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4 Things Your Startup Needs to Attract Venture Capital

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4 Things Your Startup Needs to Attract Venture Capital

Published on May 6, 2013 by Elisha Hartwig at Mashable

So you’ve finally finished developing your product or service, flushed out your business model, and you’re ready to dive head first into your new business venture — but how the heck do you raise enough capital to get started?

Taking venture capital is one way to secure the funds necessary for starting your business. According to recent statistics from Reuters, venture capital firms invested over $4 billion dollars in startups in 2012, and more than $900 million was invested in the first quarter of 2013.

Although there is a lot of potential with venture capital firms, it is important to make sure this is the right path for your startup. In exchange for the high risk that venture capitalists assume by investing in your company, they generally receive significant control over company decisions — in addition to a portion of the company’s ownership. But, VCs can definitely be an attractive option for startups unable or unwilling to secure bank loans or complete debt offerings; so, if you’ve decided that applying for venture capital is the right move for your startup, read on to learn about the must-have traits your business needs to attract funding.

1. Have a Unique Idea With High Barriers to Entry

In order for venture capitalists to justify the large risk they are taking with your company, you must offer them a fresh business venture that promises to fill a void in the marketplace. In an interview with Mashable, Charley Polachi, partner at Polachi Access Executive Search, elaborated on the importance of having a truly unique idea with high barriers to entry.

“Venture capitalists are looking to fund projects that are unique and can’t be easily replicated. Ideally, the technology or service can be patented or trademarked to give the startup some breathing room and really allow the business some time to gain traction and marketshare.”

Anyone can sell something online, but there are certain products that have yet to be developed — like the car battery that goes forever, or innovative, accessible and low cost energy sources, these are the ideas that venture capitalists would drool over — they are motivated by the next big thing like anyone else.

2. Develop a Compelling Value Proposition

Venture capitalists are really knowledgable in the startup space, so you must be able to show them why your business is different and better than each of your competitors. Showing VCs that you have a compelling value proposition is hugely important, and is often overlooked by first-time entrepreneurs.

Michael Goldstein, founder of DC-based startup accelerator Exhilarator, stressed the importance of determining customer interest.

“My personal gauge when evaluating a startup is, would the target customer wait in line for five minutes to get access to the product/service, or would they abandon? If it took five minutes to download an app or to access a site, would the customer persist?”

Another important factor of creating a value proposition is scalability. Are there enough people interested to scale the business? Even if you have a really cool, unique idea, it’s not fundable if it’s not scalable. What market are you going after, and how large is it? Investors need to believe that the market opportunity is sizeable, and that your company can generate substantial revenue at scale. Prahar Shah, CEO and co-founder of Mobee, elaborated on the importance of recognizing the opportunities in your market of interest.

“Be sure to size the market correctly and educate the investor not only on how large your market opportunity is, but also why it’s ripe for disruption. When I asked one of Mobee’s investors why he decided to back us, he quickly responded: ‘You’re going after one of the only billion-dollar industries — Mystery Shopping — that’s still run on pen and paper!’ ”

So, the takeaway is this: If your business is a product, demonstrate that people are willing to pay for it and have an unmet need that your product fills. If your business is a marketplace, be ready to show traction on both supply and demand sides.

3. Demonstrate Market Traction

In a competitive economy where only 2.5% of angel-funded companies go on to raise venture capital, it’s important for a startup to show cognizance and relevance in their market. Early-stage VCs want to see a sizable market opportunity before writing a check, and startups can demonstrate this through a pilot or beta customers.

More importantly, startups should demonstrate the ability to convert that pilot into a paying customer. Nina Nashif, founder and CEO of Healthbox, believes that showing market traction is critical, and startups should be able to replicate the process of turning a pilot into a paying customer over and over again. “The greater the number and the quality of early customers displays the startup has the ability to grow past the initial interest from early adopters.”

4. Assemble the Perfect Team

Some think that having the right team is the most important factor in attracting venture capital funding. Startups rarely have the perfect product and market fit right away, and they will probably need to pivot based on customer needs, competitive factors and industry transformation.

