Startup stories: Good ideas don’t always equal business successes

Startup stories: Good ideas don’t always equal business successes

Nathan Hoover, left, and Andrew Hagenbuch founded Carlisle-based Redbug Technologies Inc. in 2004. They closed the business in July. Photo/Submitted
carlisle-based.jpg


10/29/2007 11:27:31 AM

What doesn’t kill you will make you stronger.

That’s a pivotal life lesson. It’s

also a lesson that many new businesspeople learn the hard way: by starting a venture and then having to close it.

It
doesn’t always happen right away, former entrepreneurs said. You can
build a business for years, only to realize that your calf isn’t
growing into a cash cow.

“I learned about turning an idea into a
business,” said Andrew Hagenbuch, co-founder of Redbug Technologies
Inc. “A good idea doesn’t necessarily translate into a good business.”

Hagenbuch and business partner Nathan Hoover worked to build Carlisle-based Redbug in the course of four years. They launched

Web-based
virtual-tour software called Mapwing in 2006, only to close the
business and move out of the Murata Business Center in July.

Many
people were building free virtual tours using Mapwing.com, Hagenbuch
said, but few people or companies were paying to build more
sophisticated tours. And without more traffic to the site, it was
difficult to make money through online advertisements, he said.

The
Redbug business is on hold for now, Hagenbuch said. He and Hoover have
taken full-time jobs at other companies to refresh their personal
coffers before launching future tech endeavors. Mapwing

.com is still functional. Hagenbuch and Hoover maintain the site in their spare time.

Hagenbuch
said he learned that passion wasn’t enough to sustain his good idea.
And without a steady stream of money, the passion began to fade.

“I just started with an idea four years ago,” he said. “I didn’t know what I was doing.”

Sometimes,
the atmosphere is not right for a new business, said Linda Goldstein,
vice president and chief operating officer of the Capital Region
Economic Development Corp.

“There are a lot of reasons why
entrepreneurial types of businesses don’t make it. Sometimes, the
timing is just wrong. It’s like some of these stocks,” she said.

CREDC
and the Harrisburg Regional Chamber operate Murata Business Center, an
incubator for new companies in fields as diverse as manufacturing,
marketing and technology.

Entrepreneurs need patience, clear
goals and plans, financial moderation and some managerial experience to
make a new business work, Goldstein said. Lacking any combination of
those can kill a startup.

“Don’t let your ego and pride get in
the way of business,” Jennifer Hammaker told an assembly of about 10
entrepreneurs at Murata Sept. 29.

She was the first speaker in a three-part lecture series aimed at
giving valuable advice to entrepreneurs for the sustained operation of
their businesses.

Hammaker was the founder and president of
Yellowcakes Inc., a Cumberland County news organization for
entrepreneurial activities in Central and northern Pennsylvania. She
ran the business for four years before closing it in May. Hammaker said
she quickly found that she was in over her head.

“You have to be careful with time. That’s a hard lesson we learned,” she said.

If
new businesses are to survive past those first years, then
entrepreneurs must define their geographic limits, target a specific
market and avoid over-extending themselves.

Camp Hill-based
Yellowcakes went from a pure online publication about entrepreneurs to
a publishing and events company in four years. By 2007, Yellowcakes
included a Web site, a newsletter to update businesspeople, a magazine
with human-interest stories and networking events for entrepreneurs.

Hammaker
was running much of that from home with a small group of contracted
writers, software engineers and graphic designers. Three days before an
event in the northwestern region of the state, Yellowcakes canceled,
Hammaker said. She was overstretched.

“There were a lot of things I was taking on that I just didn’t have the time, energy or capabilities for,” she said.

Yellowcakes’
problems could have been avoided with the help of a business adviser in
the publishing industry, she said. Every new businessperson should have
a mentor, she said.

That’s a tough thing for many entrepreneurs
to do because of their independence, said Marsha Davis, executive
director of Murata. Partnering with established companies and taking
the advice of other businesspeople can make a big difference, she said.

“Be honest about your strengths and weaknesses,” Davis said.

You
can have a great product and market it well, Hammaker said. But if you
don’t have the business side secure, then it’s going to be an uphill
battle.

However, even when a business doesn’t succeed, it can teach you valuable lessons for next time.

“I got a master’s (degree) when I opened the business,” she said, “and a Ph.D. when I closed it.”

Don’t say the ‘E’ word around investors

There are some words that make all businesspeople cringe.

“Tax increase” is one combo that comes to mind.

But investors get squeamish with the “E” word.

“Entrepreneur is a
scary word for people writing checks,” said Jennifer Hammaker, founder
of Yellowcakes, the Cumberland County news organization with a focus on
statewide entrepreneurial activity.

Hammaker closed the business in May and is now a freelance writer and publisher.

It’s
not so much the word itself, Hammaker said. The problem is the way it
gets thrown around by people who want to start a business without a
plan. Investors are wary of the word for that reason, she said.

That’s
true, said Linda Goldstein, vice president and chief operating officer
of the Capital Region Economic Development Corp. Even the
Harrisburg-based nonprofit needs to see a solid plan before CREDC drops
money into a new company’s pockets.

Investors really see two
things, Goldstein said: rookies and veterans. A new entrepreneur is a
risky loan. A seasoned businessperson with capital, collateral and
experience is more attractive.

“If you go to a lender and say, ‘I’m an entrepreneur,’ there’s definitely a red flag that goes up there,” she said.

If
you have a detailed plan on how you will pay the bills, a good product
or service, then investors won’t be as squeamish, Hammaker said.

But don’t start your pitch with “entrepreneur,” she said — just to be on the safe side.

—Jim T. Ryan

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