Venga, a D.C.-based Internet start-up, is betting on an app dream

With an out-of-town guest to entertain over lunch and 30 minutes to pick a place, Reg Stettinius scanned the slate of applications on her iPhone and turned up nothing.

She could call up the 10-day weather forecast or the Nikkei Stock Average, but there wasn’t a quick way to find the best lunch special in Washington. With the whole world at her fingertips, this was unacceptable.

Stettinius set out to build a better app.

In the year or so since, she and two associates have hired developers and sold local establishments on Venga, a smartphone app created for restaurants and bars to alert customers to happy-hour specials, live music and featured entrees.

The business model is simple: Venues pay a monthly fee for a profile on Venga, where they can spread the word about daily happenings or offer specials. Patrons can download the app for free to peruse the offers, share them on social networks or book a table on the restaurant’s Web site.

Venga is just the messenger. Each establishment crafts its own promotions.

Sticky Rice: Tuesday night karaoke!

Mr. Smith’s of Georgetown: Beer of the month — Sapporo.

Cuba Libre Restaurant & Rum Bar: National Empanada Day.

With a name derived from the Spanish verb meaning “come join us,” Venga was designed for people looking to make a decision on the go — a market its creators said was not served by daily discount e-mails.

But less than a month before Venga submitted its app to Apple for final approval, District-based LivingSocial launched a program for merchants to offer discounts via mobile phones. The national brand was suddenly a direct threat, adding to the already long odds for any start-up fighting to stand out in the sea of 350,000 available Apple apps.

“I’d be lying if I said, ‘Oh, I don’t care about them,’ ” Venga co-founder Winston Bao Lord said. “I think about them all the time. . . . You just have to. It would be irresponsible if we were arrogant and said we were different completely and didn’t worry about them.”

Competition is stiff in this class of entrepreneurs who view smartphones as the next frontier. Those who catch a windfall can blaze whole new industries.

The introduction of Apple’s iPhone in 2007 sparked the rise of an app culture. The most successful apps are the ones you use every day: to kill pigs with bird slingshots, share home videos, pay your bills or send flowers to Mom. Their ubiquity — and the chance that one could pay off big — has inspired techies and daydreamers alike.

Even so, in a field cluttered with players, the success stories are few. The costs of launching a tech business have fallen considerably since the dot-com boom, so start-ups are plentiful. But consumers’ attention can be hard to catch and keep.

Stettinius, Lord and a third co-founder, Sam von Pollaro, have tapped every contact for advice, partnered with local industry groups and signed on some of the region’s most popular haunts.

Still, success is not assured.

‘The D Word’

A jar labeled “The D Word” sat on the desk in Lord’s sparsely decorated office overlooking 7th Street NW. Five quarters rested at the bottom of it, one for each time the word “deal” had been uttered.

It was only $1.25, but it represented a drastic departure from the start-up’s roots. Once dubbed Blue Plate, the app was conceived as a deal purveyor that could ride the coattails of companies such as Groupon and LivingSocial, which offer discounts to spas, restaurants and shops. (LivingSocial chief executive Tim O’Shaughnessy is the son-in-law of Washington Post Co. Chairman Donald E. Graham.)

“We realized there was a ton of stuff that focused on the consumer,” Lord said, “but nothing out there . . . was directed at the restaurateur as to what did they want to do and what were they looking for.”

So the creators went another direction, with real-time updates and marketing efforts focused on aspects of the dining experience beyond the price of the check.

“Anyone can compete on price. That’s easy to do,” von Pollaro said. “It’s competing on the value that you’re giving that is more difficult, and that’s what we help restaurants and bars do.”

The founders’ biggest criticism of the LivingSocial and Groupon model is that it too heavily favors the consumer. Merchants must offer a steep discount on products and then share a substantial portion of the remaining revenue with the dealmakers.

“You always have to create that balance between developing a product that restaurants want but that consumers will also use,” von Pollaro said. “That’s where competitors have gone awry. We’re trying to very much walk that line to create something that in the long run is going to work for consumers and restaurants.”

LivingSocial and Groupon have both defended their business models, saying they work with retailers to craft sensible deals that can act as a marketing tool for the businesses. “We ultimately think if the merchant is not successful the business doesn’t have any legs and is not sustainable over time,” Eric Eichmann, LivingSocial’s chief operating officer, said in December.

From its headquarters just down the block, LivingSocial has established an international footprint and raked in millions of dollars in revenue in just a few years. Chicago-based Groupon, the market leader that reportedly spurned a $6 billion buyout offer from Google, has set up a small sales team in the same building as Venga.

The founders don’t exactly view it as living with the enemy. They hope for the same rapid success and see room in the market for Venga.

Not everyone is so bullish. Elana Fine, director of venture investments at the University of Maryland’s Dingman Center for Entrepreneurship, gives Venga a 1-in-4 chance of success. “And that’s high,” she said.

“In these types of applications, you either hit it out of the park or you don’t go anywhere,” said Fine, who helped arrange Venga’s presentation to a group of venture capital investors at the university. “Their challenge is to really get above all the existing platforms and apps that have gotten traction in the last 12 to 18 months — Groupon, LivingSocial and Foursquare, OpenTable and Urbanspoon.”

“Not only do they need to get to restaurants,” she added, “but now they need to get to users. And that’s where they have to compete with all the noise that’s around. You’ve got to really execute well in a short amount of time.”

The pitch

For much of Venga’s development, its team has consisted primarily of 10 to 12 interns who flow in and out of its Chinatown office throughout the week, in between college classes. The labor comes cheap, which is essential for a start-up that is looking to stay lean until it has the cash flow to pay salaries. They also manage costs by sharing a receptionist and conference rooms with other fledgling businesses in a communal office space that Washington Kastles owner Mark Ein leases a block from the Verizon Center.

