There are two ways to screw up a startup or small business. Start with a really bad idea and run it into the ground or start with a great idea and try to grow it too fast. Either way, the results are always the same—you’re going to crash and burn. Quickly.
ecoATM started with a great idea--create a network of automated eCycling stations that use artificial intelligence to buy-back used mobile devices directly from consumers for cash or store credit. Then sell those devices to buyers in the secondary electronics market. For a quick peek at just how their idea works, check out this clip…
So how did the team at ecoATM turn that great idea into $17 million in funding during its Series B investment round and being chosen for a Phase II grant for up to $1 million from the US National Science Foundation (NSF)? I recently had a chance to speak with Mark Bowles, ecoATM’s CMO and founder, about their launch. Here are the takeaways:
1. Be patient
It’s easy to want to go to market when your product is 90% ready but that remaining 10% can still cause you some serious problems. If you don’t get your hardware, software, or product right, your competitors probably will. And they’ll slingshot around you in a hurry. To keep that from happening, ecoATM spent the better part of two and a half years testing their kiosks in the field, gathering critical customer feedback and making tweaks as needed.
Because kiosks are incredibly capital intensive, there’s also not a lot of room for error. If they were going to scale and grow their network, they were going to need a Golden Goose. And that meant the ecoATM team also had to spend just as much time trying to figure out how to payback their capital expenditures as quickly as possible.
2. Market research is great, but it’s also unpredictable
Prior to launch, ecoATM sent out more than 7,000 surveys to get a better sense of which green would motivate prospective customers—the “environment” or the “cold, hard cash.” Of the approximately 4,000 respondents, only 30-40% initially indicated money would be the primary driver. However, since the kiosks went live, the bulk of users seem to be more interested in the mullah.
Sample size and survey design are critically important when you’re trying to gather and analyze meaningful data but, as the ecoATM team found out, sometimes that’s still not enough to give you an entirely accurate picture.
3. Look for opportunities to outsource logistics
Initially, ecoATM was planning on contracting with armored car companies to handle the cash service at each of their ATMs. Then a light bulb went on—what if the armored car companies would also be willing to pick up mobile devices that had been collected as well as perform light maintenance on the machines?
By looking at how to better leverage existing relationships, ecoATM was able to outsource all of their maintenance—relieving what could have been a massive logistical headache all for an additional nominal fee.
4. Don’t price yourself out of the market
Creating a pricing strategy can be tough for any business—especially a startup. With more than 2,500 different active phone models and 8 different conditions, determining the right value for each mobile device could have been incredibly difficult.
Instead, ecoATM decided to leave pricing up to their buyers from the secondary electronics market. They would place bids and, once they won, they would be locked in at that price. Using this model, they were able to avoid inventory and pricing risk.
What are the most important lessons to keep in mind when launching a startup?
Share your comments below.
By: Shawn Graham
[Image: Flickr user Adrian Clark]