Ryan Feit, CEO and co-founder of SeedInvest, an equity-based, crowdfunding platform that connects investors to high-quality startups told Mashable about the importance of finding the right team.

“Given the high degree of uncertainty associated with early-stage investing, VCs bet on the jockey over the horse because they need to have a high level of conviction that the team has the necessary skills, domain expertise and diversity to evolve just as quickly as the industry does.”

So whether your team is made up of experienced entrepreneurs, or recent college graduates — as long as your team members have complementary skills with a track record of collaborating well, you should have a solid shot at attracting some venture capital funding.

How did your startup attract VC funding? Let us know in the comments

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Emerging Media – Top 10 PR Agencies for Mobile Apps

New Independent Research Site Launches with Comprehensive Agency Rankings

Top 10 PR Agencies

Emerging Media is ranked as one of the Top 10 PR Agencies for Mobile and Wireless applications! That was the surprise we received on Monday via an email notification from a new independent research site called Top PR Agencies. The newly newly launched TopPRAgencies.com (press release)  has done quite a bit of research to develop their rankings and have populated a very comprehensive database of Public Relations firms. In addition to the rankings, the site promises to provide a comprehensive directory of PR agencies, research tools, blogs, press releases and a knowledge center.

Emerging Media has been working with Mobile and Wireless space for several years now and is very proud of what we have achieved for our clients. Our clients have spanned mobile applications, mobile radio, advertising and even software infrastructure for the industry. Here are just a few:

StearClear, an app-based designated driver service that gets you and your car home safely
Echolocation, a new hyper-local, micro-blogging app that connects users to highly relevant content based upon their location
TargetSpot: the largest Internet and mobile radio advertising network
WebNMS: A leading provider of wireless and mobile infrastructure software

top 10 pr agencies“As technologies have changed, we’ve found creative ways to adapt our PR strategies with the times – from content creation to events to social media,” said Susan Lindner, President of Emerging Media. “We’re inspired by the businesses we work with, and how these technologies move all of us forward”

The Top PR Agencies site shows great promise. They have already put a ton of effort and work into creating a great database that will be a helpful resource to agencies and corporate PR departments alike. We will certainly keep an eye on the site and see if we can improve our rankings over time!

EMERGING MEDIA JOINS THE GLOBAL PR NETWORK

25 Top-tier Firms Form Global Alliance

Global PR NetworkEmerging Media has broadened its international reach by becoming a founding member of the Global PR Network. The organization is comprised of some of the leading full-service public relations agencies that deliver global, regional and multi-country PR campaigns for a wide range of technology companies. The network’s objective is to support business growth strategies across the globe by creating compelling content to build and execute integrated public relations campaigns and social media strategies. The Global PR Network is comprised of 25 full service PR, marketing, branding and social media firms across North America, EMEA, South America and Asia and can provide services through a single point of contact or on a country-by-country basis.

The Global PR Network offers the following services for B2B, consumer electronics and technology companies:

  • Corporate public relations
  • Digital marketing services
  • Article writing services
  • Communication management
  • Social media campaigns
  • Social media management
  • Media training
  • SEO services
  • Business communication
  • Public opinion shaping
  • White papers
  • Press release distribution
  • Integrated marketing communications

 

For more than 10 years, Emerging Media has specialized in working with international technology companies looking make a mark in the U.S. market. We have successfully worked with more than 25 international companies, ranging from start-ups to market leaders, helping them differentiate themselves and thrive in a highly competitive and crowded marketplace. We have partnered with many international agencies and have managed global campaigns for some of the largest companies in their industries.

“Our goal in founding the Global PR Network was to connect exceptional independent firms around the globe so that we can leverage our experience to further the goals of our clients,” said Susan Lindner, President of Emerging Media. “All the firms share the same dedication to excellence and customers service which makes us effective partners when working with a client.”

If you want to learn more or need an international team for your PR and marketing initiatives, check out the Global PR Network.

Instagram’s Insta-Scam: 5 Lessons to Learn

TOS Change Spurs Boycott of the Popular Service

On Monday, photo-sharing service and online hipster club, Instagram, released that it would be changing its terms of service within the next 30 days. Essentially, the announcement left the door open for Instagram to use photos shared by users for Instagram’s advertising and would allow other third-parties access to those photos (presumably at a premium). A lot of sites are having a difficult time trying to monetize their, often awesome, features and Instagram is a big player in the social space trying to do just that.

