Lesson #378: Artificial Intelligence Can Do Everything Now--Good News For Owners, Bad News for Staff

 Artificial intelligence (AI) has been more than a buzzword for the last couple years; it is literally taking over every single aspect of how businesses are run.  Big corporations have even started hiring Chief Artificial Intelligence Officers to ensure their organizations are getting the most out of AI tools, largely to replace slow/expensive human-driven tasks with fast/inexpensive technology-driven tasks.  The applications are literally endless, but this post should help inspire you to rethink everything you are doing in your business, as there is probably a technology out there that can do it faster and cheaper.

I did a little researching on Google to see what AI tools I could stumble upon, and I was amazed at the breadth and depth of AI tools I found:

Need a business plan?

Need market research?

Need competitor analysis?

Need products designed?

Need marketing help?

Need customer service support?

Need technology coded?

Need financial reporting?

Need fund raising?

Need to recruit staff?

Great, there are now AI tools out there that can quickly and easily do all of these tasks.  Yes, you can get a lot of these same topics addressed from the main AI engines like ChatGPT, Claude and Google, but the businesses linked about are mastering their craft in each of these specific verticals.  So, as we are all experimenting with these main AI engines, we should also be experimenting with some of these niche solution providers we have never heard of before, as maybe they have a better “mousetrap” (at least for now).

Why do I share this?  For three reasons.  Firstly, an “old timer” like myself (aged 56) would have done what I normally would have done for these topics: hire people or consultants that produce the work product needed.  Because that is how I have always done it.  I didn’t even know there were other technology driven options out there that could help me move faster and cheaper.  And I am guessing there are a lot of other people out there that would have done the same thing.  So, I encourage you to take a pause, see what technology options are available to you and see if they can help you save time and money versus the “old ways” of doing business.

Secondly, if these new technologies prove effective, it is going to dramatically decrease the amount of capital that will be required to get new startup businesses launched and operating in the market.  Which means the speed at which your business faces new competition will be much faster.  So, you no longer have the benefit of “resting on your laurels” or coasting based on your past successes.  It won’t take long for some smart AI coder to launch a better product, making your business obsolete.  So, you need to protect your turf and go on the offensive:  figure out how AI can help you with your product development roadmap and innovation efforts.  If you don’t, someone else will!

Thirdly, all human workers out there should be “shaking in their boots”, in terms of thinking about their job security.  Yes, companies like Amazon or Google say AI will help reduce their future hiring needs, letting them grow more efficiently while keeping all of their current staff.  But lets not fool ourselves; companies are driven by their shareholders that are seeking higher valuations, typically from higher profits.  And what is the best way to increase profits?  Replace a $60,000 a year salaried person with a near-free technology!  Yes, I am talking to all you graphic designers, technology developers and customer service agents!

While that may sound great for that specific company’s bottom line, if all companies out there are employing this same logic, this could mean massive layoffs in the years to come, with no replacement jobs that will enable them a “soft landing”.  It wouldn’t surprise me if a majority of Americans were living on welfare in the next decade or two, which is a pretty bleak forecast.  The stock market may do great, with all the accelerating corporate profits as technologies replace people.  But the average American and their consumer spending power is going to be materially impacted for the worse.

Yes, all of these new technologies are very cool.  Who doesn’t want to move faster and cheaper on their growth plans?  But when you think about the long term implications of these AI technology advancements, it doesn’t paint a very rosy picture for the future of most average Americans.  So, if you are worried about getting potentially disintermediated by technology (which should be most of you!), start putting your “defense plans” in place now.  Start training yourself up with new skills that won’t get cut by profit-hungry management teams.  Who knows, maybe you can use the AI technologies to your advantage, in launching the next really great startup that everyone will be using.

It will be very interesting to see how this all shakes out in the coming years.  At a minimum,  you all need to be learning how AI technologies can help your businesses and or your specific roles.  If not, you may not have a profitable business or a defendable job for much longer.  Sorry to be “doom and gloom” here, just calling it like I see it.

For future posts, please follow me on Twitter at: @georgedeeb.

 

[VIDEO] George Deeb Teaches Product Development for Startups

I recently had the pleasure of mentoring the 2016 class of entrepreneurs at Founder Institute Chicago. Here is the presentation I delivered on "Product Development for Startups". The lesson provides high level guidance on: (i) doing your market research; (ii) setting the product vision and roadmap; (iii) creating product specifications; (iv) building a development plan; (v) doing UX testing; (vi) when to build internally or externally; (vii) building budgets; and (viii) setting development KPIs to manage by. This is a must see for any entrepreneur, to learn how best to build their first products.


Red Rocket's George Deeb Teaches Product Development for Startups from Red Rocket Ventures on Vimeo.

