Elana Fine, managing director of the Dingman Center for Entrepreneurship at the University of Maryland’s Robert H. Smith School of Business, recently sat down for an online chat with readers, where she was joined by Dan Berger, founder and chief executive of the event planning technology company Social Tables.
Social Tables recently received a fresh round of funding worth $1.6 million and increased its workforce by 45 percent.
Here are excerpts from the conversation:
Q. Dan, how did you get paying customers to understand they had a problem that Social Tables could solve?
Dan Berger: We constantly do different types of customer development to validate and justify product enhancements. Our goal is to not build a feature until we have a customer ready to pay for it. This way, we know customers “understand” the value of our solution.
Elana Fine: The best companies usually don’t have to do a lot of selling to their customers. Trying to explain the problem to a potential customer often means that is not a big enough problem for them to pay money to solve.
Q. Dan, can you shed some light on how you’ve approached hiring?
Dan Berger: Most start-ups say “hire slow, fire fast” and we operate a little differently. We like to say “hire fast, fire fast.”
We have a hiring process that works really well for us. Each department manager leads the charge on hires and keeps a pipeline of candidates warm (that’s part of their responsibilities). We do two to three phone screens before bringing anyone in. Once we have an in-person interview, they will talk to six people on the team. Everyone gets involved so we get a really good perspective on the candidate.
Q. I operate my own furniture restoration business. I have a large customer backlog — about four months worth, and I lose some customers because they don’t want to wait this long. My friend recommended that I should raise prices, but I am afraid it will be unfair to my customers and I may lose a lot of them. What would you recommend?
Elana Fine: Have you looked in to getting some flexible workers? Seems like you could manage demand and backlog by hiring some contractors that get paid per item. I’d imagine in your industry there might be qualified craftsmen looking to take on projects. I wouldn’t raise prices unless you are confident that you are leaving money on the table (no pun intended).
Dan Berger: Classic dilemma. This is what my mother would call “problems of the rich.”
I would experiment with higher prices. Just try raising prices by a little on a control group (every other inbound call). Remember — price communicates value.
Q. Dan, at your current stage, do you find a lot of prospective hires are expecting equity?
Dan Berger: I expect and want people to ask for equity. That’s one of the biggest incentives I have to provide my teammates. I want them to have skin in the game. Before our [seed funding] round, we did offer stock grants. We now offer stock options and everyone gets them.
With C-level hires they do expect significant equity and are willing to take major salary hits for it. One to 3 percent is normal.
Q. I am considering using crowdfunding to fund my product launch. Have you been involved in any successful crowdfunding campaigns? What are the best strategies to achieve success? Would you recommend other funding sources instead?
Dan Berger: This is not something I know well. That being I said, I do know a few tricks:
The last five days of a campaign are the most important.
The number of backers, not the size of the donations, is what matters and makes campaigns bubble to the top.
Video. Video. Video.
Make sure you enter this endeavor understanding that Kickstarter is a futures market for products.
Leverage your social networks.
Q. What social media platform, in your experience and opinion, is most useful when promoting a product?
Dan Berger: I think they are all useless for promoting a product. They are great for building credibility, pushing out content and becoming recognized as an authority. Those should be your goals around social media, not promotions and sales. At least not until you have a great following.
Elana Fine: I agree — unless you can brilliantly promote light bulbs during a Superbowl blackout — social media has a low [return on investment] for product promotion. As Dan mentioned, many start-ups use social media to establish themselves as thought leaders. I’d just be careful about over-allocating time or hiring a “social media” expert too early on. Make sure to think about your audience. For younger demographics, you need to be flexible and move from Twitter to Instagram, Vine, or whatever will be next.