How to web app business from A-Z

@MikeMcDerment – Co-Founder and CEODecember, 2011 –#freshbooksWS

Mike McDermentCo-founder, CEO

What you need to know to get a successful web app business off the ground.

1. Building2. Marketing3. Product Managing4. Metrics5. Financing6. Culture7. Questions

What we’ll cover!

Who is this punk, and where does

he get off talking to us?!!

Dropped outEventsDesign

ConversionFateful day

To the basement~80 and counting

No institutional capital

I followed my nose…

FreshBooks is…

…leader in online billing and bookkeeping

Manage your clients

Create & Send Estimates

Track Time

Track Expenses

Invoicing

Estimates Time tracking

ExpensesInvoicing

____________________________They way professionals invoice their clients and

each other

Now for Web Apps!

Recurring billing managed inside your app

Accept credit cards inside your own appReal-Time payment notifications ( WEBHOOKS! )

http://developers.freshbooks.com/

Borrrrrring

You say:“Why should I care?!”

I say: “Because…”

Over 3,500,000 Users Since May 2004

Month

Users

Thank you for having me

Thank yourselves for being here

Quick poll

Ready?!

Story = [s]Costs = ($$$)Book = {b}

Ask questions as you see fit.

Legend

Launch ready productFounding TeamCompany ($$$)

Part I: Building

You get paid for two thingsBuild the least…you are in a

vacuumDon’t build billing

Set a deadline for launchWhat is “ready?” Exactly.

Embrace constraints and focus[s]

Building: Launch ready product

Two kinds of entrepreneursEquity = ownership = bigger pie

Human qualities: PASSIONTrust, honesty, loyalty, openness

Not in it for the money [s]Where to find [s]

Entrepreneur, manager, technician {b}

Roles: design, dev, ops, S$M3 am test

Building: The founding team

Lawyers ($$$)Docs and dark clouds

Hosting ($)Office [s]

Advisors [s]Board

Business plan

Building: The Company

CategoriesChoosing a nameDomain names

Knowing your storyBuilding your websiteSpending wisely ($$)

Part II: Marketing

“Don’t underestimate the power of categories”- Mike McDerment

Are you creating a new category?

Can you? Read “Positioning” [b]

Marketing: Categories

Easy to rememberEasy to spell without

explanationDescribes the categoryDescribes the benefit

Describes the differenceBONUS: Fun. Harsh.

Consonants.[s]

Marketing: Choosing your name

Over 3,5 00,000 Users Since May 2004

Month

Users

Google:“How to name your company”

It’s a process.It takes discipline.

It’s about constraints.It will take 20+ hours. No shit.

Marketing: Choosing your name (con’t)

Get the .com…it’s just another constraint

[s]

Marketing: Domain names

There is an art to telling storiesIt gives your history

It will be rememberedDifferent versions for different

peopleElevator pitchStories evolve

My story…

Marketing: Knowing your story

Three pagesHome page must explain:

What it is?Who it’s for?

Why it matters?

Let’s look at a site…

Marketing: Building a website

Go to FreshBooks website

Marketing: Building a website (con’t)

Out spend or out teachBanners in your community ($)Google PPC (outsource if you

can) ($)Conferences, community ($)

Community emails ($)PR is the best so…

Blog your adventure…without delay

Marketing: Spending wisely

Do supportUsability tests

Telephone interviewsDecisions = Dope

Part II: Product management

Everyone does support [s]Post your phone number [s]

Use a forumHit Twitter

Be everywhere

It’s all fuel for the Big List…

Product management: Support

SCREEN SHOT OF THE BIG LIST

Product mgnt: Support (con’t)

Give themWatch themNo talking

Have team watch[s]

Product mgnt: Usability tests

***These are a must ***Prepare a survey

Benefits open endedBefore and after

Listen = energizing[s]

Product mgnt: Telephone interviews

Decisions are part art, part science

You are editor/curatorCan’t please all people all the

timeIf you do support, you’ll know

Wait, wait, waitRemove the pain, stay true to

vision[s]

Product mgnt: Decisions = dope

MarketingRevenueExpenses

…oh yeah, tracking!

Part IV: Metrics

Cost per acquisition (CPA)$ spent/# new customers = $

Conversion rate (trial, paying)

# trials/# visitors = %# paying/# trials = %

Metrics: Marketing

Average revenue per user (ARPU)

monthly revenue/# paying customers

Churn# monthly cancels/ total

customer base = %

Metrics: Revenue

Monthly recurring revenue (MRR)

ARPU * # customers = MRR

Lifetime valueARPU * (100/% churn) = LTV

Metrics: Revenue (con’t)

You don’t have any, so no big deal

Guidelines:Hosting : ~10% revenue

Acquisition: CPA < 10 * ARPU

Metrics: Expense

Burn ratemonthly exp – monthly rev =

Burn

Run ratemonthly revenue * 12 =

Run rate

Metrics: Expense (con’t)

% of email that is glowing% of people who refer you

Job satisfactionDays you did not want to work

?

Metrics: Other

Track from the startEvent logging

Google is not enoughMarketing/cookies

Ref site, land URL, KWP

Metrics: Extra - Tracking

When to raiseWhere $’s come from

What to look for in investorsDilution thoughts

Part IV: Funding

When you don’t have to [s]Know your users better than

anyoneWhen you have a formula for

the $’sWhen you’ve got traction

When you know your market size

Funding: When to raise

Consulting business & savingsLove money

Angels and advisors (27-1)Your mortgage

…the bank?

VCs/PECapital markets (going public)

Funding: Where $’s come from?

Shared values [s]Conviction [s]Trust, honesty

Operational experienceDomain expertise

3 am test…it’s a marriage

Funding: What to look for in investors

Small piece of a big pieSmart investors want you

incentedYou take one round, you’ll take

threeBarry Diller: “Hang on”

Q: can you increase share price by more than dilution?

[s]

Funding: Dilution thoughts

Guess how many customers we had at the end of 2004?

(we launched May 2004)

Quiz

What you need to know to get a successful web app business off the ground.

Bring em’!

Questions?!!

Building Culture: Hiring

Hire for two thingsCheck for values

Open ended questionsKey words

Trust your gutWhy FB?

Building Culture: Values

Values don’t change; founders [b]

Uncover your values [s]You define the words

Haze them [s]Reward on values [s]

Building Culture: CEO does?Set the vision

Foster trust; live the valuesGet the resources

Keep sharing the visionStep forward; give credit

Recruit the bestAlign. Align. Align.