Loyal users took to (other) social media platforms immediately to share their uproar, spawning the quick proliferation of  #BoycottInstagram and sending the hashtag up the Twitter trending flagpole. In short, the idea of Instragram letting companies pay for user’s personal photos without their permission was too much for Instagramers to handle and, being social media inclined, they made sure to speak up.

In just over 24 hours after the terms of service had been released, and the ensuing backlash heard, Instragram co-founder Kevin Systrom posted a blog response aptly titled “Thank You and We’re Listening.” The blog post assured users that, “Instagram does not claim any ownership rights over your photos” and that he really heard the message of their users.

There is a lot we can learn from Instagram’s response. Here is what they did right:

  1. React…Quickly: Instagram didn’t just respond to their customer’s complaints, they did it promptly. Because the complaints were made in a real time medium, they responded in the speed that is required of “real time.” These days, if you don’t respond to social media complaints within 24 hours, you are leaving your customers hanging. In many cases this will make them doubly angry, and an angry customer is a customer lost.
  2. Respond in the Same Medium: Too often companies that have an issue respond to complaints in ways that don’t quite seem congruous with the complaint. But if your house is flooding, you aren’t going to pull out the fire extinguisher. Similarly, if you get a letter of complaint, you should respond with a letter. In today’s online era, if you get a complaint online, you also need to reply in that way.
  3. Acknowledgment of the Specific Complaints: Unless you are getting thousands of letters every day (like the President) there is no reason you shouldn’t personalize your response. By acknowledging the specific issues that your customers (you know, the people that make you money) are having,  you are showing that you are really truly listening to you customers. In turn, they feel appreciated and confident that you are capable of solving the issue, simply because you understand it. With a simple, “we’ve heard loud and clear,” Instagram shows they have been listening… seriously.
  4. Show Appreciation: Although it may be negative feedback, it is still your customer talking. If your customers are taking the time to verbalize specific complaints, and not just drop your service, it means they want to know you heard them. Additionally, the feedback is an amazing resource because it allows you to hear directly from ACTUAL customers, which you can use (if you’re smart) to make your business better and appeal more to your clientele  In the future, I bet instagram will be a lot more sensitive to all issues around privacy.
  5. Share Resolutions or Timetable: Even if you don’t have the solution yet, in times of crisis it is more important than ever to be transparent. The trust between the business and the customer has been broken causing visible outrage and even users to drop your service. The first order of business, especially if your in the business of collecting peoples personal info and lives, is repairing that trust. The best way to do that is to fix the issue. Unfortunately, in the 24-hour news cycle of today you barely have time to breath before issues can explode. The next best thing then is sharing HOW exactly you plan to fix the issue.

BONUS: One thing Instagram SHOULD Have Done

  1. Say Sorry: So often companies in crisis will respond by only fixing the issue. In this case, Instagram acknowledged the complaint, but rather than apologizing for their actions that led to their customer’s issues they provided an excuse: “Legal documents are easy to misinterpret.” Acknowledging that you made a miss-step actually makes you more human and relatable  When people complain, especially in social media, they are doing it in part because they want to heard, not just because they are upset. If they were just angry they would stop using the service. Saying sorry tells your clients you hear them and value their opinions. One word, 5 letters can make all the difference.

~Julie Kaviar

~@jkaviar

Style: Swiss Stays

Swiss Stays image from http://www.swissstays.com/.

By Essential Style for Men
December 17, 2012

 Swiss Stays image from http://www.swissstays.com/.

Today we’re going to talk about something that is probably on the bottom of everyone’s “shit to talk about that is really sexy” list: collar stays. Because honestly, collar stays are typically a boring topic.

Until last week, when the folks from Swiss Stays reached out to us to talk about their new product. They claim their collar stays are “a new collar stay on the market that is quite revolutionary.

