One thing that struck me from seeing this list: Web 2.0 entrepreneurs tend to forget that you don’t actually have a business unless people are willing to part with their hard earned cash to use what you built.  For example, FlightCaster, JobSpice, Bump Technologies, Listia….amazing sites, but I can’t see anyone actually paying money to use these.  If that’s the case then it’s not a company, it’s a project.  Call it what it is.

RentHop.com and HighlightCam.com I can see people paying for.  Why isn’t RentHop charging anything?  This idea that you can reach critical mass by going free and then suddenly switch to a paid model has been largely shown not to work – it just upsets your base who feel like you’ve sold out.  If you’re going to charge for it, you need to do it from day one.  If you aren’t, then don’t call it a business – it’s a charity project where you hope to maybe break even on ad revenue. (Personally, I think RentHop should charge a small listing fee…it’s well worth it and I’d love to see them be successful and expand to other cities.)

RethinkDB.com also looks brilliant, but might work better as an open source product and not a company.  They’re going to have a big mental hurdle to clear to get people to pay for it when MySQL is free and always has been.

But overall I’m very impressed and you should take a minute to check out all the companies in the article.

WARNING: this is a beta launch, and the site is still being developed.  So I DON’T recommend you start using it for your main newsletter or move your list over yet.  This is just for testing purposes.  I also ask that you don’t post about it anywhere else yet.  I want to keep the beta launch small and manageable (besides, it will be much more profitable for you to post about it once I have the affiliate program set up!)  Lots of things will be changing going forward.

The URL to check it out is http://feedmailpro.com

A couple points worth mentioning:

1. Yes it has the same layout/design as BuyersVote.com. I did this just because it was the simplest and fastest way to get the site up quickly, and I like how it looks.  The design comes from this open source wordpress theme by Design Disease.

Just as a side note: I personally don’t think it’s worth spending much time on the design when launching a Web 2.0 company.  If you have an awful design, I suppose it could hurt, but as long as you have something that is good enough, and doesn’t get in the way of your main message, then it’s not that important.  Your time is better spent elsewhere in the early stages (like on the product).  When the thing takes off you can always go back and get a professional design done.

2. If you read the comments from my last post you may have noticed that my friend Erica brought up some very good points about the difficulties in running this type of business (namely, communicating with ISP’s to keep your deliverability rates up).  She was absolutely right and I got in touch with her for some advice.  After talking for a bit, we figured there might be a way to outsource the delivery part of it since it was something I definitely did not want to deal with (it was not passive at all).  After some research I turned up this company (ISIPP or SuretyMail) who do exactly that: email accreditation and deliverability.  It turns out this is actually how Aweber themselves do it (they are a customer) along with a bunch of other well known email service providers (Constant Contact, etc).  So I have to give a big thank you to Erica for helping me out on that one.

Obviously hiring a company like that is not a panacea and I’m 100% sure there will still be some sort of unexpected problems to deal with down the road (as with every startup), but at least this was a step in the right direction.

3. Finally, check out the 2 minute video demo I put together.  It shows a quick overview and how easy it will be to move your account over from Aweber.  There is no doubt about it, I’m looking to steal a TON of business from Aweber on this one.  They probably won’t be happy about that and I need to be careful and make sure to do everything by the books.  But at the same time, they’ve been getting away with robbery for so long now with a mediocre product that it’s about time they got some competition.  Consumers will ultimately be the winner here by getting a better product for less money, and that’s really the beauty of capitalism at work.

The video works best in fullscreen.

I still need to add some more features like:

• generating the signup code for people to use on their blogs
• the billing system and affiliate program (will be copying lots of code from UniversityTutor here so it won’t take long)
• a way to automate adding subscribers with an API
• some more spam prevention stuff
• a way for people to send one-time email blasts which aren’t from their RSS feed

But most of the basic functionality is there.  At least enough to start getting feedback on it.

Please take a moment to check it out at http://feedmailpro.com and let me know what you think!

