Hanging Your Net Shingle, Part 2: Investors
Corporate web sites are communication tools that can influence decisions and encourage positive actions. In this second part of a five part series discussing the content of new venture web sites, we will explore Neogration’s new site, www.neogration.com, with an eye to how it speaks to the investment community.
Even if the new venture is not going to the venture market, seek a bank loan, or conduct an IPO, the outside business community is investing in it when the outside business community chooses to do business with it. Thus, the questions of investors reflect the concerns of the larger business community, including customers, employees, and partners, all of which the new venture will need to foster positive relationships.
Investors can structure their questions in a couple of manners. One structure hits the basics of “Can they make it?”, followed by “If they make it, will someone buy it?” The second structure is more detailed and follows a 4Cs-4Ps orientation: Company, Competitors, Customers, Cooperants, Product, Price, Placement, and Promotion.
So, how do these structures play out through the corporate site of Neogration? Let’s start with the 4Cs-4Ps and then back up to the big-picture investor questions.
Basic company questions include the categorizing factors: Who is this company? When was it founded? What’s the head count? What’s the annual revenue? Although the last two questions are dealt with as corporate secrets with non-public firms, readers can often infer them from the management structure or number of clients respectively. (Furthermore, they may demand answers prior to conducting transactions.) The next level of questions about the company goes to key management and core competencies. Since new ventures are about making and selling, the key leaders are usually those involved in the technology and project management or in marketing, sales, and partnerships. The kiss-of-death for a corporate web site is the publication of the details of only one key leader. In these cases, the site communicates that the firm is as much about the self-aggrandizement of this one person as it is about transacting business. Share the glory is one of the themes championed by Warren Bennis of the University of Southern California. From the Neogration site, we learn that it was spun out of ABN AMRO in February of this year but was founded in December, 2001. As expected, the site gives no clues as to how many people work there, but suspect it is somewhere between 4 and 25. Likewise, revenue is not mentioned and I suspect that either they do not have any yet or that they have some revenue from their continuing relationship with ABN AMRO, but haven’t sold anything outside of their founding firm. Again, they are less than a month old so I can’t knock them for having a short client list at this point. Finally, we get to the management team of Neogration. Neogration conveniently has a Management page that tells us that the President, M.J. Qualley, has a technology and business pedigree that includes XML, financial trading and banking infrastructure; the CTO, M. Autrata, has a long list of techy experiences and a PhD, and finally we get to the Product Manager, J.M.A. Pleyter, who has a sales and market strategy background. Neogration also has capital from BlueStar Ventures and a 5 member board of directors.
Who are the customers the company trying to attract? Does the company already have customers? These are categorization types of questions, but they also raises questions of number of potential unit sold, buying cycles, sales channels, and price tags. For Neogration, we learn that they are attempting to sell to global enterprises with significant infrastructure IT investments – sounds like the Global 500 is their prospect list, followed by the Wilshire 5000. Again, Neogration has ABN AMRO on their client list–not a bad start, but insufficient if Neogration was 2 years old.
I see little reason that any corporate web site should list its competitors. Why feed customers to competition? If the competition doesn’t find them, that is the firm’s gain and the competition’s loss usually. An exception to this rule is when a new technology is appealing to a standard that was championed by a competitor and the firm is appealing using it as a point-of-parity in selling its products. As expected, Neogration does not list their competition.
Who works with the company? Who supplies it with technology? Who acts as value added resellers? Are there any strategic integration partners? When building business applications, it might be important to state that the software works on the Sun versus HP platform, uses Oracle versus SQL or Informix as a database, and will work with a MS browser versus Netscape. If it works on any platform, list them to clarify the question. New technology does get sold into a vacuum. If the company has a distribution channel of VARs, these should be listed. If the company has a strategic interface to a CRM, ERP, SCM or some other widely accepted enterprise application, this should be listed as well. As to Neogration, I am unable to tell if they have any strategic partnerships yet, but I can tell that they appeal to the XML, UML, JAVA, and SOAP standards and that they intend to set up a VAR channel.
Rajan Kaul of LineSoft asks, “What’s on the shelf? What can I sell?” Simple enough questions but these often get confused in trying to communicate complex technologies to bureaucratic purchasing agents and C-level people. Likewise, investors will want to know if there is a proprietary or patented technology in the product that protects the firm from future competition. Neogration has labeled their product WOLF and stated that it is an Enterprise Application Integration (EAI) tool. Neogration goes further to list some other aspects of its products and services, but detailed product questions will be deferred to my upcoming Part 3 – Customers article.
Price is an important product characteristic but should a company list its prices? Price is important to list when selling commodities, but new technology is rarely a commodity. When the price is not stated, what should a reader infer about its pricing? Is it a $20 solution or part of a $10 million product and services proposal? In selling a high-volume, low-priced goods, it might be more efficient and effective to list the prices on the web site than wait for customers to call. However, for complex, high-value, thinly-traded goods, pricing can vary in a band that reaches above and below the expected average price by a 15% band. While price is a typical question, perhaps the best way to handle this for complex goods is off-line. (It would be nice if we could find a way to communicate the price range on the web site without firmly fixing a price expectation in the customer’s mind yet this violates a basic rule of negotiation and the concept of pricing to capture perceived value-add.) For investors, the price expectation and client list can be used to infer annual revenues. As expected, Neogration does not list its price. Their product is complex and would likely be embedded in a solution proposal or made available to serious investors. So, the price question is going unanswered, and I will not venture a guess.
How does the product get to market? What is the sales channel? Does the firm service its own products or does it use a VAR channel? For most start-ups, Geoffrey Moore of The Chasm Group suggest that much of the sales channel activities will have to be performed by the firm itself. Once the firm gets going though, VAR channels may be a more efficient use of resources. Neogration does not have a published VAR channel yet, but clearly states that they intend to form one.
Are there white papers? News releases? Downloadable presentations? Will the company be represented at a trade show near me? Is there an advertisement or direct mail tie-in? Is there an upcoming event where I can learn more? Maybe a web seminar? These are some of the basic promotional tools available to a firm and the corporate web site is a great means to integrate the various communication tools utilized by the new venture. Looking at Neogration, we find that they are mentioned in a number of press articles and hope to soon have white papers and other material downloadable in the near future.
From this in-depth analysis of the 4Cs-4Ps, an investor can easily address the fundamental questions of “Can they make it?”, followed by “If they make it, will someone buy it?” Investors know the team, what the product is supposed to accomplish, how complicated the product might be, who are the prospects to call on, and how they will call on the prospective clients. A major purpose of the corporate web publication is to entice people to gather the basics then contact the firm for off-line discussions at the discretion of the firm for further details. Neogration didn’t do too badly with their site in regards to giving the basics and directing people to contact them for further information especially considering that they are less than a month old. Having the benefit of being a spin-out of ABN AMRO surely helped Neogration. The rest of us will have to put it together on our own.
The May Report, TECH BUSINESS BRIEFS, March 7, 2002