The matching slide show on SlideShare can be found here:

Product Development for Startups from Red Rocket Ventures

I apologize for the low quality of the video, but the substance of the speech is what I wanted you to focus on.  I hope you pick up some good learnings here, to help your business.


For future posts, please follow me at:  www.twitter.com/georgedeeb

Lesson #232: Do You Own the Copyright to Your Own Technology?

Back in Lesson #70, we talked about the importance of protecting your intellectual property.  But, that was focused mostly on your brands and your trademarks.  It is equally important to make sure you have the appropriate contractual paper trail to prove you in fact own all of the technologies you are building through third party contractors.  To help me with this post, I thank Steven Buchwald, a startup attorney in New York at Buchwald & Associates, for his wisdom on this topic.

DO YOU OWN THE COPYRIGHT TO YOUR OWN TECHNOLOGY?

That’s not as unusual a question as you’d think - many startup founders don’t. Creations such as graphics, web design templates, and software are all governed by copyright law, according to which the copyright owner is the creator/author of a given work. The company commissioning the work, meanwhile, has no ownership unless a written contract exists that speaks to the contrary.
What this means is that every time a developer or designer works on a site without a sufficient contract, they’re the ones that own the content they create - not their client.

THE IMPORTANCE OF A GOOD CONTRACT

In situations like this, copyright law seems more counter-intuitive than protective. After all, when you a hire a designer, they’re creating something for your company that they wouldn’t have otherwise thought to make. Why should they own the rights, rather than you? Unfortunately, this is simply how the law is structured, and even a written contract on its own isn’t necessarily enough.

Although a copyright transfer must be in writing in order to be effective, intellectual property law often requires time-tested “magical language” - legalese and formulaic wording - in order to be valid. A contract which lacks this language offers little to no protection. It’s therefore imperative that you have your lawyer draft contracts that include a binding, accurate intellectual property clause.

This isn’t simply a matter of content ownership, either. Imagine the ramifications of not owning your own logo - the primary image of your brand. Imagine how it might impact your core business if the source code of your site belonged to someone else.

In some cases, lack of contracts may even impact your startup’s ability to receive funding. VCs and angel investors alike diligently examine whether a company has ownership of its intellectual property before putting forth capital. If you don’t own your own content, many will abandon your startup and seek out one that does.

THE CAUTIONARY CASE STUDY OF MIKKI MORE

These are not simply empty warnings, either - there is legal precedent for our discussion here.
In Smith v.  Mikki More LLC, a startup hired one graphic designer and one website developer. The designer was responsible for designing labels, packaging, and advertisements for the startup products; the developer was responsible for the creation of the company website.  Neither agent signed a written contract with the company.

When Mikki More failed to pay the service providers their agreed-upon compensation, the case eventually went to court. There, it was found that Mikki More was, at best, the holder of a non-exclusive license. As explained by the court, “ownership of a copyright or an exclusive license can only be transferred by an “instrument of conveyance, or a note or memorandum of the transfer” signed by the owner of the right.”

Because there existed no IP contract between Mikki More and its service providers, they were able to cancel the company’s implied permission to use their work. Without such implied permissions, the startup was placed in the awkward position of infringing upon the copyright of the very content it had hired the contractors to create.

Mikki More attempted to argue that it was a co-author of the commissioned work. It had, it maintained, contributed the product name, the outline of the marketing story, and the font.  This argument ultimately fell flat - none of these were independently copyrightable contributions.
Indeed, according to the proceedings of Gaylord v. United States, “a person who merely describes to an author what the commissioned work should do or look like is not a joint author.” Only the person actually doing the work is deemed to be the copyright owner of such a work.

Accordingly, the court found the startup guilty of copyright infringement for using its own website and package designs.

THE KEY TAKEAWAY

Service providers must sign a contract transferring the legal right to their work over to you - if they do not, they remain the copyright owners. Further, never fail to pay your service providers in full - not only is nonpayment bad business, it also gives them the right to revoke permission to use their work, placing you in the same situation as Mikki More. That is, you could be committing copyright infringement simply by using your own website, app or other technology.

Thanks again, Steven, for helping me research these very valuable insights.  Feel free to reach out to Steven at 212-729-8505 or via his Buchwald & Associates website, in case you need any help with your contracts or other questions here.

For future posts, please follow me on Twitter at: @georgedeeb.

Lesson #197: R&D and Sales Must Be Tied at the Hip (Break Down Silos Part 2)

Back in Lesson #194, we talked about how your operations and sales departments must be tied to the hip, sharing learnings both ways for maximum efficiency.  That was the first part of breaking down silos between internal departments.  The same should be said about the relationship between R&D (e.g., new product development) and sales, as the second part of breaking down internal silos.

