Rick Webb over @ The Barbarian Group just posted a company blog about “Request for Business Plans” — a growing trend where some management team comes together and tries to get a firm to build their business concept for them:
Today’s rant: RFPs that are secretly RPBs, or Request For Business Plan. Seriously. I can’t begin to tell you how many RFPs I’ve gotten that basically are asking us to start their business for them. They want to build the next Facebook or Flickr, and want to pay us something like $50,000 to build it for them. I am at a complete loss how anyone could really think this is reasonable.
Well Rick, welcome to Web Two-Point-One-Two-Five-Four-Nine, also known as “Two-point-D’Oh!”. At least these firms have had the common sense to try and get The Barbarians on board.
As you know, I’ve been busy the past few months leveraging FindMeOn’s technology and resources with a few NYC area startups while we deal with ‘those’ patent/trademark issues. By some stroke of fortune, one of these companies is working with TBG — which has kept me personally excited about the project (though it is odd to be working with old friends).
A slew of those RFBPs have been hitting my inbox and calendars as well, and I’ve been *amazed* at how ballsy and often grossly incompetent some of the teams are. Everyone has these great big ideas and great big eyes , but no one has any clue how to pull it off.
My most favorite recent meetings:
– Company A dropped 500k on development through PS firms to be “the next Facebook”, but didn’t have any in house tech or marketing or bizdev – everything was contract. They wanted my team to audit + manage tech and create a monetization strategy using our profile analytics and segmentation strategies. We didn’t think they could last 3 months and declined; they lasted four before going bankrupt.
– Company B wanted to partner with FindMeOn to build a hybrid mobile/web social network for a 110Million user cellphone carrier: they would handle the front-end clients, we would handle the platform and revenue model. After a string of meetings and auditing their software, we realized they didn’t have any capabilities to handle the project and were trying to get us to spec out the deal and their business plan. It was still a good opportunity, so I offered to put the deal together for them at-cost – never heard from them again.
– Company C wanted to do a hybrid in-store/mobile/web customer retention and marketing program – and got a 800k quote from a professional services firm that they wanted to bring down. We trimmed it down to 350k, they countered “What can we do for 40-80k?” They also mandated owning all the IP and everything be done as SaaS so they don’t have to maintain. No one in the company seemed to have technology, mobile, or marketing experience — or the common sense that their total budgets were likely the fixed costs on the hosting itself.
On the inverse of RFBPs you have teams with a defined and well-thought-out business plan that just happens to be the worst possible idea. One of these groups came my way with a plan that seemed pretty solid, and raised a good seed from various sources. They knew exactly where they wanted to go, and how they wanted to get there — except they didn’t have the know-how to make it happen.
The result was a strategy was fine – but wrong for the market. While their team is full of proven leaders and visionaries, no one had a good tech or advertising background, nor did they know how to appease the VC circuit for common-questions or due-diligence. Instead of selling their existing strengths, their plan was more about leveraging the expected hottness of an unrealized product — which seriously undervalued their key market differentiators and revenue potential, and had no safeguards for when someone else offers the same exact product.
I had to convince them not hire us to do what they wanted — I couldn’t take their money and sleep at night. Thankfully, they listened. Not only is their new approach closing in on huge round but, just as I predicted, everyone-and-their-mother is now offering the same kitcshy tech they wanted to spend their budget on. Had they stuck to the original plan, they’d be out of business unable to adapt or compete — instead they’re now poised and ready to dominate a new industry that they concepted.
This got kind of longer than I meant it to, so three quick bullet points:
1. The average amount of seed capital needed to get a v1 startup beta up to VC fundable standards: 250-750k. The average online campaign (- advertising ) spend by brands: 250-750k
2. Exactly which startups successfully exited by farming out their Business Plan and entire technology to interactive agencies or Professional Services firms? I can think of one, and it wasn’t a good exit.
3. Everyone is pushing towards WhiteLabel offerings. I recently sat down with one of the top-3 providers who said these words of wisdom “Our system delivers beyond belief if you have an existing brand, a solid social media strategy, and want to farm out some heavy lifting. If you’re looking at us or our competitors to be a turnkey solution for your entire web strategy, you seriously need to rethink your business plan.”