Jim interviews Jeremy Mims, co-founder of OwnLocal.
There are a few big trends in the ever-evolving tech world right now:
1) The first is that the market for local business – combined with online – is exploding. A recent study showed that Nearly All Consumers (97%) Now Use Online Media to Shop Locally.
2) The second is the continuation of “old school” media such as newspapers and publishers trying to monetize their products as web and digital tablets evolve. Check out this interesting article, which shows that magazines like the Atlantic are already moving beyond phase one of the tablet era (replicate your publication for the iPad) and into phase two, which could be an HTML5-based freemium model with upsells:
3) The third is that Y Combinator keeps cranking out cool startups that are taking advantage of emerging trends, and I’ve been fortunate enough to be able to sit down with several of them to discuss their vision. Today is no different.
I sat down with Jeremy Mims, co-founder of Ownlocal, who is actually on his second venture-backed startup. OwnLocal makes a suite of products for local businesses to succeed online, a byproduct of which is making newspapers and other publications considerably more money.
– Jeremy’s background and how he got to his point
– How he got connected with Y Combinator
– The challenges of reaching local small businesses
– How he structures partnerships
– What kind of investors he’s had
– How a local hardware store could sell more hammers
– And finally, time travel
So go ahead and listen to the podcast on this page or from iTunes, or read the full transcript below:
Jim Hopkinson: Hey everybody, this is Jim; welcome to the podcast. Today I have a special guest, Jeremy Mims, who is cofounder of OwnLocal, which is a Y Combinator company; it’s actually his second ventured-backed startup. And, what OwnLocal does is make a suite of products for local businesses to succeed online. So, thank you, Jeremy.
Jeremy Mims: Hi, thanks so much for having me, Jim. I really appreciate it.
JH: So, first, give us a brief overview of what OwnLocal does, andâ€¦
JM: Sure. So, OwnLocal is an app store, if you will, for small businesses; and our entire purpose for being is to make sure that small businesses have the best tools, and the resources to succeed online.
JH: Very cool. So, we’ll get deeply into that, but, I always like to get in the back-story. So, tell me, where did you grow up, how did you get involved, how did you end up as a Y Combinator of a company, and go from there?
JM: Sure. So, I grew up in a small town in Connecticut, I went to a college in a small town in Virginia. And then the first thing I ever did when I left college was to build up a local market place for restaurants when I was living in Boston; and, I really got the bug. I went to a conference put on by Y Combinator in 2005, when nobody knew who they were even. And, it was very exciting to see other technology founders; and a few years later I applied, and did my first company through there. And then met up with the founders of OwnLocal and joined up with them.
JH: Cool. I mean it is such a great thing to be around other entrepreneurs, and when you have that happen for the first time you realize, like, ‘Oh, there’s people like me out there.’ So, you got hooked up with Alexis Ohanian. And for people that don’t know what Y Combinator is, I’ve talked about it a few times, but, it’s kind of an incubator for small companies, for startups. And, one of the resulting ones was Reddit.com, which is owned by Conde Nast; and, Alexis has been great of bringing me all these cool new companies that are making their way in the digital world. So, you met up with them, and then how did the company start to evolve from there?
JM: So, when we started, our goal was to help find a way to fund journalism in the 21st century. And, while that’s a complex problem to solve, we saw that most people were kind of avoiding the hard problem which is – they need to make more money. So, when we started approaching newspapers, we figured out that what they really needed to be successful was something that approximated a digital ad agency: a set of services that they could sell to their small business customers, so that those customers could be successful online. And, this is something that they’ve never offered to those customers before.
What we soon figured out was that by offering these services to the small businesses, we were really serving those small businesses, and, as a by-product, we were helping make newspapers a whole lot more money than even we thought possible. For example, one small newspaper that we’re working with in a rural town in Nebraska, about 8,000 people live there – a small daily newspaper, and they made $150,000 in new revenue last year, which was probably about 25 per cent of their profit.
JH: It’s such an interesting approach, because everyone, the whole argument all the time is, ‘How about a pay wall, people pay for content, what about this, should we go digital, should we go online, what about newspapers?’ And, no one was really thinking of what they have. Like in a community is they have that level of trust, and a relationship with customers; and, it sounds like you did a good job of saying, ‘Well, let’s not focus on, kind of getting more readers or a different digital ad model.’ It’s giving them something else to sell, so to speak.