HOW SALES FEEDS R&D

Too often, entrepreneurs get started building out their product before knowing if there is actual demand for that product.  And, by the time they realize the product is not selling, it is too late to pivot into a new direction before they run out of capital.

If the business had done the proper market research around their product before they launched (as we learned to do back in Lesson #118), by speaking with prospective customers to learn if your product solves a major pain point for them that they would be willing to buy (effectively pre-selling the idea before you even began writing one line of code), they would have saved a lot of unnecessary heartache by building a winning product offering of the gate.

Once you are up and running, your salespeople are the "eyes and ears" of your R&D department.  They have the tight relationships with the clients.  They know what new features the clients are asking for.  They know what clients are saying about competitors' strengths.  And, so on.  Your company needs a defined process on getting the right questions into the hands of your sales team, for them to feed intelligence back into the R&D department, to help prioritize their new product development efforts into winning solutions.

HOW R&D FEEDS SALES

Well, obvious enough, without a product there is nothing to sell.  And, the better the product, the easier it will be to sell.  But, most importantly, products should never be stagnant:  the R&D department needs to continue to innovate and iterate their products over time, building new versions of their products on a consistent basis.  The better the features, the better the user experience, the better you can differentiate your product, the easier it will be for the sales team to sell.

And, again, it is not about only building one product.  It is about building a suite of products over time, where you can start selling clients on product A in year one, and upsell them on product B in year two and product C in year three, improving your average client ticket and lifetime value of your customer along the way.  And, we all know, it is a lot easier to "land and expand" inside one client over time, than it is to add new clients from scratch.  So, this mindset will make it a lot easier and more efficient on your sales team and process.

THE CAVEATS

Not to counteract anything I said above about doing the proper prior research and pre-selling ideas with your clients, you can't always pre-sell a product without a working protoype to "set the bait".  And, that means sometimes you need to make smart bets, building minimum viable products from which your clients can better grasp your solution.  So, don't let your desire to be cautious before acting, slow down the speed in which you are innovating and staying ahead of the market with next generation ideas.

Hopefully, the message here is loud and clear:  don't let your R&D department develop products in a vacuum.  The business demands should always drive your product offering, and not the inverse (which, unfortunately, is not always the case in startup land).

For future posts, please follow me on Twitter at:  @georgedeeb.

Lesson #189: How to Price Your Software Technology

Oftentimes, tech startups are so focused on building their technology, that once it is built, they have no idea how to price it.  This lesson will provide some high-level guidance on how to do that.

HOW MUCH DID IT COST TO BUILD?

The first thing you need to do, is quantify how much investment went into to building the technology in the first place.  How many developers were working on the project, at what hourly rate, etc. And, since you are most typically competing with a "buy vs. build" decision for your prospective clients, it is OK to use market prices for the costs of your tech team (e.g., $150 per hour, even if you are investing sweat equity and it really didn't cost you that much in cash out of pocket).  So, for an example, let's say you had a team of four developers working full time (40 hours per week) for three months.  Your cost would be $312,000 (13 weeks x 40 hours per week x 4 people x $150 per hour).

DETERMINE AN APPROPRIATE ROI AND TIMEFRAME

Just like a venture investor shoots for 10x ROI on their investments, businesses need to shoot for a reasonable ROI on their investments.  And, since we are talking about technology that may have a limited useful life before it becomes obsolete, you need to have a reasonable timeframe that you want that ROI to be realized.  My rule of thumb, where you can, is to shoot for a 10x ROI on your technology investment within a three year period of time.  Continuing our example, that means you need to recover $3,120,000 in revenues in the coming three years, or around $1MM per year, on average.

DETERMINE YOUR SALES ASSUMPTIONS

Next, you need to reasonably estimate how many sales of the technology you will have during the three year ROI period.  You need to take into consideration: (i) how big of a market are you serving; (ii) how many potential buyers are there; and (iii)  how much sales and marketing investment are you making to drive leads and close sales.  In our example, let's say you have one salesperson calling on prospective clients and one salesperson can close one transaction a month.  In order to close $1MM in sales a year, the salesperson would need to be selling the software license at around $80,000 per sale.

SANITY CHECK YOUR ASSUMPTIONS VS. MARKET

The above assumed there were 36 prospective clients that would be closed in a three year period.   And, with a 20% conversion rate in B2B sales, that means your sales person needs to have identified 180 prospective customers.  When you sized the market above, how many potential customers did you reasonably think you were out there?  If not at least 900 customers (assuming most business have a hard time growing beyond 20% market share), then your sales assumptions may be too aggressive, and you may need to adjust your projections (e.g., shoot for fewer customers at a higher average price--maybe 18 transactions in three years at $160,000 price).

