Business RX: Advice on improving or starting a business

Oct 23, 2013

Elana Fine, managing director of the Dingman Center for Entrepreneurship at the University of Maryland's Robert H. Smith School of Business, will take your questions. This week, she is joined by special guest Paul Capriolo, chief executive of Social Growth Technologies. SGT is his third entrepreneurial startup. His first startup, Now or Never, also cofounded with Patrick Jenkins, was acquired by Free Cause where he became VP of Development. Following Rakuten's acquisition of Free Cause, Paul returned to Maryland and started SGT with Patrick Jenkins. Paul was named Maryland's 2013 Emerging Entrepreneur of the Year by Ernst & Young.

Paul, how exactly does Social Kredits work, and how would the currency be redeemed on Facebook? Is this like a poor man's bitcoin? Is virtual currency the next bubble?

Social Kredits at its core is very similar to a rewards program that you might have as part of your credit card. As you make purchases through any of our 7,500+ advertising partners, you earn Kredits that can be redeemed for Facebook 'Money' and deposited directly into your Facebook account.

Bitcoin is an interesting comparison to Social Kredits and other more traditional programs. The main difference is that, while Bitcoins are also a form of virtual currency, Bitcoin operates like cash in the sense that it is not platform dependant and is extremely liquid. With Social Kredits and other reward programs you can redeem on things within the specific ecosystem (games, services, gifts, etc...). It's like comparing a dollar bill to a $1 gift card.

For virtual currencies as a whole, they come in so many countless forms (credit card points, airline miles, grocery rewards, etc...) that many have busted and others have stood the tests of time. I will say they are getting more complex everyday and these days it takes a deep understanding of economics and consumer behavior to manage a virtual currency effectively. 

Elana, love the chats and your excellent columns in the Post on Monday's. I always learn so much! With the new crowdfunding rules passed by the SEC, do you think more small startups will be able to receive real dollars? What about the scammers? What's your take?

Thanks -- we enjoy speaking with so many great entrepreneurs. I do think that crowdfunding will result in some real money to startups -- but I think the model will take a few years (or more) to work itself out.  Already there are have been a lot of lawsuits on existing non-equity based crowdfunding like Kickstarter, so imagine that will also increase as the rules shake out for equity platforms.  Like many multisided platforms, the net net should be to create a better marketplace between buyers and sellers.  

Paul - congratulations on your growth. You've come a long way since winning Cupid's Cup.  You recently received press for growing out of your office space and making new hires? What would you say have been the key factors driving growth?

Thank you! Yes, in the last few weeks we graduated from the MCE (Howard County incubator) and moved to our own space - something we can continue to grow into. We're constantly in hiring mode and have been bringing in some extremely talented people lately that are kicking butt.

The major growth drivers for us are bringing in the right people to not just do the job we need them for today but hiring people that can evolve with the business as we start new projects and bring on new partners.  Also, I believe our team excels at identifying industry issues or missed opportunities and carving out a niche by building innovative solutions.

My partner and I started a business (e-Bay reseller of kid stuff, like car seats and toys) but now we are having a dispute. We don't have any formal arrangements. What should we do? She is not doing any work anymore.

Very tricky situation. I'd imagine that regardless of outcome you both will need to be amiable enough to put a legal agreement together that either defines how you both will move forward together or outlines the split-up of assets/value.

In general it is always a MUST to get an agreement in place. It's easy, especially between two people that know each other well, to kick that can down the road, but putting together something simple is quick and cheap and will protect everyone.

I agree with Paul that you need to have agreements in place.  I'd also work to figure out why your partner has stopped doing any work? Is it that they have lost interest or is there something else going on? This might be a good inflection point to step back an assess the assets you bring to the table and your combined commitment to the venture. 

I have been focusing on the farmer's/artisan market network to test out customer interest in my jewelry. I understand that I have steep competition with jewelry since everyone seems to be wanting part of the Pinterest/Etsy craze. When I'm selling at markets, I always get compliments ranging from how interesting my pieces are to how professional and manufactured they look. However, my sales are low. I try to keep my prices reasonable - between $5-$15. What should I be focusing on in order to increase my sales since the customer feedback is all positive?

Are your sales low because the venue's are small or are you expecting more sales based on what you see other vendors at these markets bringing in? If your jewelry is getting good feedback locally I'd definitely consider sharing it with a broader audience online and see if the feedback remains positive on a larger scale? You mentioned Pinterest and Etsy, those are great places to explore growing into. Its so cheap and easy to set up a simple storefront or put your products on various online marketplaces that it might be worth just putting up a couple of your more popular pieces and gauging the response and if your local 'tastes' in jewelry are shared nationally.

Elana, I saw the recent news about the Dingman Center Angels being one of the most active networks in the country. What do you think this means for the DC/MD startup community?

Well, breaking news --- we do have angel investors in Washington.  The most interesting piece of data in those numbers is the level of follow-on activity.  While Washington doesn't have as many angels as other regions, the angels here take their investments seriously and are looking for longer term relationships.  Rather than making a lot of "bets" and writing a limited number of 2nd checks, our angels are taking more informed bets on companies where they think they can make an impact and digging in for the long haul.  

As follow up to the comparison to BitCoin, how has the increased awareness/penetration of virtual currency impacted your business? Has it decreased your sales cycle and/or increased inbound customer interest?

I wouldn't say it's positively or negatively affected our sales cycle, but it has certainly reinvigorated interest in the 'alternate currency' debate. BitCoins are unregulated (for now), so as we saw with the Silk Road busts, they are anonymous and can be used for buying literally anything. The virtual currencies we work with are regulated by the closed system that manages them so it's more controlled and 'real' users are tied to their wallets. If we were giving out BitCoins, I do think it would be a much harder pitch to advertisers because they would absolutely not want their brand associated with a currency that can be used in some of the ways BitCoins can be used. Facebook 'Money' and other closed virtual currencies are much more brand safe.