JM: It’s almost going back to square one. It’s like saying, ‘What do our customers need, and how do we make something that they want?’ It’s actually very similar to Y Combinator’s entire reason for being. Everybody who goes through it, they get a T-shirt that says, ‘Make Something People Want.’ And, that’s what we do. From the very ground floor, we’re not really into being gimmicky. And, I think that a lot of the things that newspapers are doing these days, they’re â€˜Hail Mary’ passes. They’re saying, ‘Well, let’s cut off our readership; let’s charge for our content right now.’ And, it sort of breaks the way the internet really works.
And coming back to square one and saying, ‘OK, well what are your customers going to be buying; what are they going to be paying for?’ You know, advertising worked for over 300 years, well, almost 300 years now in the United States for newspapers, ever since Ben Franklin’s brother in Boston, Massachusetts. And, here we have a situation where our distribution costs have been lowered almost to nothing to put something out there. And, almost anybody can access your product. And, it’s sort of a miracle that you can’t figure out a way to make money on that. If somebody walked into my office tomorrow and said, ‘I’m going to take away your major cost centers,’ – I’d be thrilled. And that’s the situation that they’re in. So, what we’re helping them do is realize it and figure it out.
JH: So, take us through the products that you offer. So, you’re kind of going; at first you do work directly with local businesses, but you’re also kind of going to newspapers and chambers of commerce, so almost like the middleman in giving them tools to let local businesses succeed. So, what tools are those?
JM: So, we start off with a white label directory. Think of it as a Yelp for non-urban markets, most of the time. And, that’s really the center for our products. Beyond that, what we offer is websites for small businesses, search engines optimization, social media, and other services that they need – anything from Wii generation to search engine marketing. So, really what we focus on offering those businesses is sort of a comprehensive package of exactly what they need to get going and to really be successful. We follow that up with things like daily deals; although, our daily deals function a little bit more like Woot.
JM: So, the simplicity without the tipping mechanisms and things like that.
JH: So, it’s difficult because we sometimes forget, we live in New York City where you have 8 million people, and it’s the media capitol of the world, so you know about this stuff – about the Yelps, and Groupons, and Living Social, and so many stores.Â But, so, you forget that like if you’re in Nebraska and you have a small town of 10,000 or so, you’ve got your newspaper and if you’re a hardware store or something, maybe there isn’t a Yelp directory, there isn’t a Groupon, and so you’re giving them, they might have heard about it, but you’re giving them the tools to have that.
JM: That’s right.
JH: So, take us through. So, say, you are the local hardware store, and you’re probably getting sold to, from getting calls from Yelp, and if you started something 10 years ago, you’re telling me if you started the business in 2000, you didn’t have to think about this stuff. So, all of a sudden, they’re being told, ‘They have to be on Facebook, they have to be in social media, you have to search engine optimized, and they’re getting these calls from Groupon,’ and it’s probably pretty scary for them.
JM: Yeah, you have to put yourself in the shoes of somebody who takes their life savings and they invest in this business, and it’s usually a physical retail business; whether that’s a restaurant or a hardware store like you said, or a dance studio, whatever it is, they’re putting this business together because they have a real passion for what they’re doing. You know, if you’re making a pizza parlor, you’re going to make the best pizza you know how. And then somebody comes along with all these new things and they keep throwing more and more at you, it doesn’t get less complex.
JM: It only gets more complex to them. So, if you weren’t on Facebook in 2006, and someone told you need to get on Facebook today, well, what about Foursquare; what about Groupon? What about all of these other products and services that exist in the market? And, how do you control your business presence on there?
We have many businesses that we work with; and, I’ll never forget this couple of women who came in, they’d been running a deli for about 30 years. And, recently, somebody had put some negative reviews about them online. And they were furious, and they didn’t know what to do. It’s such a difficult thing to read about you, and not really have anyway to counter that. So, they felt like that it was happening to them. And, what we able to do is give them a way to take control over what people were reading, what people were seeing – at least in some part. It’s one thing if your deli has eight reviews on Yelp and one of them is negative, or two of them are negative, and you can feel hopeless about it. So, we actually give them these tools, we turn it around for them and then the results are fantastic. If they start showing up at the top of a Google search or near the top of a Google search they start posting blogposts and tweets, and all that, and actually this is stuff we do for them. What they end up with is this feeling that they’re in control of their business again.
JM: And, that’s really what we offer them.
JH: And so, what are some of the challenges that face a local business? We just talked about a couple, and I would think there must be challenges on the newspaper side trying to sell technology. They probably have a lot of old school people that don’t get this either, how do you train them to train the local businesses?