SANITY CHECK YOUR ASSUMPTIONS VS. COMPETITORS

So, let's say the $80,000 price held up based on your market analysis.  But, how does it compare to your competitors? Where are they priced?  If you are materially more expensive for a similar product, then you need to lower your price to get competitive (hence, lowering your ROI expectations at the same time).  Or, are you materially cheaper than your competitors?  If so, now you can afford to actually raise your prices (and grow your ROI expectations beyond 10x, which is a really terrific situation to be in).  But, if the ROI starts to dip below 5x, you really need to question doing the project in the first place, given all the risks you will be taking in launching this new product.  So, make sure you do your revenue projections before you start building one line of code.

SANITY CHECK YOUR ASSUMPTIONS VS. CLIENTS

Lastly, you need to ask yourself two questions, as it relates to your prospective clients:  (1) is the price affordably within their budgets (e.g., enterprise clients can easily afford a $80,000 software licence, but SMB's would not); and (2) how much would it take for them to build the software themselves, in a buy vs. build decision.  In this example, they are getting a $3MM technology investment for $80,000 (that feels like a steal for them, and could argue raising your prices).   If you were trying to sell $80,000 software that would only cost them $160,000 to build themselves, then they would start to think about the merits of doing it themselves to "own it".  I like to pitch "we are only 10% of the cost of building this yourself", which suggests we could raise our prices to $300,000 in this example, and still be a big value to clients.

Anyway, pricing is more of an art than a science.  Play with it, test it out on a few clients and adjust accordingly based on how fast or slow they are to act on your offer.  Hope this helps point you in the right direction.

For future posts, please follow me on Twitter at:  @georgedeeb.

Lesson #172: Don't Finalize Your Tech Development Plan, Until You Involve Marketing

Most startups get a great new idea, and their immediate instinct to start coding away on building that product with their very limited budgets.  They put on the hat of a consumer using their technology and do their best to build a functional user experience in line with their original vision (which is a perfectly reasonable and expected part of launching a startup).  But, then they launch their product and realize no new customers are showing up. 

I have previously written about how most entrepreneurs do not set aside an upfront marketing budget to help acheive proof-of-concept, as part of the problem.  Another part of the problem is, the founder started building out their technology, without first consulting with any marketers to figure out what they need to build a virally-engaging experience, to easily assist with acquiring new users in a low-cost kind of way from the core technology product.

As an example, let's say you are building a new mobile app.  Have you thought through a responsive web design or mobile web versions, vs. native iOS or Android apps, and which will reach the most users with the best consumer experience?  Did you build social sharing tools within the application, so users can easily share content with their friends?   Are there ways to gamify the product to make it more engaging and help spread word of mouth?  Is there anything in the product that limits its appeal to prospective users?  Are there ways to experiment with Groupon's highly successful 24-hour ticking clock or 500 person tipping points, which helped with rapid viral customer acquisition?  Is there any "fear" built into the purchase process, you can quell with a few well-placed "learn more" links?  Are there ways to build in user incentives for desired user behaviors?  Does the UX create any confusion or friction impeding a user from completing a transaction?

All of the above types of questions should be tackled upfront as part of the initial technology build planning discussions.  As these types of marketing-related technology improvements, will help you more quickly and affordably acquire new consumers, vs. traditional higher-cost, media-related marketing efforts.  And, hence, will most likely result in you pushing off certain user features or functionality to version 2.0, in order to create budget for these much needed marketing related technologies that will help with customer acquisition.

The best technology in the world is useless if new users can't easily find it.  So plan ahead from day one, and incorporate marketing-driven technology needs into your product right from the start.

For future posts, please follow me at:  www.twitter.com/georgedeeb.

Lesson #155: Best E-commerce Platforms for Small Business

Choosing an e-commerce platform for your online store can be a daunting experience. There are many providers new, old, and truly tested, that are available in the market.  That said, it does seem like shopping for a new house - a very personal experience, as you try to find the platform that best meets your specific needs. To assist me with this lesson, I asked for guidance from Yulia V. Smirnova at CommerceBrain.com, an e-commerce marketing and technology consulting business.

Yulia pointed out that e-commerce platforms have some similar features between them and some unique features to themselves.  There is no perfect platform and there will be tradeoff you make in picking one over another. And, like with any system, there will be things you will learn along the way, that you wished you had known ahead of time. Hopefully, these lessons will help point you in the right direction for making the best decision for your business.

To decide which e-commerce platform is best for you, it comes down to: (i) your capital budget; (ii) your team resources (access to in-house developers); (iii) the scope of your e-commerce business (niche market or multiple revenue streams); (iv) your product offering (high-end vs. mass-market, depth of SKUs); (v) single retailer vs. multiple retailer marketplace; and (vi) expectations of your target audience (minimum features needed for them to effectively compare/buy what you are selling).

