

“We started with big ideas but severely limited capital,” Lauer said. “When we looked at our budget and tried to envision parting with funding to cover advertising costs, we knew we could get clicks and site visits but probably not much else. Instead, we’ve watched as our investment in high quality and highly visual in-house content has drawn those same clicks and site visits through collaborations with industry leaders, and at the same time, has been a particularly powerful tool in establishing relationships and trust with customers.”

For a company trying to bring trust and structure to an unwieldy market, this outcome is in many ways more important than page views.

Regular, reliable content

Sweeten’s blog features two key categories of regular content.

The first is fairly typical “before and after” photos that show how the site connects homeowners to contractors who are uniquely suited to a project’s budget, location, and style. The second is content that digs deeply into questions around the renovation process that most homeowners face.

This combination of content is attractive to both a design-savvy urban audience as well as actual homeowners who are desperately looking for reliable information before spending significant money on their own home renovations. In both cases, this content is relatively cheap to create and has a high return on prospective customers and users of the site.

Content partnerships and social conversations

In today’s world of Instagram, Pinterest and other ‘photo-first’ platforms, users continue to demonstrate an increasing demand for quality content. As Lauer said, “We’ve learned that quality writing and photos seem to be constantly in demand – there is this insatiable appetite for design gorgeousness and trustworthy information.”

And to prove it, Sweeten’s photography has generated a not-insignificant social presence with 160K followers on Instagram.

“The Instagram crowd loves our design perspective and actual homeowners are coming back to our site for guides to renovation pricing and regulatory insight that they need to feel ready to start a transformative renovation.”

Lauer is now focused on getting the most out of the content: tailoring it across social media platforms and building it into the site so that customers are getting personalized information as they use the marketplace.

Lauer is also seeing that investors are paying attention to the content cycle; “Our investors want to see site traffic and transaction growth, and they love the fact that we’re able to garner this kind of volume with zero acquisition costs. When you pay for a click, you might get that one click and then the interaction is over. When you create great content, you can get thousands of clicks and use that piece over and over again.”

More and more companies are beginning to realize the value of content over paid advertising. Sweeten is just one example of a startup that is realizing this and for them, the result is over $150M in transactions.

How To Deal With Company Growing Pains

This post originally appeared on Forbes.com.

Every company goes through growing pains. They suck. And no matter the company size these problems will always exist. It’s just that the pains will be different as the business grows. A 300 person organization feels the same pressure that a 10 person organization does, but early stage companies don’t have the resources that a later stage company does. As a result, it’s often very easy to get caught up “in the business” without ever thinking about how to work “on the business.” So here are some easy tips that can be used to work “on the business” that I’ve found to be helpful for early stage companies:

Create and write down roles, responsibilities, and goals and then review these goals. Do it over and over again. Each week, team leaders should have one on one’s to talk about what is working and what is not, and why. If the team members can’t provide answers with data and facts, that means they are not doing the hard work of getting their hands dirty. Goals and documented responsibilities will hold everyone accountable. Without accountability, there will be complacency and complacency will lead to a slow death.

Look at the data. Spend time to segment your best customers by your most important metrics. Try to identify what the overlap looks like between those top metrics. Consider including and also removing the outliers to see what that might mean, if anything. See if the results align with any hypothesis that you might of had. And then once you have your answer, stop, and go execute. Don’t get bogged down with analysis paralysis but do enough to make you feel confident in your course of action and then aggressively attack. Stick with your instincts and if the data supports it, then great! If not, try to figure out why. I heard a story once of a company who thought all of their customers would be located in the densely populated US cities like New York and San Francisco. It turned out their customers were all in India and so they relocated the entire company.

Sell. It’s great to try to optimize the inbound and outbound marketing funnels of your business but sometimes a quick sales hack to sell something is to simply get in front of the person you want to sell and to close them. Often times old fashion ‘hustle’ is the most critical part of a business and as Mark Cuban says, “Sales Cures All,” which brings me to my next point.

Prospect and get referrals. Take time to create your top 100 customer list. Figure out who the decision makers are at those organizations. Then figure out who knows those people and can provide you with a warm introduction. This requires hustle but often times this tactic yields the highest ROI. For B2B businesses, LinkedIn is a powerful tool here. For B2C businesses, Facebook and Twitter can be pretty powerful.

Create urgency in the organization. One of my favorite business stories is when the founder of Intel Israel created an artificial war. He knew that for his semi-conductor factory to stay operational, in a region torn with chaos and doubt, he would have to exponentially outperform his peers and competitor. What did he do? He put up a black pirates flag with the motto “$0.66 or die” meaning that if they did not figure out how to hit a specific $0.66 price point for their semi-conductors, their organization would be out of business. Well, they hit their goals and became one of the highest revenue generators for the early days of Intel. What can you do to get the team fired up and operating like they need to win?

So those are just a few ideas that might be helpful to a growing organization. Perhaps they aren’t the most revolutionary, but sometimes easy tweaks is all that’s needed to make a difference.

The $2.3 Billion Business Model – How Content, Community and Commerce are fueling these companies.

This post originally appeared on Forbes.com.

A new breed of business model is emerging which combines content, community and commerce to dramatically improve the consumer discovery and shopping experience online. Sites like Houzz, Polyvore, and Motoroso are putting themselves at the center of their industries using this “Trifecta,” a moniker applied by Mary Meeker of KPCB in her 2014 Trend Report.

Why is this?

Consumers rely on three factors when making purchasing decisions: content, community, and commerce. Content for inspiration and information; Community for social validation and recommendations; and Commerce for making the purchase. Today the landscape of the web serves all of these needs from every imaginable angle and from millions of fragmented sources. This results in a lengthy and frustrating experience for the consumer. Amplified by the massive adoption of mobile, consumers are increasingly demanding seamlessly integrated experiences that combine these 3 C’s.

This concept seems to be working well. Five years into its life, Houzz recently made news by fetching a $2.3 Billon valuation and appears to have become the definitive online resource that combines design inspiration, products, and service providers in the $300B home remodeling industry. Polyvore has revolutionized fashion by enabling community contributors to curate and drive sales of fashion, propelling it into the limelight and attracting over $22 Million in venture capital.

It’s not unimaginable that companies like these will rise to become powerful forces at the center of many different industries. One such business focused on the automotive industry is Motoroso. Released in beta just 2 months ago, Motoroso features over 100 official brand profiles from leading auto and motorcycle brands, including Ducati North America, Porsche, and Volvo. Ducati North America Online Marketing Manager Patrick Flynn says: “Motoroso is an excellent online platform for Ducati as it allows the distinctive designs of our products to speak for themselves. It’s a welcome addition to our online marketing strategy.” Volvo Cars of North America’s Head of Social Media, Rahul Mahtani states “Volvo is in the process of a major brand transformation and Motoroso provides a unique channel to showcase the evolution of our products visually, as well as demonstrate our commitment to innovation.”

Porsche 911 GT3RS (Photo credit: Axion23)

I sat down with Motoroso CEO Alex Littlewood, he says “We live this lifestyle, so we know how painful it is to discover and shop. We’re here to create a better experience for everyone in this industry.” In regards to launching Motoroso he adds “We’re starting with enthusiast niches and lifestyles, because they’re the influencers that drive the larger industry trends.”

While Houzz, Polyvore, and Motoroso seem poised to become powerhouse companies in their respective industries, it will be exciting to see which other major verticals or lifestyles will see similar business models applied. Sports, travel, food, outdoor, education, and pets could all benefit from sites that serve their industry this way.

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.

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 (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 (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.