Startups defying the downturn
Chris Denny
Co-founder, Sartin Denny Productions
Santa Rosa, Calif.
Launched: August 2008
Former job: Marketer
Sometimes timing is everything. I had thought about starting a business for a while. My business partner, Dan Sartin, and I wrote a business plan, and I finally made the decision to resign from my full time job in August. But before I could give notice, my company laid off a large group of employees.
I would have liked to have spent another 30 to 60 days at my job, but my last paycheck was $3,600, which was a huge help to move us forward. Sure, starting a business with that money was a risk, but apparently so was being employed. I decided I didn’t want my future to be dependent on the decisions of others.
As an event company, we didn’t start out glamorous. We were bootstrapping everything. But things were going great. Corporate clients used our services for company events and families used us for large functions. Our client portfolio was really growing. But when the market started to turn, our clients started to scale back. We both have backgrounds in marketing, so we decided to take on side projects for business owners, helping with branding, Web site design, and advertising.
This part of our business was intended to be just a supplemental income, but it wasn’t long before we saw some serious growth and decided to launch a spin-off company, The Engine Is Red. People are looking to take advantage of this down economy by expanding their marketing. Because some of our clients can’t pay us now, we’ve taken them on in a profit-sharing arrangement so that our businesses can grow together.
With unemployment rising, we see a lot of opportunity to partner with a large network of artists, copywriters and graphic designers who are both available and affordable these days. This recession has taught us that it’s imperative to be proactive and optimistic. It’s not just cash flow we’re watching, but every business practice – we have to plan with purpose and strategy, even if it means altering our business to adapt to the economy.
Jessica Robertson
Owner, Pookinoo.com
Sonora, Calif
Launched: January 2009
Former job: Student (still taking classes)
On January 1st of this year, I decided to launch my handmade diaper and toy business. In this economy, particularly with a young family, I know it’s important to live off of as little as possible. For me, that means making the most out of recycled materials.
My one-year-old son is my inspiration for my creations, which are all made of recycled clothing and items from second-hand stores. People like all-natural materials for their children, and I’m getting a good response from customers. My primary outlets for selling my products are Etsy.com and craft fairs.
But the challenge is getting the business off the ground with so much else going on in my life. It’s hard to find time to be creative while being a mom and a student and a weekend yoga instructor. I try to keep my prices low – about $10 for the diapers and $20 for the toys – but the business is just paying for itself and not really supplementing our income.
I’ve had other jobs but they’re just not fulfilling. I stopped working for other people when I got pregnant because I wanted to do something that both helps people and gives me enjoyment. For the time being, I’m just going to keep treating this like a hobby because I worry that if I make this my full-time job, I’ll stop liking it as much as I do. I’m going for my teaching credentials, so that will lead to a career. But even then I know I’ll always have this, even though I can only designate an hour or so each day to it.
Joshua Crandall
Owner, CleverCommute.com
Montclair, N.J.
Launched: September 2008
Former job: IT employee for Morgan Stanley
I spent 14 years doing IT work with Morgan Stanley. My commute from New Jersey to New York City was frustrating, as the delays on public transit were unexpected and frequent. In 2006, I approached a few acquaintances that I knew on my train line and asked if they’d be willing to share delay information. They agreed, and I created a group e-mail address so that if any one of us found out about a disabled train, he’d only have to type the information once and we’d all get it.
To their credit, New Jersey transit has a top-down alerting system that commuters can sign up for, but our system was often quicker. Word spread about our little communication system and within a year, we had a mailing list of 70 people. I decided to invest some money to patent and trademark the back-end tech work and the process, which I called CleverCommute.
It was a fun hobby – and commuters love it. So I expanded it to the other lines on the New Jersey Railroad, the Jersey bus system, the Long Island Railroad and the Metro North Railroad, which services the Connecticut and northern New York lines. In the fall, CBS asked if they could use my data to help with their commuter traffic reports, so I invested more money to set up feeds for them and they paid me for the service.
Then, in November, I got laid off. I was lucky, though. I left with a severance and a business that was just slightly profitable. I had more than 5,000 people using the service, so I decided to flesh it out. In December, I got my first advertisers, who loves having such a target market. They advertise by train line, so whenever there’s a delay, the commuter will get both the message and an ad.
If this business is going to continue grow, I will need to work on penetrating the lines that don’t yet have a solid network. I know there’s room to expand in New York, but I’ve already started looking at the commuter lines in Boston and Chicago.
Last week I hired my first salesperson and I intend on continuing to hire as I add transit lines. I’m excited about where I am right now and am feeling confident about how the business is taking off.
Janie Monares
Owner, Posh and Prim
Dallas
Launched: November 2008
Former job: Business manager (still working full-time)
I launched my site on Black Friday. The idea came about six months earlier, and I spent that time getting the site ready.
Posh and Prim is a boutique of items from designers across the U.S. It had been about 10 years since I’d been in the fashion business. I started on eBay. I used to be a PowerSeller, but once their fees started skyrocking, we weren’t making a profit. I thought designers would also be looking for new places to sell. I promoted the site online, and found designers through blogs and through Etsy’s bulletin boards.
I wanted to stick with indie products directly from designers. Right now, with this economy, a lot of people don’t like outsourcing. They’d rather get something in the United States, handmade.
The best-selling products on the site are small products – health and beauty items, jewelry. Small things are easier for people to afford. I advertise online and in some indie magazines, and sales have been pretty good.