Below, Yulia selected and compared a number of cost effective providers that e-commerce startups and smaller online businesses mostly end up using, based on her experience.  She has broken the decision making process into four key user scenarios:

1.    Go with Shopify. Big Commerce or similar hosted solutions if . . .

·        you are a small startup that still needs to prove that you have a good market and that your product is in high demand.

·        you desire to keeps your back-office technology staffing costs low with an easy plug and play solution for your business people to use.

2.    Go with OpenCart, 3DCart or another open-source, self-hosted solution if . . .

·        you are tech savvy enough and need a low cost solution and have time to figure out the setup and implementation.

·        you wish to customize the solutions to meet your specific needs and want the control of a self-hosted system.

3.    Go with Magento, the largest and most-robust of the self-hosted solutions if . . .

·        you are a $10MM+ online business and need a more innovative user experience with custom functionality.

·        you wish to sell in international markets with no hassle on translations, pricing and fulfillment.

·        you need the capability to plug into the APIs of your vendors.

·        you have a team of smart developers to fine-tune the system.

·        you are up for playing a serious game in e-commerce built for scale.

4.    Go with building your own system if . . .

·        your tech team thinks they can build a system that is easier to use than Magento (complex to use), and you have the time/budget to build such.

·        you are building a longer-term enterprise needing highly customized solutions.  Not recommended for lean startups needing MVPs.

·        your other local systems do not work well with Magento or the others (you might be operating in an emerging market).

For a full comparison of the top 12 e-commerce platforms for small business, including the ones listed above, click here to learn about the pros, cons and costs of each.

It is also best to ask other e-commerce retailers in your industry or market to learn what they use and what works best for them, to get a better perspective.  Most of the times, it is these private conversations from the people running their stores which ultimately settles which system will work best for your business, getting their candid feedback.

Thanks to Yulia for sharing her insights here. She has made herself available for any e-commerce strategy, marketing or systems questions you may have from here.  Feel free to reach out to her at http://commercebrain.com/contact/ or 415-666-6002.

For future posts, please follow me at:  www.twitter.com/georgedeeb.  If you enjoyed this post, please click the social sharing buttons to share with your social networks.

Lesson #150: Responsive Web Design for Multiple Devices

In this day and age of multiple devices, mutliple platforms and multiple screen sizes, Responsive Web Design (RWD) has become the web designers' go-to strategy for building web sites.  For this post, I enlisted the help of my colleague, Eric Nardo, the Creative Director at Ora Interactive, whom I am grateful for his deeper education on this topic.

First of all, what is RWD?  It is the process of building your web technologies in a way that it will automatically reformat itself based on the inbound platform a user is using.  This means updating the page width, font sizes, displayed text, navigation bars and other elements to easily and quickly resize and optimize the site for PCs, tablets and mobile phone screen sizes "on the fly".  No longer do you need to build a stand-alone mobile touch sites, or incur addition costs building different versions of your sites for the various platforms.  And, the good news:  it is no more expensive than building non-responsive sites, so there really is no reason not to be doing it.

RWD first hit the stage in 2010, with Ethan Marcotte's book on the topic.  But, it really did not go mainstream until the middle of 2012, when many of the big web browsers started to support CSS3 (since RWD is dependent on media queries using this cascading style sheet technology).  It is now the default preferred solution for any good web design. 

So, if you are not building your new sites, or rearchitecting your old sites, using RWD frameworks, you really need to look for new professional technology assistance, as you may be materially impacting your user's experience on your sites, depending on what devices they are using.  It is critical you customize your user experience to the devices your users are using to optimize the user experience, word of mouth marketing benefits and conversion rates for additional revenues.  All you have to do is look at you Google Analytics data to realize 30-40% of your inbound traffic is coming in via mobile devices today, not PCs!!

The most-popular RWD frameworks come from the Zurb's Foundation, Twitter's Bootstrap and Dave Gamache's Skeleton.  Zurb's is the "grand daddy" of the industry that has the most features and is on the leading edge.  But, it is the most complex and hardest to learn and use.  Bootstrap is the middle grade, with a lot of customizable buttons and menus, too.  But, if you don't think you will use those functionalities, Skeleton, like its name suggests, is a "bare bones" framework for your simplest of needs.  Making it many designer's favorite, given its quick and easy use.  That said, there are scores of other frameworks out there, and you can also try to code this functionality yourself, if you are a good coder.  But, don't re-invent the wheel if you don't have to, with good open source options available out there.

To be clear, RWD does not replace the potential need for developing stand-alone native apps for smart phones and tablets.  Native apps run locally on the device, and do not require connectivity to the web, where performance can be spotty.  And, native apps can directly tap into the device's hard drive, memory, storage, GPS targeting, voice/email/SMS functions and integrate with users' other mobile apps, like their social media connections, where RWD does not.  So, for rich media applications, like gaming, nothing will perform better than a native app.