Lord was halfway through an office tour when von Pollaro interrupted with an unexpected change to the day’s schedule. Joe Englert, whose bars and restaurants helped revitalize H Street NE, had agreed to meet with them that afternoon.

Lord and von Pollaro arrived for the meeting at the Star and Shamrock to find not just Englert but also a half-dozen owners of venues such as H Street Country Club and Russia House in Dupont Circle.

Lord, a longtime public-relations associate, likes to prepare extensively for situations such as this. He scours a venue’s Web site and social media for outdated content, missed marketing opportunities or tidbits of information that could be used to convince the owners they need Venga.

Today, he had none of that information. Plus, he had more than a handful of people to charm while music hummed overhead and lunchtime diners chatted at adjacent tables. Needless to say, the circumstances were not ideal.

Typically, “I know more about the restaurant than I’d ever need to know going into that conversation,” Lord said later.

“We try to make it relevant to them,” von Pollaro added.

“And that’s what I didn’t do well today,” Lord said.

None of the restaurateurs committed on the spot, but their interest seemed genuine, the duo concluded before ordering sandwiches to go and heading back to the office.

That scene had played out in the founders’ favor many times before. Think Food Group (Jaleo and Cafe Atlantico) has signed on, as well as Passion Food (DC Coast, Ceiba, Acadiana) and Clyde’s Restaurant Group (Old Ebbitt Grill, 1789, Clyde’s).

Rob Wilder, the head of Think Food and an old friend of Lord and Stettinius’s, has never worked with LivingSocial and Groupon. He said he thinks they condition patrons to expect discounts.

He agreed to back Venga, he said, because it offers a different marketing tactic that is more in line with his higher-end collection of restaurants.

“We like the idea that it gets people excited about what we do because of what we do,” he said, “not because of some discount or financial offer.”

The details

Stettinius, Lord and von Pollaro gathered around a conference table and sifted through a packet of critiques from family members and friends who piloted an early version of the app for the iPhone and Android.

The feedback ranged from quick-fix typos to freak malfunctions that defied explanation. Quickly ticking through the list, they stopped at a suggestion that merited discussion: Why can’t users send appealing specials or happenings to friends also using Venga?

“It would be great, but I think it’s a Version 1.1 kind of thing,” said von Pollaro, the trio’s go-to techie, as a tinge of regret crossed his face. “I like that idea a lot. I wish we would have thought about it a month ago.”

This was one of many sessions in which the founders worked through the kinks of Venga before its launch. They sometimes quibbled over details as minute as word choice. They know that customers are fickle and will reject a new product for any number of reasons, big or small.

First, of course, they had to get past the gatekeeper: Apple, which reviews each app and turned down Venga on its first pass. “Your heart stops a beat when Apple sends you a rejection,” Lord said.

The one-week review turned up one small hiccup: A map needed the Google logo. A week later, they got the green light. “Luckily, it was a very easy fix,” Lord said.

There’s more at stake than pride and their time; the founders have funneled about $100,000 of their own money into the app and raised $300,000 more from investors.

Tech investor David Steinberg was not sold on the concept when Stettinius, whom he has known for years, first called. He turned the founders down multiple times.

But with each no, he said, “I would give them advice: ‘You ought to look at this.’ And, ‘You ought to look at that.’ And every time they came back, they had done what I suggested.”

At one point, Steinberg suggested to the Venga creators that they obtain written commitments with some big liquor and beer distributors. “I asked them, ‘Did you ever think of going to bigger points of distribution like the wine and beer guys?’ ” he said.

The next time they met, over coffee at Georgetown’s Baked & Wired bakery in January, Stettinius produced a written agreement with Premium Distributors, the giant local beer distributor owned by Reyes Holdings.

“Finally, I said, ‘Yeah, you guys are doing it, and I’m in,’ ” Steinberg said. “By that point, I thought I was missing the boat and thought this was a good business.”

The launch

The crowd around the bar at the Italian bistro Fiola had grown thick with guests at Venga’s April 20 launch party. Lord, Stettinius and von Pollaro moved deftly around the room to ensure no face went ungreeted.

Tonight, entre­pre­neur­ship was glamorous. The trio posed for photos with the likes of “Meet the Press” host David Gregory, a friend of Stettinius’s, and Nationals player Ryan Zimmerman, who is dating Heather Downen, a Venga sales representative.

The fete was Venga’s first effort in a campaign to build buzz about its arrival on the market. The party was deemed a success. “I think we’ve generated enough hype through that party and high-level Washingtonians to get other people interested and move on to the other demographics that I know we’ll be able to engage,” Stettinius said.

Indeed, Venga has only just begun to engage with consumers. The coming weeks will feature additional launch parties, prize giveaways and word-of-mouth marketing. Venga has partnered with the charity D.C. Central Kitchen, the Restaurant Association Metropolitan Washington and food blog Metrocurean to elevate its profile in the city.

Lord knows some people may need to hear about Venga three or four times before they download the app. And then they will have to use it regularly for restaurants and bars to see its value. Still, he said, a one-in-four shot is worth the gamble.

As he put it, “I will take those odds to be the next big thing.”

Steven Overly covers the business of technology, biotechnology and venture capital in the Washington region for The Washington Post and its weekly Capital Business publication. In that capacity, he has written about start-up struggles, investment trends and major drug discoveries.
Thomas Heath is a local business reporter and columnist, writing about entrepreneurs and various companies big and small in the Washington Metropolitan area. Previously, he wrote about the business of sports for The Post’s sports section for most of a decade.
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