I still work in business management, and run the online boutique as well. My husband, a stay-at-home dad, built the site and manages the operations. He’s a disabled Naval vet. The business helps bring in another income. It’s really hard, the way the economy is. You have to do everything you can.
Ken Kash
Owner, KenKash Designs
Hillsborough, N.J.
Launched: July 2008
Former job: Theater scenery designer
Getting my business launched has not been an easy ride. I studied theater design in college and learned how to work with metal. After twelve years at a theater company’s set design shop where I honed my skills, I lost my job because the shop shut down. That was in July.
For the past few years, I considered leaving theater and starting my own metal working business, but I liked the idea of having a steady, secure job. Now that that’s gone, I figure this is the time to jump on my opportunity. The only issue is that I really need a shop of my own to do the work, with the proper machinery and storage space. That requires capital that I simply don’t have.
Since the summer, I’ve had a few part-time jobs in surrounding theaters, and I also scored a few gigs designing and making window gates and free-form ornaments. But I’m still relying on my friend’s space to do the work and the leftover materials from my theater job, which they told me to take when they shuttered the shop.
I figure I’ll need about $50,000 to get everything I need. My parents might be willing to help me out a bit, but they lost a lot of money in the stock market, which is pretty scary since they’re retired. I have no collateral, so I haven’t even bothered with banks. I did some research into grants, but quickly became weary of scams. I’ve thought about taking money from my 401(k), but that seems drastic. I put my Roth IRA into savings but don’t want to use that money for the startup because I find I sometimes have to chip at it just to pay the bills.
But I refuse to give up. My friends ask me why I’d start a business in this economy, but I’m optimistic. I have the knowledge and the talent to do it – I just need to broaden my client base and find a place to do the work.
Charlie O’Donnell
CEO, Path101.com
New York City
Site launched: March 2009
Former job: Venture capitalist, entrepreneurship professor
I’m currently an adjunct professor of entrepreneurship at my alma mater, Fordham University. Although I’m about to launch my first business, I’ve been in the startup world for a long time. For years I was an analyst at a New York-based venture capital firm, and the connections I made during my tenure there have really paid off.
I’ve always loved talking to people about their careers. In fact, I used to think my ideal job would be as a school counselor, but I didn’t really want to go to school for that. Eventually, I developed an idea that could touch on both my passion for start-ups and career advising. My site, Path101.com, not only connects recruiters with job seekers, but helps people find out what job is perfect for them. By gathering data from the resumes posted, we can offer advice to help people get the direction they need to start a career they love.
I got the idea for the business in 2007 and found a tech partner. After cashing in my social capital, I was lucky to land $350,000 in angel financing in February. The site is in alpha testing right now and will officially launch later this month.
Our main business model is recruiting-based. But we recently got approached by a school that asked if we’d share our data for their own use. It never occurred to me that additional revenue streams could come from sharing our information, but that will help us to hit the ground running. In a good economy, you need to think outside the box. That’s even more true in a bad economy.
Tim Trzepacz
Co-founder, Vers Audio
Wayland, Mass.
Launched: March 2007, now trying to expand
Former job: Product developer for Brookstone
My business partner, David Laituri, and I started our environmentally conscious business two years ago. We developed a high-end iPod dock that’s made of wood and sustainable materials. We tried a total of 11 banks, but they all turned us down because we didn’t have a revenue history. Then we tried a small lending institution, Middlesex Bank of Framingham, just down the street from our office. They gave us a $200,000 asset-backed line to use on inventory.
We expanded nationally and internationally very quickly. We avoided large retailers and concentrated on indie retailers that are focused on green products and that could appreciate our product. In our first year, we hit $1 million in revenue. I think we’ll hit $2 million this year, and we’ll need more capital so that we can start turning orders around faster and developing new products.
I went back to Bank of America recently. They had turned me down for a loan, but I came to find out that Vers is no longer small enough for their small business lending. I’m not going to pitch to their corporate banking division now – we’re really happy with our current bank. Of course, in this lending situation, you never know. Despite our growth, anything can happen. So I’m nervous about that, but I think we’re covering our bases by also initiating conversations with interested private investors as well.
Joe Petviashvili
CEO, News Alpha
Foster City, Calif.
Launched: December 2008
Former job: Programmer, serial entrepreneur
In August, I dropped my previous business idea. Since 2007, I had spend massive amounts of time building a Web site that aggregated and ranked news articles, but that space was already very crowded. Investors weren’t crazy about it and it really wasn’t going anywhere.
But being a serial entrepreneur, I decided to tweak the idea and immediately launch another venture, this time just focusing on financial news stories. So we got WhoMovedMyStock.com up and running – just in time for the financial collapse. People like hearing good news about their stocks, but they can’t bear to look when things are bad. Our traffic fell off with the stock market.
From that experience, my business partners and I discovered that the stock market is influenced by the news, among other factors. So in December, we developed algorithms that analyzed words in the news articles. Out of that came News Alpha. It’s an institutional tool aimed at helping hedge fund managers.
None of this has been easy. I have financed these businesses with my own money, mostly savings from my 7-year stint as a programmer for another company. We are almost cash-flow neutral, as we just got our first paying client. But to move forward, we need more and that’s tough in this industry. We can’t rely on word of mouth – in the hedge fund world, people keep the best things for themselves – and selling our product is a challenge because usually hedge funds think the tools they’re using now are just fine. Not to mention hedge funds are not doing well in this economy.
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