For further reading on this topic, check out the book "Responsive Web Design" by Ethan Marcotte and this blog post by Pete Cashmore at Mashable. 

If you need any further assistance, or are looking for a professional developer for your RWD needs, Eric Nardo at Ora Interactive is happy to help at eric@orainteractive.com or 312-854-7096.

For future posts, please follow me at:  www.twitter.com/georgedeeb.  If you enjoyed this post, please click the social sharing buttons to share with your social networks.

Chicago's Top Web & Mobile Design, Development & Marketing Agencies

I am often asked who are some of the better web and mobile design, development and marketing agencies in Chicago, to assist with your startup's digital technology or marketing needs.  Below is a list I have built over time of some firms to consider, including some of the key services offered, as promoted on their websites. 

You will notice some of these firms are one-stop-shops for all of your needs, and others are specialists for specific needs (e.g., mobile experts, ecommerce experts).   There are plusses and minuses of either direction, so do your homework here, based on your needs.  I also split the list between "startup friendly" and those that "typically work with bigger budgets", so most of you will focus on the the former.  It is also important to note, that on rare occasion, some of these firms may consider trading a portion of the cost of the project, in exchange for equity in your business, if you want to explore that option with them to reduce your cash costs.  And, before engaging any of these firms, be sure to check out their past work and speak to their past clients as references.

HAVE EXPERIENCE WORKING WITH STARTUP ACCOUNTS & BUDGETS

www.colorjar.com  web stategy, design, development, consulting

www.digitalintent.com  startup strategy and development

www.doejo.com  branding, product, mobile, ecommerce, design, packaging, social, video

www.8thlight.com  design, development, UX

www.4tegroup.com  IT staffing and development

www.fueled.com  design and develop mobile apps, web, video

www.gammapartners.com  web design/develop, mobile, search, social

www.heymann.com web design, SEO, social, CMS, integrated marketing, consulting

www.logicalmediagroup.com search, display, analytics, social, email, video, mobile, web dev, ecommerce, affiliate

www.lyonscg.com  ecommerce design and development

www.killswitchcollective.com  web design/develop, branding, print creative, multimedia, broadcast

www.orainteractive.com  design and development for web and mobile

www.pathf.com web/mobile product design, development, execution, marketing

www.plumtreegroup.net  web/mobile design, development, marketing, video, branding

www.sandstormdesign.com strategy, branding, web design/develop, copywriting, UX, SEO, social, analytics, research, testing

www.socialkaty.com  social media marketing, content creation/distribution

www.thoughtworks.com  web design/develop, consulting, testing

www.vokalinteractive.com  100% mobile strategy, design, develop, execution

www.wireflyinteractive.com  branding, web design, flash animation, online marketing

TYPICALLY WORK WITH BIGGER ACCOUNTS & BUDGETS, BUT DO LARGER STARTUP PROJECTS

www.acquitygroup.com  strategy, execution, UX, tech

www.americaneagle.com web design/dev, hosting, consult, integration, search, multimedia, social, mobile

www.banddigital.com  tech development, strategy, creative, mobile, intelligence

www.fuor.com  digital marketing agency, display, search, social, mobile, content, email, analytics

www.gorillagroup.com  strategy, marketing, web design/ develop, managed services

www.ideo.com  design products, services, spaces, interactive

www.iprospect.com  search, local, display, ecommerce, global, social, mobile

www.launchwhatsnext.com  engage, promos, digital/video/mobile, shopper marketing/merchandising, trade marketing

www.magenic.com  development, apps, intelligence, UX, QA

www.manifestdigital.com  strategy, UX, creative

www.reachlocal.com  search, social, display, video

www.rightpointconsulting.com  strategy, UX, digital marketing, technology

www.riseinteractive.com  interactive marketing, SEO, PPC, email, social, display, affiliate

www.sapient.com   manage tech changes, strategy & development

www.sprinc.com  software design/dev, coach/consult, project management, IT staffing, process management, social

www.vibes.com  all mobile (platform, strategy, campaign mgmt, analytics, CRM, development)

The above excludes all the major marketing agencies in town (e.g., Starcom, DDB Digital, Ogilvy Online)

If you think I am missing any important firms here, please add them in the comments section below.

For future posts, please follow me at: www.twitter.com/georgedeeb

Lesson #117: Legal Considerations When Using Open Source Software

Many startups use open source software ("OSS") in their service or product offering, to help lower their costs of development and to quicken their speed to market. However, too many startups do not fully realize the risks of using OSS or what "open software" even really means.  To help further educate us on this topic, I engaged the expertise of my colleague, Christopher Cain, a Partner and startup lawyer at Foley & Lardner in Chicago, with deep expertise in copyright and software related matters. 