They are the first, patented, adjustable collar stays that can fit every sized collar on the market.” But they’re collar stays.  How exciting can they be? Well, in the ho-hum world of collar stays, they’re pretty dope.  Check them out in the video below:

They’re a one-size fits all solution for collar stays and the person who came up with this new product is the same dude who founded Astor & Black – David Schottenstein (because running one business is never enough).

If we were to guess he would know a little something about men’s clothing. The folks from Swiss Stays sent us a few samples and we noted how even the packaging is impressive.  The box looks like an old-school Zippo lighter and the stays are arranged like pieces of equipment James Bond would use to pick locks. Check them out below: Don't try lighting a cigar with this one.  Swiss Stays even get the packaging right.

Don’t try lighting a cigar with this one. Swiss Stays even get the packaging right. Our opinion with Swiss Stays?  They’re a great and unique product, especially if you have a need for multi-sized collar stays.  Just buy yourself a box (or two) and you’re set for life.

Or at least until you lose them in the wash.

You can choose between PVC ($24/9 pairs of stays), stainless ($60/9 pairs of stays) or brass ($90/9 pairs of stays).  We personally prefer the stainless ones because they can double as lock picks or impromptu ninja stars for when you get into trouble on your next undercover assignment.  And because they look cool. Our only negative feedback is we actually had to use Swiss Army knife pliers to open the stays up the first time (and we’re not using hyperbole here). Once you get them open however, they work perfectly. For more information on Swiss Stays or to purchase a box for yourself, you can check out their official website at http://www.swissstays.com/.

ESMTo create Essential Style for Men, mix 2 parts petrol, 1 part secret agent, 1 part rock and roll, 1 part hip-hop and a shot of tequila in a shaker with ice and vigorously shake for 20 seconds. Pour into a martini glass rimmed with explosives and have a supermodel serve for all your friends to enjoy.

The return of the office holiday party?

BY MARY DIDUCH, STAFF WRITER THE RECORD

For John Yessis, head of the catering department at Il Villaggio in Carlstadt, booking the 50 to 60 gatherings the event hall hosts during the holidays has proved easier in 2012 than in the last few years.

MARKO GEORGIEV/STAFF PHOTOGRAPHER
Paul Mosher setting up for an event at Il Villaggio in Carlstadt, which has regained clients since the recession.

When the recession hit in 2008, Yessis said companies that would usually book their holiday parties with Il Villaggio called to say they couldn’t afford the event anymore. Their longtime clients were replaced by new ones that were faring better — usually technology companies — and many of the parties were smaller.

Now, company holiday parties in North Jersey are coming back slowly, an indication that businesses are faring better and feeling optimistic about the new year.

“The number of lucrative [events] are back where they belong,” Yessis said.

Nationwide, more than 83 percent of companies are planning holiday events this year, up from 68 percent in 2011, according to an annual survey of 100 human resources executives by Challenger Gray & Christmas Inc., a Chicago-based outplacement firm. But the percentage of companies holding holiday celebrations still trails the percentage in 2007, before the recession, when 90 percent of the surveyed companies held parties.

Laura Knopf, president of the North Jersey-Rockland chapter of the Society for Human Resource Management, said among members of her group, holiday parties have risen. But the increase is slight.

More than anything, many companies believe they need to keep employees’ morale up, she said.

“People feel that they need it,” Knopf said.

Yessis also noticed many are spending more, but not “outrageously,” he said.

Companies are “not blowing their budgets out, but in the past two years you would certainly have a lengthy discussion with a representative of the company about keeping the price frozen from year to year or possibly lowering it,” Yessis said.

Tito X. Freire, general manager of The Tides banquet hall in North Haledon, said many of the companies that are bringing back celebrations aren’t necessarily bringing back amenities such as open bars or guests.

Many gatherings are on the smaller end, too, at around 75 to 150 people instead of more than 200. Prices are lower at $50 to $80 per plate since winter is not as busy as April to November, when it can cost $80 to $140 a person, Freire said.

Companies “still want to do things for their employees, but they’re watching. They’re definitely more conservative,” Freire said.

Freire also said some local companies may not be hosting a party if they were badly affected by superstorm Sandy.