A lot of our entrepreneurs ask questions about the chicken/egg cycle of making great hires before raising capital and needing great team members befor raising $? Can you provide any tips on how to fund early employees?

I haven't had to deal with this problem but what I have seen with others is to entice early employee's with options or have them agree to join pending raising a round. That way you can tout a great team to potential investors without having to pay for it. Also, sometimes your idea is just good enough that you can find great people to work initially for little/nothing pre-funding if they really believe in the business and agree to make them whole on the backend. 

Not sure if you can help... I used PayPal to buy something from a small business. They had an Etsy store, but I purchased directly from their Web site. They never delivered and have now disappeared. Website, Etsy, and Facebook pages are all gone. It has been more than the 45 days which PayPal offers for disputes. I am not sure how to track down the couple who ran the business or how to request a refund.

Well, depending on how much you spent on this product the amount of time you spend hunting them down and possibly initiating small claims dispute might outweigh what you initially spent.  This is certainly a "buyer's beware" situation.  The web makes it extremely easy for anyone to sell goods & services.  That is why companies like Amazon & eBay provide value by certifying sellers and providing reviews.  

Elana gave some great ideas which I'd definitely pursue. Unfortunately sometimes dealing with small businesses (as we've seen countless times here) you're just out of luck. If they go under/out of business you're going to spend time trying to squeeze water our of a stone and it's often not worth the trouble. 

I'm sure their are many, but what is the number one character trait or action/decision you made to which you attribute your success in starting and growing your business?


I am in the process of developing a piece of technology that will revolutionize the way people workout. I want to start promoting the product and build a buzz before our launch date. What is stopping someone from stealing my idea and launching it first? Is there anything I should look out for?

Congrats on your pending launch. Do you have anything you think id patentable? Initially, I had the same concerns with our business. Over time, I became less and less concerned as I realized that other companies are far too busy dealing with their own products and problems to worry about. It sounds like you'll have a first mover advantage too so as long as you're diligent you can evolve your product while others play catch-up.

In reality there isn't anything stopping them, but that rarely happens.  IP is important, but what you do with that IP will dictate your success.  In talking to potential customers, you can certainly discuss the value you will bring rather than your secret sauce of how you are doing it.  I wouldn't focus so much on building buzz -- but on verifying that you are building something that people want to buy.  Sometimes early buzz hurts you if your product isn't ready for prime tie.  

We just launched a tech startup and my team is wondering if we should stay in the DC area or move to the more active tech hot spots such as San Francisco, New York or Boston. We feel like funding and technical talent is more abundant in those cities. What is your viewpoint?

Although I might be biased that this area is a great place to be starting a company, I do think that any business needs to think about what resources they will need to grow.  Certain areas of the country have skill sets, expertise, investors, labs, etc. for specific sectors.  Consumer Internet is harder in D.C. -- but education, healthcare, cybersecurity, even gaming are no brainers.  Not only do we have the experts in many sectors, we also have one of the largest customers (federal gov't, when open) but one of the most educated populations.  Like anything, assess what you need and the location/resources that will match those needs. 

For us, being in Columbia, we're regionally unique enough business to cut through the clutter in terms of both funding and hiring. In San Francisco, New York, etc., sometimes you're a small fish in a big pond and it can feel like everyone has a startup. Where we are, we can hire from two major cities (Baltimore and D.C.) and there is a ton of technical talent in this area from University of Maryland and other colleges. If you can bring something fresh and new to an area you can be that big fish in a small pond. The Internet works all over the world :).

We ask a lot of our guests to highlight any mistakes they have made --- what do you wish you could get a "do-over" on?

Just a free do-over? I'd say stay more focused and say 'no' to requests/projects that didn't fit our mission. When we were just starting out and we'd speak to bigger companies, we'd hear "we're looking for xyz, can you do that for us?" and our natural inclination is to say 'yes, of course'. We wanted to say yes so badly because it was an opportunity and we were scared to say no because it could damage a relationsihp. But looking back,  if it didn't fit our mission or into our long-term plan, we should have said  'no' and used that time and those resources more effectively.

Paul - thanks for participating in this chat.  Any last words for those listening in?

Thanks for having me, this was a lot of fun. Entrepreneurship is one of the most difficult things an individual can do but the reward of building something for yourself is unparalled. A lot of your current issues may feel like a 'doomsday scenario' but one day you'll look back at these issues as if they were nothing. The hardest parts are always yet to come!

In This Chat
Elana Fine
Elana Fine was appointed Managing Director of the Dingman Center in July 2012, after joining the team in 2010 as Director of Venture Investments. As Managing Director, Elana's primary focus is leading the Dingman Center in support of its mission and strategic plan. Key responsibilities include oversight of our student venture incubator, Dingman Center Angels investor network, business competitions, and technology commercialization efforts. Elana earned an MBA in Finance and Accounting from the University of Chicago's Booth School of Business in 2002, and earned a BS in Finance, from the University of Maryland, College Park, in 1997.
Paul Capriolo
Paul Capriolo, CEO of Social Growth Technologies, Inc. is a native Marylander. He received his BS in Computer Science from University of Maryland and a Masters in Entertainment Technology from Carnegie Mellon University. Social Growth Technologies is his third entrepreneurial startup. His first startup, Now or Never, also cofounded with Patrick Jenkins, was acquired by Free Cause where he became VP of Development. Following Rakuten's acquisition of Free Cause, Paul returned to Maryland and started SGT with Patrick Jenkins. Paul was named Maryland's 2013 Emerging Entrepreneur of the Year by Ernst & Young.
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