At the outset, a term you will often associate in the open source context is "free software". Free software as a term distinguishes OSS from traditional copyrighted software.  The two terms "free software" and OSS are used interchangeably, with most companies referring to OSS. So what distinguishes OSS from traditional software? OSS is software distributed under a license that ensures freedom (hence the term "free") to run, copy, distribute, study, change, and improve the source code. Specifically, OSS licenses typically require: (a) no fee or royalty for redistribution; (b) source code must be available; (c) licensee may create derivative works and modifications; (d) derivative works must be distributed under the same license as the original; (e) no discrimination against users; and (f) all rights granted in the original code must be granted in any redistribution.

So, the benefits of using OSS are pretty clear: the ability to get source code without a license fee and the ability to modify that source code and use it in your product offering or service, provided you live by the rules listed above. Moreover, with more popular OSS, you have a community that is supporting the code, finding and fixing bugs and adding features. These are all great things and most start-ups know these. What they don't often know or think through however are some of the risks of using OSS.

What are the risks in using OSS? Well for a start, OSS licenses typically lack any meaningful contractual protections. Most OSS licenses provide that the code is "as-is", without warranties of any kind. There is typically no support and no indemnity from intellectual property infringement. In addition, OSS licenses have not been fully tested by courts. Court decisions are an effective way to clarify the scope and extent of a license. That lack of clarity from courts is heightened by the fact that many OSS licenses were written years ago, without legal input. As such, the licenses can be less then clear. Not surprisingly then, conflicting license interpretations exist within the OSS community. 

More specifically, no clear standard exists on what constitutes a derivative work of OSS. This is a serious issue because it is the ability to create derivative works of OSS that can get a start-up into unexpected trouble. A derivative work is a copyright term that means a work that is based at least in part on one or more original works. For example, version 2.0 of a software program is a derivative of version 1.0 if any of the code in 2.0 is based on the 1.0 code. Recall that one of the requirements of most OSS licenses is that they require you to distribute derivatives of the OSS under the same license terms as the original. That generally means that if your object code contains OSS, you have to distribute the source code for the entire program when you distribute the object code. Most start-ups that intend to license their software do not want to provide their "secret sauce" by providing the source code as well!

To avoid having to distribute all of your source code, start-ups should take care to "silo" the OSS code from their proprietary code or if the OSS is in the form of libraries, use dynamic linking instead of static linking. Both of these at least create an argument that the OSS code is separate from the proprietary code ,and as such, only the OSS source code has to be distributed. To be able to make this argument however, a start-up has to first be mindful of its OSS use. Each OSS use should be intended and compliant. For example, start-ups should keep an inventory of all OSS it uses. If it is not sure, there are automated tools and proprietary OSS databases (like Black Duck Software) that can help parse code and identify OSS components. Start-ups should have a designated person that approves all OSS use, how it is handled and modified in conjunction with the start-up's offering.

Note that you don't generally have to worry about OSS distribution risks if your business model is based on software-as-a-service or a cloud offering.  That is becuase if you are not distributing your code that contains OSS, but instead, are making it available over the internet as a service, the OSS source code distribution requirement is not applicable.  And, worth mentioning, companies can still charge license fees for products that contain some OSS, with the argument you are not charging for the OSS portion, but are charging for the entirety of the product offering including your proprietary code.

Bottom line is OSS is good and has benefits, but be mindful of the risks highlighted above.  Your startup will be the better for it.  If you have any questions from here, feel free to reach out to Christopher directly at 312-832-4553 or ccain@foley.com, and you can follow him on Twitter at @chrisccain.

For future posts, please follow me at:  www.twitter.com/georgedeeb.

Lesson #36: Picking The Best Technology for Your Web Startup

I am a business person first, and a tech person second.  So, I solicited the input of my technology colleagues, Tyler Jennings and Todd Webb from Obtiva, a leading web development company in the Chicago area, who have done terrific work for Groupon and others.  So, be sure to follow up with them directly, for any detailed questions from here.

One of the biggest mistakes I made at iExplore in 1999 was building the website in entirely the wrong way.  The first problem, it was not a lean startup, by any means.  It was built using the most expensive technologies of its day, from providers like Oracle and Sun.  We just assumed the site would be a huge success, so we built a "mack daddy" back end to hand the meteoric growth.  But, the site never grew to 10MM visitors a month, it only grew to 1MM visitors a month.  And then, we were saddled with huge overhead costs of around $25K per month, just to run the website.  I equate it with building the foundation for a 10,000 foot mansion, but only constructing a 1,000 foot house on top of it, which was a very inefficient use of capital for a startup (with the 9,000 foot uncovered hole in the ground taking on water). 