Please send me your thoughts on what you like and don’t like about it in the comments below.  If you encounter any strange bugs feel free to report them in the FeedmailPro Support Forum I set up.

Until next time, keep breaking free!
Brian Armstrong

I thought I’d share some results with you.  As you recall, I was split testing two price points.

The way it works is that tutors sign up on the site and get three free job requests.  After that they get an email asking them to upgrade and become a paying member.  I’ve recorded the number of emails sent out, and the number that actually subscribed.

Test Group 1: $9.95/month or $79.95/year

Test Group 2: $5/month or $45/year

Just a quick reminder: both price points had a monthly and yearly option.  I was NOT testing the monthly price vs. the yearly price.  I was testing a lower price (both monthly and yearly) vs. a higher price (both monthly and yearly).

Here are the results:

There isn’t quite enough data yet to be super precise, but we can paint some broad strokes…

• The conversion rate was about double for the lower price.  That means I could make the service affordable to twice as many people with no loss in revenue (one option).
• Very few people chose the yearly option.  After thinking about this a bit I realized that most tutors are college students and will be moving during the summer.  They probably don’t plan on tutoring year round necessarily.  I’ve since added a line to the email saying “you can move or change cities and keep the same tutor account active”.  This may help, we’ll see.
• Revenue was higher in Group 2 because one person chose the yearly option.  Without this, revenue would have been $60, and revenue per email $0.42 – just barely lower.  The only reason you might want to look at it like this is that with so few people choosing the yearly option, we don’t have statistically significant data there.

The 4% or 8% conversion rate might sound low, but from what I’ve seen of other major sites this is actually quite good.

Also, just a quick note on HOW I actually did this test.  I unfortunately had to program it by hand.  Basically I setup a piece of code which recorded whenever an interesting “event” took place, such as an email going out or someone subscribing and saved it to the database.  I wish there was an easier way to run tests like this.  The closest thing I’ve seen is Google Website Optimizer, but I’ve found it very difficult to use when running tests like this, and that’s why I coded it by hand.  Not an ideal solution for everyone I know, but I thought I should mention it.

Next steps?

I haven’t completely decided yet, but the option I’m leaning to here is to go with the lower price.  It seems worth it to get more tutors signed up at the lower price (who can evangelize the product and tell others about it – not to mention having more tutors available in searches on the site).

What do you think?  Also, if you have any other suggested split tests you’d like to see, let me know in the comments and I can try running them.

I have had an idea for a website business very similar to universitytutor.com but with a different industry. I have conducted research with parties that would utilize this service and indication is they would utilize the service. My fear is that since I do not have web design experience, it will cost thousands of dollars (that I don’t have) to produce the site. And because it will involve profiles, ratings, driving directions, etc., I would guess it would be expensive! Is there any advice or potential services that would be helpful. Thanks and any feedback would be greatly appreciated.

Here is my response:

Hi Torrey,

I have a few ideas that could allow you to get it done for cheap or for free:

Cheap
You may want to look at outsourcing websites like odesk.com or guru.com. These will allow you to post your idea and get bids from programmers all over the world to build it. Some bids will be cheaper than you might expect since they live in countries like India and the Philippines (maybe as low as $5 per hour). The quality varies here though, so read their feedback and give them a small project first to see how good they are. It could potentially be done for less than $1000, depending on what you need.

Cheaper
You could try a pre-built tool like WordPress and then add a “ratings” plugin for it like this one. There are actually tons of plugins for wordpress so you might be able to put together a lot of those features you mentioned. It’s open source software so it is for the most part entirely free. The only downside to this is two fold: (1) It won’t be as customizable as designing it from scratch – you might not be able to get EXACTLY what you want but pretty close. (2) You need to be somewhat tech savvy to get all these plugins working. You won’t need to be a programmer, but tech savvy yes. If it gets too crazy, you can always hire someone as in the first option but only for a few hours to help you with wordpress so it should be much cheaper.

