Poornima VijayashankerEIR at 500 Startups
Bio

Femgineer who likes to build tech products & companies. Previously founding engineer at Mint.com. Currently advising startups in financial tech, payments, and B2B, SMB. Focused on product development, technical recruiting, and bootstrapping.



Recent Answers


Without knowing exactly what you mean by infrastructure, I'm just going to assume that you mean product infrastructure (e.g. hosting, servers, etc.).

Basically you don't want to over optimize your infrastructure until you have a known or anticipated growth rate.

So you want to spend your initial round of funding on marketing and customer acquisition. You'll also want to be careful about not committing to CAC (customer acquisition costs) or CLV (customer lifetime value) because that is what you are trying to figure out.

Happy to jump on a call and talk about when it makes sense to think about focusing on infrastructure.


This really depends on the stage you're at.

Keep in mind that I don't know your specific product or service, so I'm offering you some general advice. If you want to do a call I'd be happy to provide more tailored analysis.

Currently I run two businesses: BizeeBee (SaaS product), and Femgineer (education services). For both and in general, I never expected to make a profit off a customer in the early stages. I'm usually trying to figure out a customer's price sensitivity and price model (one-time purchase, subscription, contract, freemium, etc.).

Having said that in the beginning you can expect to make almost little to no profit off of a customer, because you're spending every penny on building awareness, capturing mindshare, and creating a high quality experience. The reason you're even asking them to pay is just to validate their "willingness to pay". I stay away from thinking of early customers are profitable once, and think more of them as my early evangelists. I want to create case studies off of them, and have them spread the word about my company.

You'll obviously want to set a budget, which it looks like you have for acquisition. But it's really hard to figure out the exact unit economics, mainly because you don't know how much it's going to go cost you yet to service them.

I say service them, because you might have attracted some customers at certain price point who are actually more demanding than you'd like, as a result your servicing costs maybe even greater than acquisition. So you'll want to track that to either avoid attracting those kinds of customers in the future, or possibly increase your price point to cover the cost of servicing customers.

Finally, the profitability of a customer depends on the type of product you have. If you have a one-time use product, then barring returns, you should be able to know the profitability pretty quickly after the sale i.e. expiration date of the return policy. If instead you are operating as an ongoing service then it's likely that it will take much much longer. If you're offering a service then you have to restate the value proposition every time someone is paying you i.e. monthly subscription or renewing a contract, and keep track of costs to servicing them during that period of time.


In general it's hard to scale an hourly business. However, here are a few suggestions:

1. Offer a lower rate tier where you can capture a lot of people such as group coaching. You'll need address topics that are general to the group, and make sure that the people within the group are similar enough, but don't feel like they're competing with each other.

2. From the group coaching you can suggest people upgrade to a higher price such as the $4K for 6 1-hour sessions to address specific needs and provide the high touch individualized attention they're looking for. However, I'd still be cautious about letting people know how much they're paying for an hourly rate.

3. Can you productize this service in any way? Most businesses scale by productizing their information. If you can create learning modules for people to go through, then you can have the complete work on their own, then use 1-1 time more effectively.


Please realize that my suggestion would be slightly different if I knew which two countries. However, without knowing that here's what I'd suggestion:

1. Since you're just getting started figure out which country provides the best legal benefits for starting a company. This should include tax benefits, legal protection, and ease when it comes to filing paperwork (incorporating, managing payroll, taxes, etc.). This will undoubtedly save you time and money moving forward, and staying lean.

2. Once you've established your home base country, you'll still need to hire people in the other country as you scale. You may want to think about using a service like oDesk or Elance, not necessarily to recruit people but to manage ALL the paperwork associated with hiring international people. They will of course be given contract status.

If you are going to be providing employees equity then I'd suggest consulting a lawyer for how people in the non-home base country will be treated.

3. Reporting revenue. You need to be very careful about whether you are providing goods and services. If it's goods keep in mind that you might be subject to tariffs. If you're providing services then I think you might be in the clear, but please double check. Finally, some countries might have an issue with where the revenue was actually made i.e. are you sitting in your office in your home based country while servicing clients in the non-home base country, or are you actually in the non-home base country.

4. No matter what you'll need to setup a remote working environment for yourself. Invest in the best technology you can, and find clients who are willing to utilize your services on a remote basis.

Here are a few additional posts on running a remote team that I've written:

http://femgineer.com/2013/09/running-remote-and-making-progress/
http://femgineer.com/2013/03/how-to-transition-to-a-remote-team/


SMB is a tough market, I've been working in for the past 4 years, on my startup BizeeBee.

However, you seem to have a really great focus: managing subscription based services.

Depending on the size of the SMB (more medium) there maybe one person managing the services, such as a business partner, accountant, or CFO. However, if it's a smaller business then it could be one person who is wearing multiple hats, and then it's a matter of convincing them to give you the time of day.

You might want to offer a little bit more a teaser, by addressing some of the problems SMBs experience when managing subscription based services, asking if the SMB you are talking to experiences it, and who the best person would be to talk to regarding the management of services.


I'd agree with Mikeal. I've also integrated with BalancedPayments for my startup BizeeBee. I went through a year long search before I chose them. It took awhile because Stripe and Balanced didn't exist when I was searching.

However, I don't know if Stripe or Balanced supports Canada yet. You might have better luck using BrainTree if you're looking for support in Canada.

Holding funds for users isn't the big issue. The issue is the reason why you need to hold funds, which comes down to two things:
1. Fraud - you want to make sure you've verified someone's identity before letting them withdraw a large sum. Your underwriter might also limit how much you can withdraw at a time e.g. PayPal has limits of $1000 initially.
2. Cost per transfer - most of the time it's not that expensive to do a transfer of funds to a bank account. However, if you find that in aggregate it's costing you a lot, then it makes sense to batch all the funds, and issue a transfer every few days or once a week.

Here is more info on the thought process I went through when picking a payment processor for my startup BizeeBee:
http://bizeebee.com/2012/04/bizeebees-process-picking-payments-processor/


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