By Rob C. Masri, CEO, Cardagin Networks, Inc. 

Deciding Whether or not to Outsource 

One of the most difficult decisions for a technology company to make is whether or not to outsource development. Cardagin Networks is building a mobile loyalty platform that allows businesses to digitize their loyalty card programs, capture customer transaction data to identify who their customers are and ultimately use that transaction data to create, publish and distribute mobile coupons and promotions to such customers. 

Building out the technology is a laborious and time-intensive effort.  It requires technology development, web services, database creation and administration, web design, etc.  Before any sales and marketing initiatives can be engaged, technology needs to do what we have been telling our constituents it can and will do. 

The process of deciding whether or not to build the technology in-house or outsource it can make or break a company.  For us, we knew that building the technology in-house would cost us hundreds of thousands of dollars in salaries and licenses so we decided to issue an RFP to 5 companies that we thought could do the work for us.  We were able to receive a proposal from all 5 and selected the one that we thought we could work with the best. 

There’s no question that we are saving money on cost and perhaps saving time since they are able to staff many more people on the project than we would be able to hire.  However, we are trading what we gain in time and money for what we lose in control.   

Surprisingly there has been no issue with language or communication.  In fact, the most difficult aspect is project management, regular and specific updates or asking for small modifications that may be slightly outside the project plan or a specific work order.  Remember, an offshore development shop doesn’t have the same sort of creativity and intuition that an in-house development team would have.  Moreover, you can’t just ask someone to change a word or a graphic icon and expect it to be done instantaneously.  It has to be communicated to your project contact who has to communicate it to the team contact who has to communicate it to the actual developer in charge of that particular piece of the project.  It often takes at least 24 hours to correct a typo. But, at least there are no employee benefits or office overhead that you have to pay.

By Jason Duff, Founder & CEO, Community Storage & Properties, Ltd. | COMSTOR Outdoor Media

This blog is part of a series featuring the country’s top young entrepreneurs who speak on the Extreme Entrepreneurship Tour (EET). The National Chamber Foundation is proud to be the title sponsor of the tour, which brings these top young entrepreneurs to college campuses to help spread the entrepreneurial mindset among students during half-day conferences. It is the only tour of its kind. To learn more, visit http://www.extremetour.org. 

Growing up in a free market economy, I deeply appreciate the value of free enterprise and the vital role that small businesses play in innovation, job creation, and advancement of quality of life.  It’s easy for me to assume that these values and practices are globally recognized when the truth is – they are not.

In some African countries it can take over 100 separate steps to create a new business.  According to a  report published by CNNMoney, the US Ranked 3^rd easiest places to create a new business among 181 countries reviewed.  Even with the recent of the growing US debt, expansion of government entitlements, and greater burdens to US businesses and communities – we still have one of the most supportive countries for startups and entrepreneurs to be successful.  Some argue that this is changing.

This brings me to ask the question.   Should entrepreneurship be recognized as a fundamental Human Right and if so, what are we doing to protect and advocate for it?

In a time that the world faces some of its greatest challenges, why should we trust and assume that government is the only and best solution.  Shouldn’t we advocate for smart governance instead of “Big Government?”  Haven’t we learned that nothing is “too big to fail” and that bigger government is often the greatest failure in itself?  Instead, it’s those of us who work and own small businesses who know and understand how resources can be used to invest and solve some of the world’s greatest challenges.

Democracy is not just about elections, it is about participation, activism and community involvement.  

Now is our opportunity to lead the World by using the collective minds and brainpower of every Main Street and village to advocate for one of the most basic human rights – Entrepreneurship. The rights to think, create, and work hard for the dignity of having a role and purpose in the world.

By Rob C. Masri, CEO, Cardagin Networks, Inc.

To Raise (money) or Not to Raise (money)

One of the most difficult things to consider when starting a company is financing.

Most companies who are not able to bootstrap their activities typically pursue financing from one of four sources: (1) banks, (2) friends and family, (3) angels and (4) venture capital firms.    All sources are fraught with peril.