Free
Find a programmer and offer him equity (percent ownership in the business) in exchange for building the site. I would look for a current college student (computer science major) to do this – college students are great programmers but still young and hungry and would go for this type of thing more than a programmer who already has a job at a big company.

None of these methods will be an overnight instant success, but few things worth doing in life are. If it was easy then someone probably would have already done it by now, and would be raking in all the cash from YOUR idea :) The fact that it’s a little bit difficult is actually great, it makes a barrier to all those other people who don’t want it as badly as you do!

Hope this helps,
Brian

Ask them to look around the room wherever they are and notice everything that is red in the room. Take inventory of it. Then ask them to close their eyes and tell you all the red things they saw. They will name a bunch.

Then (with their eyes still closed) ask them to tell you anything they also saw in the room which was yellow. They often won’t be able to name a single yellow item. Yet, when they open their eyes they will see a bunch of yellow items all around them.

How did they not see them the first time? It’s almost as if they were “blind” to any yellow items even though their eyes passed right over them.

Well, if you set out looking for something, you will almost surely find evidence of it – even to the point of excluding other facts. Human beings are great at finding evidence for what we already believe (or are looking for)!

This is the same paranoia we have all felt when our hair is a little funky and it seems like EVERYONE in the room is staring. Or when we’ve done something wrong and it seems like everyone is making little snide remarks hinting at it. In reality it’s probably our brains LOOKING desperately for evidence which isn’t really there because that’s all we can focus on.

It’s the kind of irrationality that could make someone think even the US Airways Hudson River Landing is a conspiracy. If that’s what you believe in by default (conspiracies) then you’ll find one.

Sometimes this is also referred to as the experimenter’s bias. We all have it.

So our brains are easily fooled. How can we use this to our advantage?

In most matters of fact, we should be aware of this limitation and try to keep an open mind on important issues.

But where can it be beneficial in life to be a little bit delusional? How about changing your beliefs about success?

The thing is, success has no clear truth to it in the way that the Hudson River landing does (yes he really landed there). Whether or not you are going to be successful is totally up in the air.

If you believe that you’re just NOT smart/young/educated/rich enough to start your own business and become financially free, then your brain will constantly be finding evidence to back this up and reinforce the belief for you. You will only see the red.

If, on the other hand, you are absolutely convinced that you are going to be successful (even to the point of being somewhat delusional and ignoring evidence to the contrary) you are more likely to try in the first place, less likely to give up, and therefore more likely to succeed.

Success can be a self-fulfilling prophecy. If you belief you can do it, then you are half way there.

Remember the Apollo 13 mission? Their oxygen tank exploded and all electricity went off in the space shuttle thousands of miles from earth. A completely fair and unbiased assessment of their situation would have concluded that they were totally screwed. Their air was going to run out in a matter of hours, nobody had ever survived an accident of this magnitude in space, etc. But this was a good time to be delusional and keep irrational hope that things would be ok. Because if you “incorrectly” believed things would work out…then you might keep looking for the solution which ultimately saved their lives.

So yes, I am delusional about success. I don’t really believe there is a recession going on right now. I assume by default that everyone I meet really likes me and considers me a pretty swell guy. And I belief the world is generally a really happy place full of opportunities to make tons of money. I see evidence for these things because I look for it, and ignore everything else.

Sure, I’m probably a little bit delusional. But you should be too.

It started when I got an email from a new customer on my tutoring site (this is a passive income business I’ve been working on).

Brian,

This got marked as Spam, just so you know. I just happened to catch it while browsing for a FR33 D0NG-B00ST WITH M3XICAN V1AGRA!!!
Don’t know why this got blocked when none of the student contacts did, but you might wanna check it out. Meanwhile I’ll subscribe; I been clockin mad cheddar from this shit. Too bad any students who’ve wanted to catch me the past week would have missed me… but I was ready for a break anyway. Thanks for helping me make my car payments (just bought a Passat)!