Atrium Staffing, a woman-owned staffing firm with an office in Little Falls, this year will donate funds to those suffering from the storm in lieu of personalized gifts for their clients, said Jamie Parks, director of marketing.

In the past, the company gave monogrammed gifts to clients for the holidays. But this year, the firm plans to donate that money to helping children displaced by Sandy get back to school — $2,500 to the United Federation of Teachers in New York and $2,000 to schools in Union Beach and Monmouth Beach — on behalf of their 600 clients, Parks said.

“We just really thought that it was time to change gears,” Park said. “Everyone’s finding ways to give back this year.”

Around 83 percent in the Challenger Gray survey said their businesses planned to spend the same as last year on holiday gatherings, and 55 percent said parties would be hosted on-premises — an increase from 30 percent last year.

‘Find the best deal’

Seventeen percent of respondents also said more money is being budgeted for festivities. About half of the companies surveyed intend to serve alcohol, 36 percent will allow employees one guest, and close to two-thirds plan to use a caterer or outside service, up from 45 percent last year.

Sharmine Mella-Almonte, human resources manager at Sonar Products Inc., a pharmaceutical and cosmetic manufacturing company in Carlstadt, said this year they are spending a bit more on their function, which they continued to hold through the economic downturn. This year their venue is Il Villaggio.

But she said the banquet hall provided the best deal for her company, which has 95 employees, in terms of food and service.

“You really try to always find the best deal, always try to negotiate if there’s a way to save more money without being too noticeable. You wouldn’t want to cut something for the party,” Mella-Almonte said.

Sanjay Prasad of Mahwah, president of Global Business Dimensions Inc. in the Pompton Plains section of Pequannock, said his company of 100 employees also was able to maintain its holiday celebrations. During the recession, the company scaled back. For example, while they always hosted their events at another location, they would try to find venues that were not expensive, Prasad said.

About 10 percent of respondents said they were holding a party after one or more years forgoing one because of the economic downturn. Another 72.4 percent of companies surveyed said their companies kept holding parties, despite the poor economy.

Read the full article online on The Bergen Record. 

Liazon Expanding in Benefits Market

By , Buffalo Business First Reporter-Business First

Liazon Corp.’s new partnership withIndependent Health continues an expansion for the Buffalo company into the health benefits exchange market.

Liazon announced this week it will power an online benefits exchange system with the insurer. It was the third such announcement in recent weeks, following a similar deal with Schenectady-based MVP Health Care; and a Nov. 15 announcement about deals with brokers in New York City.

Liazon’s Bright Choices online system allows employees to shop for health-care options, along with a host of other services ranging from dental, vision and disability to wellness, telemedicine, legal services and even pet insurance.

Read the full article online at Buffalo Business First. 

Product review: Swiss Stays adjustable collar stays

By Patrick Lagreid, Men’s Clothing Examiner

Every once in a while a product comes along that is so simple, so practical, and such a problem-solver, that you wonder why someone hadn’t thought of it by now.

Case in point: Swiss Stays, the world’s first patented, adjustable collar stays. Designed to fit every sized shirt collar on the market, these handy little items are the creation of David Schottenstein, a fashion innovator and founder of Astor & Black, one of the fastest growing custom clothiers in the world.

View slideshow: Swiss Stays adjustable collar stays.

“I looked at dozens of collar stays and went through several designs before coming up with the Swiss Stay,” Schottenstein said. As I did with custom suits at Astor & Black, I wanted Swiss Stays to be made from the best materials and with excellent craftsmanship.”

One set of Swiss Stays is designed to fit all 24 different sizes of collars on the market today thanks to a pair of rotating extensions that turn one collar stay into four different sizes.

Made from sterling silver, brass, stainless steel or PVC with stainless rivets, Swiss Stays give your shirt collar a perfect look thanks to firm materials that are thicker and stronger than other options on the market and keep your collar standing strong all day long. They are the versatile option for a product that should be a part of every well-dressed gentleman’s wardrobe.

The company sent over two sets to try out, and they certainly live up to their promise. Packaged in a convenient three-pack that’s roughly the size of a Zippo lighter, the stainless steel stays quickly became the go-to option for all my dress shirts. The stays are a bit stiff at first and the adjustment process requires a bit of bending and finger work, but they fold out without too much headache and slip neatly into every collar I could find.