Assuming you qualify, taking money from a bank is usually done by applying for a loan.  However, unless your company has operational history and assets with which it can collateralize a loan, banks will almost always require a personal guaranty.  Such a guaranty can put all or many of your personal assets at stake to secure the loan.  In addition, you typically have to pay the bank interest on the loan for the amount of time the money is outstanding.  The positive aspect though is that you typically don’t have to dilute yourself or any of your employees by taking money from a bank.

Taking money from friends and family is often considered the easiest way to raise money. Many of these people simply want to be supportive of your efforts.  They often require little or no due diligence and they won’t argue with valuation.  There are two problems with friends and family money though.  First, that money tends to be extremely passive.  Most of these people know nothing about your business and will offer little strategic advice.  Second, there is the moral dilemma that many entrepreneurs have when taking money from friends and family.  What if things don’t work out?  How do you look people in the face at the next family outing?

When raising a lot of money for a venture, VC firms may be the only option.  Moreover, the prestige associated with raising money from a big name VC firm is validation for you and others in the business community.  Finally, the networks that many VCs have could open doors to customers and strategic partners.  However, VCs need to make a significant return on their investment and money from a VC firm comes with many strings attached.  Expect to debate valuation and control.  The valuation is completely correlated with dilution.  If you value your company at $10 million but a VC fund values it at $5 million, then a $1 million investment represents 10% of the company to you but 20% to them.  That delta could make or break a deal.  In addition, VCs often want a Board seat and will impose covenants in your transaction documents that limit what you can do with their investment.

My company Cardagin Networks, Inc. (www.cardagin.com) opted to raise its first round of capital from a group of angel investors.  Angels are typically seasoned entrepreneurs, retired executives or wealthy individuals who are seeking alternative investments.  They often have networks similar to VCs, but they typically don’t require the same sort of control that VCs do.  Valuation can sometimes be a stumbling block since they want to make money as well, but if you have an exit strategy and can effectively communicate it, you can often strike a deal.  The main problem with many organized angel groups is that they try to act like a VC fund when conducting diligence.  Managing the individual agendas (and schedules) of up to 20 people can be burdensome.  Consequently, organized angel groups tend to be very delayed in deciding whether or not to invest.  It’s often quicker for the entrepreneur to divide and conquer by meeting with select individual angels as opposed to making a formal presentation to an angel group.  The difficult part is getting an audience with such individuals.

By Rob C. Masri, CEO, Cardagin Networks, Inc.

Do Your Homework! 

All too often, people come up with a cool concept or an innovative idea, but fail to identify a business need or market demand.  Even friends and family won’t fund something that can’t be monetized.  For that reason, before raising money for Cardagin or writing the business plan, I needed to prove that there was interest from a two-sided market.  I knew that there was demand from consumers, but what about local merchants?  What were their pressure points? Would we be addressing a market need for them? More importantly, would they be willing to pay for our solution? 

So I went out and interviewed merchants in Charlottesville.  Here’s what I learned:

1. Local merchants also hate paper and plastic loyalty cards.   They complained that the cards cost money to create and aren’t environmentally friendly.  In addition, there is no quality control with the paper and plastic cards guarding against employee fraud or customer fraud.
2. Local merchants want to take advantage of the mobile trends occurring at a macro level in the economy on a micro level.  They read about the growth of mobile usage and see many of their customers with the latest mobile phones.  They understand that mobile is the wave of the future. They hear about the Droid, the iPhone or the Google Nexus. And, they are being told that within two years more people will access the Internet via mobile devices than via PC. 
3. Finally, existing advertising outlets don’t work for local merchants.  A business in Charlottesville (and the same can be applied in virtually any other small city in the US) is limited to ValPak ($750-$1000 per flier per month), local newspapers (up to $250 for ¼ page ad per day), local radio – ($30-$60 for one 30 second spot) and local TV ($60-$90 for one thirty second spot). This doesn’t even include design and production costs.  What’s more is that those costs are blind.  A local business pays and prays, without any sort of tracking or targeting. 

Once I gathered this information, I was able to distill it into one basic theme: local merchants are not simply looking for customer acquisition outlets; they want a customer retention outlet.  They also want the power to create, publish and dispense offers, coupons and promotions at anytime and to a specific customer profile, without relying on the deadlines of a third party advertising outlet. 

Introducing Cardagin Networks.