[name removed]

After contemplating whether or not to add his quote “I been clockin mad cheddar from this shit” to my testimonial page, I decided to investigate why my email might be getting marked as spam.

After all, this was a pretty important email. It was the email where I ask tutors (with a free account) to subscribe and pay me money after their free trial has ended. It’s the moment of truth where I find out if people really think my service is worth paying for. This needed to be fixed ASAP!

Here is what the email looked like that was getting marked as spam (with html links and image removed):

Hi [first name],

We hope you’ve enjoyed using UniversityTutor.com. Five students have now contacted you (which is the max for a free account) and hopefully at least one of those has turned into a tutoring job for you!

Now would be a great time to subscribe if you’d like to continue getting matched with students and making money tutoring. Keep in mind that the real benefit comes over time as you build your experience and client ratings on the site. If you already have a couple students you’re working with, it might be time to raise your prices!

Here’s what you’re going to get…

* Unlimited contacts from students looking to hire you
* Unlimited client ratings and reviews so you can build your experience and raise your hourly rate
* As always, keep 100% of what you earn and set your own price
* Work WHEN and WHERE you want with flexible hours and locations
* Try it risk-free with our 60 day money back guarantee!

Subscriptions are month-to-month and it’s easy to cancel or pause your subscription at any time. There is no setup fee, no early termination fee, and no long term contracts.

With an ongoing stream of tutoring jobs, you can earn hundreds or even thousands of dollars a month, but a subscription to UniversityTutor.com is just $9.95/month for a limited time. It pays for itself with less than one hour of tutoring!

Best of all, you can try it absolutely risk-free. Here is our promise: if you are not completely satisfied, contact us any time within 60 days for a full, no-hassle refund.

Click here to subscribe and continue earning money tutoring. It takes just a few seconds:

If you have any feedback, questions, or concerns, feel free to reply to this email.

Thanks and talk to you soon!
UniversityTutor.com

To unsubscribe from UniversityTutor emails please click here.

One tool you can use to analyze the “spam score” of a message is called Spam Assassin. Luckily, my Aweber account had a tool built into it that allowed me to check the spam score with Spam Assassin. (If anyone knows a way to do this without Aweber please post a comment below).

Whoever wrote the tool had a sense of humor because this is the report it generated on my message.

Apparently it got a spam score of 4.9 out of 10, which isn’t terrible but it’s right on the border line of becoming spam. I had to laugh a little when it told me my message was being marked as spam because it didn’t believe my claim of “risk free – suuurrreee” and that “something was being emphatically guaranteed”.

After reading the report, all I had to do was make two small changes. Instead of saying:

Try it risk-free with our 60 day money back guarantee!

I changed it to:

If you aren’t 100% satisfied, contact us any time within 60 days for a full, no-hassle refund

And I removed the sentence which reads:

Best of all, you can try it absolutely risk-free.

Here is my NEW spam score:

I think I must have been reading too much internet marketing junk – because I realized that my original email did sound pretty over-hyped (and it still does probably). Smart people don’t get tricked by gimmicky stuff like that – they just want an honest service that won’t screw them.

So anyway, hopefully more of my potential customers will be getting this email now. If you don’t even ASK for the sale (because it’s in their spam folder) – you will never get it.

Until next time, keep breaking free!
Brian Armstrong

You can check out the video by clicking here.

I got to see about 54 new companies present their ideas to venture capitalists and try to get money. I took a bunch of pictures and video for you.

While I don’t believe in taking venture capital, especially for a Web 2.0 business, I did really enjoy seeing a whole bunch of new business ideas and meeting a bunch of entrepreneurs.

Brian Armstrong at the Web 2.0 Venture Forum

Disclaimer

Some of what I’m about to say might sound negative. I believe in encouraging people to pursue their ideas in business and take action, so the people who presented deserve a lot of credit. But in my opinion a lot of VC’s giving feedback at this conference were way too polite.

