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.