The second problem was the site was not easy to maintain, requiring complicated builds to refresh the site for even the most simple of changes and a staff of expensive, hard-to-find developers that were proficient in the technologies we were using.  So, the key lessons: (i) never build a tech infrastructure in excess of reasonable growth targets (to keep your costs at an absolute minimum); and (ii) build your technologies in a scalable way where the site can easily be developed and maintained over time, by easy to find developers. 

Below is some high level guidance on current trends in the startup tech community.  But, the most important guidance of all:  finding the right CTO is 10x more important than picking the right technology itself.  Technology needs vary wildly based on the specifications of various projects.  And, only a strong CTO or technology consulting firm will ensure you are heading in the best direction, based on your specific needs and budgets.  And, in all cases, don't get romanced by "Rolls Royce" solutions, when a "Honda" will do just fine, for the needs of most lean startups.  And, keep in mind, preferred technology platforms for startups continue to change from year to year, as new advancements hit the market.  So, read the below from that perspective.  And, hopefully, this post will not become obsolete by the time I have finished writing it!

Most lean startups with basic website needs today are building their web-based businesses using the Ruby on Rails coding platform, which is entirely based on inexpensive and freely available open-source technologies.  So, if you can, avoid more expensive, licensed platforms based on Java, C#, PHP or VisualBasic.net.  Ruby has become the preferred language of choice since: (i) you can get your product to market faster with less code to write; (ii) it is a flexible language easily tied together with other systems; (iii) it is easy to scale and iterate; and (iv) Linux based hosting providers are numerous and inexpensive.  Many successful startups like Groupon, Living Social and Hulu, were all written with Ruby.  The only real negative of Ruby is that it is still a relatively new technology, and experienced talent are in high demand (although many new developers are learning the language in force).

As for the alternatives, Microsoft's VisualBasic.net technology is not advised unless there is a real business need to using it, like having to integrate with other Microsoft based technologies.  This is due to: (i) the ubiquity of open source solutions; and (ii) the higher expense of hosting sites on the Microsoft platform.  But, there are times when more complicated or expensive technologies could be the way to go.  For example, if you are processing tons of data, Java is a good choice.  If you are doing tons of number crunching, C# could be the way to go.  If you have a very small project that does not need to scale, PHP could be a good alternative, as it is inexpensive to host and requires fewer resources to operate. 

Now, that we have picked our development language, we need to make our hosting decisions.  And, for lean startups, you can't beat the low-cost of cloud-based hosting.  So, instead of investing big monies in hardware, software and systems administrators, piggyback on the services of the cloud with a "pay as you use it" solution.  This is much preferred to building your own infrastructure, to run in your own server room or in a full co-location facility, which can get really expensive.  Leading cloud-based hosting providers with expertise with Ruby include Amazon's EC2 cloud, Engine Yard, Rails Machine and Blue Box, to name a few.  At some point (e.g., once you get to Groupon scale with tons of traffic), the cloud may become too expensive compared to internally built and managed solutions.  But, for most startups, the cloud works perfectly fine and is the preferred way to go.

As for other elements of your web architecture, assuming you move forward with Ruby as your coding language of choice, the following open-source LAMP stack is preferred: (i) Linux as the operating system; (ii) Nginx as the web page server; and (iii) MySQL as the database.  PHP written sites would be similar, except Apache would be the web page server of choice.  Other operating system options include RedHat, gen 2, and Debian.  Another database option includes Postgres.  But, in all cases, these are less used than the optimal set-up above.  All of these are free open-source technologies.  Each cloud-based hosting provider has their unique architectural set-ups and options, so research them accordingly, to make sure they are compatable with your needs.

The other thing to consider is making sure your product is readily available for use on multiple web or mobile platforms (e.g., web site, iPhone, iPad, Android).  The most inexpensive way is to build a browser-based "touch site", which automatically resizes and reskins your website based on the users' device.  This can cost $10-$30K to build this kind of functionality.  The other option is to actually build and maintain "native apps" for each of the various platforms, which can cost $50-$75K per platform, or $200K-$300K for the 3-4 key platforms.  So, much more expensive than the "touch site" option.  The primary reasons to build native apps are the full customizability of each app to each platform, and the marketing benefits you will get as consumers are browsing for new apps in the iPhone Store or Android Market.  So, consider this incremental investment as part of your marketing budget to attract new users, especially if you are a mobile based business which will be dependent on those stores for new business.

I hope this helps get your development efforts off to a good start in a "lean startup" kind of way: investing the minimum amount as possible to take a viable technology to market as quickly and cheaply as possible.  Thanks again to the Obtiva team, for their help here.

For future posts, be sure to follow me on Twitter at: www.twitter.com/georgedeeb