That isn’t what these entrepreneurs needed to hear and that’s not fair to them. They need to hear your real opinion even if it’s harsh. Some of the most valuable and time-saving business advice I’ve ever gotten was when somebody (the right kind of person) told me my idea sucked. So I’m not going to hold back here.

Anyway, here are some of the highlights for you…

The First Four

These were the four “main” companies who went first. They had 15 minutes each while everyone else had only 90 seconds.

Nutshell Mail

If you have a lot of different email accounts this service will consolidate them by giving you a summary in one of your inboxes. The business model is ad-supported. I didn’t see the value in this and it strikes me as solving a problem that doesn’t exist. A better solution to this already exists: set up auto forwarding of your old accounts to your GMail account and use their multiple accounts feature to run everything from Gmail.

Rudder.com

This service emails you personal finance updates about all your bank accounts, credit cards, etc to give you ACTIONABLE information and a general financial picture. These guys might be on to something. I’ve been saying for years how awful Quicken is and the market is ripe for the picking. Newcomers like Mint and Wesabe got so close but never delivered the most inportant part: ACTIONABLE information. They just said “what pretty graphs can we make?” instead of giving people the 2 or 3 pieces of information they really wanted (cash flow, net worth, etc).

Anyway, if (and it’s a big if) Rudder.com can accomplish this they might be on to something big. It’s not easy to code connections to all the hundreds of different types of accounts people have, so it’s a big project, but I wish them the best.

GendaiGames

This company is trying to make it easy for anyone to create games. Basically they’ve made some software which takes the programming out of it with a simple graphical user interface, and makes a community where people can upload the images and sounds that you can use in the game.

I like the idea, but there is a big hurdle to this business: the trade off between how easy the game is to create and how good the game is. This is what happened when people came out with “no programming!” tools to create webpages (also known as WYSIWYG editors like Frontpage and Dreamweaver). Sure, it allowed anyone to make a webpage, but the webpages weren’t all that great. You’d be hard pressed to find a top 1,000 site on the internet today what was created in Dreamweaver or Frontpage.

So anyway, my thoughts on this company are – “if you can do it great, but I’m skeptical that it’s possible to create good games in a generic app like that”. From looking at their demo they are still only able to create the most basic flash games – but in their defense they are still working on it. We’ll see.

Moximity.com

These guys made an iPhone app that shows local data (restaurant reviews, etc) and is ad supported. Good idea, but the problem is that they got all the reviews from Yelp.com and just threw some ads on top of it. Why wouldn’t people just use Yelp.com and avoid the ads?

Yelp.com has created something of real value (a community of users, a large database of places and rewiews, etc). They also have their own iPhone app which is quite good. So they are in control – they are the one with the real value which is the community and userbase. Moximity has added some other features such as a social networking component that allows you to see your nearby friends. But I can’t see Moximity.com having any success with this when the main value of it comes from Yelp.com and they have added some ads on top. Even if the ads are really coupons – I think you’d have a hard time making the case to users that this is an added value for them. This is a classic case of focusing too much on making money instead of focusing on how to create something of real value.

Keynote From Google App’s Evangelist Jaime Casap

This was the best talk of the day in my opinion. Jamie covered not only Google’s mission and approach to products, but made a compelling case for the next wave of internet users who will be using the products you create. These people are…

• Young
• From developing countries (India, China, Brazil, etc..)
• More concerned about helping others and being part of a community than traditional status symbols
• Way more computer literate than you are

Also, surprisingly only about 18% of people in the world are online and only about 10% of the world’s information is online. We have a long ways to go.

Myself and Jaime Casap after the talk. I’m always impressed with the talent Google has on it’s team. It was clear to me that Jaime was one of the few people at this conference who really understood Web 2.0 and where it’s going. A lot of the MBA and VC types are still stuck in an old fashioned way of thinking.

Panel of Bloggers

Apparently there are a lot of other great startup bloggers around Texas that I didn’t know about. These guys did a panel on the changing environment of startups and venture capital money.

