Business Models, Not Technology Distinguish NY Startups
Last Friday, I headed to the headquarters of IAC in Manhattan’s Chelsea neighborhood for a the demo day for the New York Entrepreneurs Roundtable Accelerator’s third class of startups. Those of you who have attended Silicon Valley demos might be surprised by the difference. In New York, there was almost no talk of technologies. It was all about markets and business plans. The failure rate among these startups will, I am sure, be high, but it is good to hear early-stage companies talking of their plans for success rather than peddling themselves as features to be snapped up by another company.
One theme that ran through many of the 10 companies was the aggregation of data–and not necessarily very big data–to consolidate
fragmented services. CaterCow, for example, collects information from restaurants, caterers, and others providing catering services to provide a one-stop for browsing, pricing, and ordering food service for events. There’s nothing technologically novel about this, but it seems to meet a real need. The business model is one of the oldest in the world–an 11% cut of the value of transactions booked through the site. CaterCow is currently beta testing in New York, and the big problem I see with the service is that it is not likely to scale very well. Catering is a highly localized service and it seems to me to move to new markets will essentially require starting over in each.
Juniper & Trade takes a similar approach to another fragmented market, custom made home goods. Currently, crafts people who make custom furniture and other home goods have unpleasant selling choices. If they are good and lucky, they might be represented by a gallery that will keep 50% of the retail price. The can drag their often-bulky works around to craft shows and fairs. Or they can hope customers discover their web site. Juniper & Trade is building an on-line craft show that can match buyers and sellers in this fragmented market. Like CaterCow, it is launching in New York and has scaling issues, though they are somewhat better because while the producers are highly local, their markets potentially are national.
AngelPolitics is going for bigger data, trying to build a database of donors to the 87,000 candidates who run for office in the U.S. each election cycle. The task is daunting. The data exist in the records of the Federal Election Commission (for everyone who gives more than $200 to a candidate for federal office) and in an assortment of state and local repositories of widely varying quality and formats. Campaign finance records are also notoriously dirty as donors, deliberately or otherwise, confuse things by using variations on their names and posting more than one address. The information is also subject to many different state and federal restructions on just how the data can be used and, especially, on how it can be resold. If AngelPolitics can pull it off, it will have succeeded in commoditizing data that campaigns now go to considerable effort and expense to create. There’s a market for that.
mxHero was unusual among the ERA companies. For one thing, it offers services you can use today. It’s an enterprise infrastructure company with a focus on technology. And it is based in São Paolo, Brazil. mxHero’s business is creating services that enhance the functionality of Google Apps mail, the white-label, paid version of Gmail. One service, called Footers, lets companies using apps mail manage footers, like those annoying disclaimers that law firms love, that are automatically appended to email messages. Another, called Hero Attach allows files of any size to be attached to messages which are then delivered as links the recipient can click to retrieve the file from a server. On the recipient end, this is much the same as getting a file sent through DropBox or YouSendIt, but the sender need only add it like any other attachment, not go through a whole separate process. The company has partnerships with Box.net and Cloudmark and is bringing its tools to VMware’s Zimbra enterprise mail solution. Again, the business model is a simple one: a limited free services with a paid offering costing between $4 and $12 per mailbox per year, depending on services.
There’s something refreshing about the straightforwardness of these East Coast startups. They’re not promising to change the world or even to reinvent much beyond some useful services. They may have something to be modest about, but their modesty is becoming.