The PVC option is a bit thinner than the stainless steel version, though it feels thicker than the stock plastic stays that come with most dress shirts. They probably won’t get quite as much use as the stainless steel version, though it is nice to have an extra set around.

If there’s one gripe, it’s that you have to return them to their fully folded position for them to fit back into their case and have the lid close. Granted, this is about as minor of a concern as their could be with a product such as this, so don’t let that deter you from trying them.

Swiss Stays are priced at several different levels, from the PVC option at $8 for a set of three to the sterling silver gift set at $125. The brass stays are $30 for a set of three, while the stainless steel are $20 for a set of three.

The company is also offering a VIP membership club, the Swiss Stays Concierge. Members will get a box of collar stays shipped to them each month, and if they find they’ve left their stays behind on a trip, they can call the concierge and have a new set in hand within 24 hours.

Learn more about Swiss Stays and find links to purchase them via their website, SwissStays.com.

Click here to read the full story online at Examiner.com!

Cardinal Capital Manages LIHTC Assets With Lexington Solutions

Lexington Solutions

Lexington Solutions

Cardinal Capital Management, Inc. to Deploy Lexington Solutions’ Fusion™ Asset Management Software and Electronic Data Collection

BOSTON, MA–(Dec 4, 2012) - Lexington Solutions, a leading asset management software and services provider for the Low Income Housing Tax Credit (LIHTC) market, today announced that Cardinal Capital Management, Inc., a developer and provider of asset management services for the affordable housing industry, will deploy its flagship software Fusion™ to help manage their LIHTC portfolio. In addition, Lexington Solutions will provide Cardinal Capital with automated, electronic data collection and Business Intelligence Dashboard integrated with Fusion.

“As a quickly growing LIHTC developer, we needed a system that would allow all of our asset managers to seamlessly access data from a centralized location and empower efficient analysis of portfolios,” said Erich Schwenker, president at Cardinal Capital. “Fusion will help our asset managers quickly drill down into our financial data and concentrate on monitoring each property for variances. With Fusion, we will be better equipped to fulfill our mission of protecting and preserving affordable housing.”

Cardinal Capital and its affiliates manage over 7,500 units in more than 130 communities throughout Wisconsin, Iowa and Arizona. Continuing to expand, Cardinal Capital selected Fusion based on its requirements for a thorough LIHTC asset management solution that includes:

  • Complete and centralized access to all their property data for every employee to provide consistent information flow throughout the company
  • Comprehensive comparisons and real-time analysis of portfolio data to empower asset managers to effectively manage portfolios
  • Logical and intuitive views of data and analysis that allow asset managers to quickly find information when they need it
  • Automatically identified portfolio variances, so asset managers can spot trends or issues and take action to resolve them before they become larger.

“Working with Cardinal Capital underscores how critical robust asset management software is for LIHTC developers,” said Brian Madden, COO of Lexington Solutions. “More and more developers are recognizing that piecemeal in-house solutions and Excel sheet analysis are not sufficient to produce consistent results or enable proactive analysis that today’s asset managers demand. With Fusion, we’re able to provide the asset management technology and services that institutionalizes a company’s knowledge and positively impacts operations and the bottom line.”

Lexington Solutions will work with Cardinal Capital to implement Fusion’s cloud-based asset management software and data collection services. With Lexington Solutions’ data collection services, financial data from Cardinal Capital’s management companies will be automatically imported into their Fusion database. Lexington Solutions will deploy Fusion as a hosted solution, maintaining responsibility for disaster recovery and backup systems to secure Cardinal Capital’s critical data.

Today, Fusion manages more than 170,000 Low Income Housing Tax Credit units throughout the United States. To learn more about how Fusion can transform LIHTC asset management, visit:www.Lexington-Solutions.com.