Check out…

• Dean McCall from Ideagin
• Bryan Menell from Austin Startup
• Alex Muse from Texas Startup Blog
• Josh Tabin from Startup Houston

They did a great job and I wish I’d gotten a chance to meet them afterward as fellow bloggers. Unfortunately, I couldn’t find them!

One thing that did surprise me was the amount of money being talked about at this conference. At one point in the panel they said something like “the days of getting $4 million in funding are over…take a look at what some of these companies have done with just a couple hundred thousand dollars. That’s the new landscape and that’s what you need to do too!”

I almost fell out of my chair when I heard this. We’re talking about a couple guys getting a website thrown together. That was LITERALLY all these “companies” were. To me a couple hundred thousand is absurdly high. It made me realize how different I am from the mainstream MBA/VC crowd when I am out there telling people how to start a business for $100 and do it in one month. If you are just developing a website – partner with a developer and give them some equity. Don’t rent an office or hire employees or any of that junk. Do some viral marketing campaigns. Your only cost should be your time and $10/month in web hosting. You should be embarrassed to have spent $100k on a “business” which is nothing more than a website and hasn’t seen a dime in profit yet.

ANYWAY, I digress…

The Three Best Companies I Saw

Here are my picks.

Plura Processing

These guys developed a distributed super computer – similar to SETI at home if you are familiar with that – except this one is deployed through the web so it can reach a ton more people. They claim to already have the 10th largest super computer in the world based on current users.

The only concern I see with this is the perception of security – a lot of companies that use super computers like drug companies and financial firms – have intellectual property they want to protect. So they won’t be too keen on the idea of their data being processed on thousands of computers around the world. I think in reality it will be very secure (after all each computer is only doing a tiny piece of a much larger project, so it would be practically useless even if you DID manage to break the encryption). So this will be more a matter of changing perception at stodgy old firms than actual security risk – but still a hurdle.

Even so I bet they will get some big customers – really innovative idea, I hope these guys succeed because they’ve got a great idea on their hands.

Less Networks

Everybody loves free wi-fi but for some reason it is still pretty hard to come by in most cities. These guys have a plan to get more free wi-fi out there by making it ad supported. Basically, when you connect to a node you’ll get a branded welcome screen, you’ll have to enter your email, then you see another branded confirmation page – and you are free to surf the net. Since they know (at least roughly) your geographic location they can make the ads more targeted. They just landed Miller Brewing as their first customer and they’re partnering with phone and cable companies who have the infrastructure. Sure – the ads might be a bit annoying and you’d have to give them your email, but for free Wifi, a ton of people would do that! Brilliant idea – I’d love to see more free wi-fi around the U.S.

Rudder.com

This is the company I mentioned at the beginning. I think they could have something big on their hands if they execute it correctly. Basically, creating people’s financial statements for them automatically each month and delivering them by email.

Video of Presenters

In this (rather shaky) video I took you can see some 90 second pitches by various presenters:

Web 2.0 Venture Forum – Dec. 11th, 2008 – Rice University from Brian Armstrong on Vimeo.

Conclusion

Overall, I enjoyed going and it was a long day. My biggest take aways were…

• Venture capital is almost entirely unnecessary for Web 2.0 companies. They shouldn’t be asking for it!
• The ideas about how to inexpensively start a business are way off for most people in the MBA/VC community. 9 out of 10 ideas aren’t going to work so people need to go through them quickly and inexpensively. It is ridiculous to spend a couple hundred thousand dollars to get a website created.
• There is probably too much focus out there right now on ad-supported business models. This is a nice fall back but I don’t think it should be relied upon as much.
• Don’t sugar coat your advice – you are doing a disservice to entrepreneurs when they want your real opinion.
• Solve a real problem and if you don’t have a MAJOR benefit over an incumbent don’t even try (there were too many people trying to copy YouTube and Facebook).

Hope this was useful to everyone.

Until next time, keep Breaking Free!
Brian Armstrong

Try to notice today when you see someone who is frustrated. If you can solve their pain, you might be on to a great business idea.