JM: So, actually what’s really interesting is the biggest problem facing most small, local businesses doesn’t come from online right now. Even somebody like Amazon isn’t the driving force that kills a small business. It’s somebody more like Walmart who comes into the town, and Walmart, obviously, has a wonderful page rank because they’re huge, and they’re everywhere. So, people who are small business owners don’t really know how to compete with that. So, we can help them do that. If you’ve ever been to a small town, you’ll see decimated downtowns and these clusters of businesses near on-ramps and exits on the highway. And what we help do is really help them build that downtown back up, if only online. And, small businesses have this harder way – it’s harder for them to be discovered just by virtue of them being small. Walmart has big signs, big billboards, all of this, and small business doesn’t really have very much unless they are on a main road or something.
So, that’s one area. And then on the other side, newspapers, historically, have been terrible at offering their customers these kinds of services. They’ve always treated things that were online to be competition for the paper. It’s been a fascinating process to see. Some newspapers come around and realize that they’re not the paper they’re printed on; to realize that they’re the news, that they’re providing these services. And, their ultimate goal, and their goal all along, wasn’t to sell ads in the newspaper, it was to help the small businesses that they serve in their community succeed.
JH: Right, because they’re doing like profiles on the business, and here’s Susie who owns a local flower shop, and then offering her an ad, and classified ads, people want to sell stuff or buy stuff, so, it’s interesting. In some of the rural towns, you’re saying like it might even not have internet access, soâ€¦
JM: Actually, we do have customers that have no internet available to them, or theyâ€¦
JH: You’re talking like in the shop, right?
JM: In the shop, or they don’t have, even at home, that can happen. One of the closest analogies I can think of is this is a little bit like rural electrification for small businesses. It’s at an accelerated pace, but when that program started in the 1930s under the New Deal, the idea was that rural areas would be electrified and it would happen fairly quickly. It turns out that the Rural Electrification Administration only shut down in 1994.
JM: It took that long. Even in the late 1970s, two per cent of the United States didn’t have electricity; and it impacted, predominately, rural areas. What’s happened now is that the technology has actually clustered in urban areas – places like San Francisco, New York, Los Angeles, Chicago, etc., and these guys are getting left behind. What we’ve built is a bit like a time machine. It’s time travel, and when we go into these markets we’re actually able to help these businesses catch up; and, it’s a wonderful feeling.
JH: Yeah, so you’re a little hardware store, you can catch up and all of a sudden, you can go to a trusted source like the newspapers, so it’s not an agency coming in, they might not even be agencies in a rural area, but, they’ve trusted these newspapers in the past; and, if they do it right, then all of a sudden they’ve got a blog page. They can have a Facebook presence, they can do a, ‘Hey, come in and buy a hammer and get a free nail,’ [Laughter] or something like that.
JM: Yeah, that’s right. One of the interesting things is social media, especially Facebook, has had a bigger uptake in rural markets than pretty much any other technology has had. So, that social media is an acceleration; but, they don’t have any of the tools to really maximize it right now. So, if you don’t have a website, but you’ve got a Facebook page, you’re missing out on Google searches, you’re missing out on all these things that you could be driving more customers to your business with.
JH: So, you’re working with a couple, you sometimes work with small businesses, sometimes with larger entities, how do you structure, how does this work, how do you structure these partnerships?
JM: So, our partnerships are set up, primarily, to leverage certain assets that a newspaper or a radio station or a chamber of commerce, or whoever we work with in a community, already have. And we bring to the table what we do really well, which is our software products and our customer service. So, for a newspaper, they’ve got these great long-term relationships with these small businesses. Usually what we do is we actually go into the market. It’s something we’ve been accused of being a little too light about it, because most people are really afraid of doing something like that. Most technology companies, most digital companies, don’t go into a market, they don’t send somebody who’s going to actually talk with these businesses.
They say that it takes about 10,000 hours of time to be an expert, and we’ve really, in the past year, done at least 5 or 6 thousand hours of talking to small businesses to really understand what their needs are. So, one of the things that really matters to a small business is trust. They need to know that the person or group that they’re buying this from isn’t just going to leave. And, we make sure that we work with the most established partner we can in the market, and then we use that partner to help drive leads. And, we guarantee a certain amount of revenue; and then we do a rev share on our end, so, usually, what’s happening with that business is if we’re successful and they’re successful, we make money. We’ve never had a situation where somebody hasn’t hit their targeted goal because we really take it quite seriously; and when we go into a market, we’re really there.
JH: Yeah. So, give us an example, like kind of start to finish, of something, a company that wanted this service, you went into this town, and kind of the success that came out of it.
JM: Sure. So, right now we’re actually running the largest newspaper directory in the country with the Press Enterprise, which is a fairly large newspaper in California. They’ve got a circulation of over 100,000 and they’re, actually, in the 13th largest demographic area. But, when we went into that market about seven months ago now, they were making, I can’t tell you exactly how much, but they were making some amount of money; basically, I think they’re going to make about five times that this year from what we’ve done.