About Lexington Solutions
Lexington Solutions, a wholly owned subsidiary of Boston Capital, is an innovative asset management software and services provider to the LIHTC market. The company’s flagship product, Fusion™, is the most comprehensive LIHTC asset management software of the market, and the only platform specifically built by asset managers, for asset managers. Fusion’s built-in analysis helps asset managers to proactively pinpoint potential issues earlier, and confidently manage assets and tax credits while reducing credit delivery risk. Today, Fusion is used to manage over 2,500 LIHTC properties nationwide as the most affordable asset management solution for the affordable housing industry. For more information, visit: www.Lexington-Solutions.com.

 

Uptown Cheapskate Brings New Life to Old Clothes

By Donna Fenn, YEC Mentors, Open Forum

When siblings Chelsea and Scott Sloan were teens growing up in Salt Lake City, they frequently talked about starting a business together. That probably came as no surprise to their parents, the founders of Kid to Kid, a franchisor of resale stores for used children’s clothing, toys, baby gear and maternity wear. Chelsea Sloan, 27, says she and her brother, 31, “saw what our parents had done and we wanted to do something on our own.” So in 2009, the siblings secured an SBA loan and opened Uptown Cheapskate, an upscale resale clothing store catering to the 18-35 market. Three years later, the company already has 23 franchisees, and her success earned Sloan the top prize at the Global Student Entrepreneur Award, $150,000 in cash and in-kind business services from Entrepreneurs’ Organization, which sponsors the competition.

A Fragmented Industry

Sloan says she had been “obsessively researching resale stores for years” and had found that only 17 percent of the population would shop in a resale store in a given year. “That statistic struck me as not right,” she says. “There’s just so much product sitting in your closet. People ought to be engaging in resale.” Also, more than 80 percent of shops were small, mom-and-pop operations, posting sales of less than $250,000 annually. She saw that fragmentation as an opportunity as well.

The siblings reckoned that the size of the teen and adult resale market was approximately $2.5 billion. Another franchisor, Plato’s Closet, “had 400 stores and only about 10 percent of the market,” Sloan says. That meant there was plenty of opportunity for a newcomer. She and Scott decided to think big, and they set their sights on creating an entire franchise that would not only attract existing resale shoppers but, through sophisticated branding and merchandising, would lure the other 83 percent of the population as well. Their other point of differentiation: Unlike consignment shops, they would buy used clothing outright at approximately 25 percent of the store price. Shoppers would get an additional 25 percent for their clothing if they agreed to take a store credit in lieu of cash. 

Early Lessons

The two opened their first store in Salt Lake City in early 2009, after six months of planning. Since they knew from the beginning that they wanted to franchise their business, they made sure everything from the signage to the lighting was replicable. But they made some mistakes as well.

“We tried to do things on the cheap,” Sloan says. But penny-pinching cost them more in the end. For instance, a low-cost lighting contractor used bad credit to pay for fixtures, then disappeared. “The lighting supplier then came after us,” Sloan says. And within six months of opening, there was almost $10,000 worth of theft in the store. While security tags are expensive, Sloan quickly learned that they eventually pay for themselves.

The Sloans’ franchising plans also compelled them to create a proprietary database of brands and prices that would make it easy for their future franchisees to price items of clothing. Sloan started by looking up brands on Amazon, building the database herself. The database now has 4,200 brands, and, she says, “allows anyone to correctly price almost product that comes into the store.”

Immediate Expansion

Before the siblings even opened their flagship store, they had signed their first franchise agreement with a North Carolina couple. Now, the company has 16 franchisees and 22 stores nationwide. System-wide, says Sloan, the stores rack up more than $1 million a month, with the average store posting $700,000 a year in revenue. The total investment for a franchisee is between $227,900 and $335,000. All franchisees go through two weeks of training in Salt Lake City, and company representatives are present for all grand openings.

Sloan estimates that Uptown Cheapskate will open an additional 20 stores in 2013. Eleven franchise agreements are already signed, she says. “Our only constraint is our ability to support them,” she notes. That means systematizing training and hiring more support staff.

For advice on growth, the siblings frequently turn to their original inspiration: their mom and dad. But the advice goes both ways, Sloan says. “My mom taught me everything I know about the retail industry, but we’ve been able to pass things along to her, since we’re more tech savvy. The companies are really helping each other become better at what we both do.”

Read more Startup of the Week posts.

Check out the full article online on Open Forum.