And, that’s really powerful. That’s game changing, as it means that they can focus more on producing journals and they canâ€¦
JH: And, how did you do that exactly? What was their need and what did you bring to them?
JM: So, really, really serving small businesses; and, it’s not a magical thing – it’s sort of unsexy!
JM: To be honest, it’s talking to the small businesses on an average for about 45 minutes, figuring what their real needs are, and then giving them things like directory listing, search engine optimization, a website, and helping them manage their social media; as well as figuring out how we can help them drive leads. It’s an education problem in many ways.
JH: Yeah. So, how would they do like a social media? So, say the hardware store, and I sign up through the newspaper, what tools do I get to kind of work with social media?
JM: So, one of the tools that you get, this is a big difference, is a phone number. You get a phone number that you can call and say, ‘Actually, we’ve got a special on hammers this week, what do I do; what should I do?’
JM: So, we come back and we say, ‘Well, let’s write a blogpost about this, and let’s make sure this ends up on your Facebook page, and let’s send out a tweet here, and let’s do some email marketing for you, too.’ And, they say, ‘Oh, thank you!’ And, we say, ‘We get the information, and then we handle for them.’ And, that handling it for them is the piece of the puzzle that they’re missing, is they can’t afford to hire somebody fulltime who’s going to sit there and do this. They don’t necessarily even know the questions to ask to have somebody do this; but, to have it done for them is a very powerful thing.
JH: And then how does that scale for you guys?
JM: So, that scales really well for us, actually, because we take, if I were just to work this backwards, the newspaper gets a revenue share, we get a revenue share; we have fixed costs for every last little piece if what we do. At the end of a month, it’s incredibly profitable for us.
JH: But do you outsource, like who writes the blogpost on the hammer?
JM: So actually, we have writers from around New York City and in other areas; even in some cases, newspaper writers or ex-newspaper writers are helping to do these things. And, it’s been a fortunate situation for us because there’s been a lot of available writers; but, at the same time we’re able to provide good, easy paying work for them.
JH: ‘Extra, extra, ball peen hammer on sale, $4.99!’ [Laughter]
JH: All right. So, we’ve talked about most of the products you have, so creating a directory, daily deals, building a website, what’s AdForge, tell us about that one?
JM: So, AdForge is actually something we built for the newspaper, specifically. And, AdForge is an old concept done right. And, that’s to take print ads, put them online, make them searchable by consumers in Google, and all of that, and then to give the newspapers a really solid and easy way to upsell their customers into things like coupons, directory listings, maps; we make everything sharable, they can actually have something sent to their mobile phone if they want. And, AdForge is really powerful for the newspapers because it’s an â€˜instant on’ revenue generator for them. The average newspaper that we work with will make anywhere from three to $20,000 a month from AdForge alone.
JH: And, those ads run on the newspaper website?
JM: And, it runs on the newspaper website. There’s widgets, people can use it in all the social ways you expect.
JH: So, for dozens of years, it was just like, ‘Come to John’s Used Car Sale,’ and he’d have a picture of him with a Buick on the front; and now it sounds like, through almost like a wizard, like step-by-step, it’ll take, ‘Do you want to upsell them to an online ad, and do you want to put a map on it to show where you can find them, and do you want to make it clickable, and offer a discount for the first 10 people that come,’ and stuff like that?
JM: Right, so it’s a way to help businesses that are wary of doing anything online – take a baby step towards where they actually need to be. And, it’s a relatively easy sale, it’s really simple for the newspaper, and it solves one of our goals, which was to make newspapers more money.
JH: Right. And, who are some of the investors that you guys are working with?
JM: So, we’re really proud to have, of course, Y Combinator, but, also Baseline Ventures, Paul Buckheit, Leher Ventures here in New York City, backed by Ken and Ben Leher, 500 Startups, the Knight Foundation, and many, many other guys; Josh Schachter who started Delicious, and we really have this wonderful team is helping us.
JH: So, having gone through this before, when did you start and finish at your last startup?
JM: So, I finished my last startup around the end of 2009, and this one went through Y Combinator in early 2010.
JH: Â So, a lot of people are saying that things have kind of changed, and there’s all these new angel investors, have you seen a shift like that?
JM: It’s really funny. When I started my last company, what we found was that you either did angel investment or you did venture capital. And, with services like Angel List around today, you have this really exciting early stage investor culture happening; which is anybody who’s an accredited investor can have access to these startups, and put their money where they believe the future of technology will go. And, I feel like it’s become a little less formal, a little less insidery, and I think, ultimately, that’s a good thing forâ€¦
JH: Is there any requirement, I mean, I’m sure people would love to just take your money, right, but, let’s say, so, ‘I’ve interviewed you, I’ve interviewed Grub with Us, I’ve interviewed Whitey Board, I interviewed,’ I’m trying to think of the other ones he sent me. So, lets say I just wanted to give 500 bucks to each of you and hope that it hits and get back ($)510; is that something I could do, or do you have to be kind of in that network?
JM: So, you have to be in the network in the sense that you have to an accredited investor.
JH: OK. So, you have to take a test? [Laughter]
JM: Well, you have to have a certain net worth or have hit certain amounts of income over the past year, which is, or may be over the past several years. And, there are new restrictions actually coming out that you can’t count your home as part of that net worth, and all of that. And, part of that is to protect ambitious investors from giving their money to people who really can’t afford to lose it.
JM: But, on the other side, you’ve got something like Kick Starter, and Kick Starter fund projects, not necessarily companies so much. And, like the last Kick Starter project that I just invested in was something called, ‘Table for One,’ and it’s a film that’s getting made, and they needed $10,000. So, giving a couple of hundred bucks is not that hard, and it’s not a whole corporate thing, I’m not getting shares in the company or anything; and, that really just changes the dynamic for getting these smaller projects funded.
JH: Yeah. Very interesting, and so, getting accredited as an investor, is that a government thing?
JM: Yeah, it’s a government thing; basically, you just need to specify that you have a certain amount of income; that yes, you can cover this, and [then you can participate.]
JH: And do they give you a certificate, and then like a card you can carry around? [Laughter]
JM: No, I don’t think so, but, the interesting part of this is companies don’t want to take money from people that aren’t accredited investors.
JM: In all startups for probably forever, the friends and family funding has sort of been a right of passage where you say, ‘Look, I got to quit my job, I’ve got $25,000 saved up, that’s going to last me five months,’ and, you go to your aunt and uncle, you go to your guy who works in finance, and you say, ‘You know what, I need $100,000.’
JM: ‘Let’s build this prototype, let’s get this done.’ And the system allows for that, but, usually, once somebody gets a little more established, or they’ve figured out what they’re doing, then it goes to the accredited angel investors, and then, venture capitalists.
JH: I like the analogy, I think it was a Y Combinator guy that said; there was someone in the Wired Business Conference that said, ‘There are three stages of money for an entrepreneur, was it negative to zero.’ [Laughter] So, you’ve got student loans, and you’ve got allÂ [â€¦], and your credit card, and then like zero to $25K where you’re at least positive, and then above, you know, $100K or something when you’re at least making some money; and, if it fails, you know you can do something different.
JM: Right. And there’s different stages of profitability, too. Paul Graham is quite famous for coining the term, â€˜Ramen Profitable.’ [Laughter] So, at the point where you can afford ramen noodles; and you’re not spending more money that you have coming in to make that happen, that’s a really big stage for a lot of companies. You know when the AirBnb guys who just raised quite a bit of money this past couple of weeks, when they first got ramen profitable, we asked them how they were doing, and they said, ‘Well, we got ramen profitable.’ And then we talked to them a month or two later, they said, ‘Well, we’re steak profitable.’ And then a few months after that it was, or really probably a couple of weeks after that, it was, ‘We’re filet mignon profitable!’
JH: Exactly. I love the food analogies. The other one is, ‘We like to break people up into two pizza teams’ – any group of teams working on a project that could be fed just on two pizzas.
JH: Well, this is great stuff. As always, I’m always impressed by the companies coming out of Y Combinator, and where can people find out more about OwnLocal?
JM: So, if you go to â€˜ownlocal.com,’ that is the only way to get in touch with us, really. You know, send us an email, you can call us, we’ll respond to you pretty quickly. And, right now we’re only working with publishers, so if you have a newspaper in your market that you know has been struggling; we can help them, too.
JH: Maybe I can go check with the Weymouth News, my old hometown newspaper, and see how they are doing.
JH: [Laughter] All right, thanks for coming in, Jeremy.
JM: All right, thanks so much, Jim.
This has been the Hopkinson Report podcast. I’d like to thank my special guest, Jeremy Mims. Remember, you can check them out at â€˜ownlocal.com.’
I’d like to thank my good friend, Alexis Ohanian, who’s a Y Combinator advisor for sending me along these great startups. And, if you’re in a startup and aren’t quite ramen profitable, and want to learn negotiation skills or have a fulltime gig and want to be paid what you’re worth, check out my book at ‘salarytutor.com.’
And, as always, thanks for listening.