Fireside Chats with Fiery Entrepreneurs – Part Two, with Rahim Fazal, CEO, Involver

It’s time for Part Two of Fireside Chats with Fiery Entrepreneurs™, an exclusive, six-part series of candid, one-on-one conversations with some tremendously talented and successful entrepreneurs from a variety of different industries. The objective of this series of chats is to allow you to get a glimpse into how these entrepreneurs approach business planning. If you missed Part One of this series with Michael McDerment, CEO of FreshBooks, you can check it out here.

This week, it is my pleasure to welcome Rahim Fazal, Co-founder & CEO of the San Francisco-based Involver, a company that develops a suite of web applications that help brands market on Facebook. Don’t let the length of this interview put you off. Rahim offers several terrific insights that I assure you will help you in your own business planning efforts. Here’s Rahim’ bio from Involver’s website:

Rahim Fazal is a three-time entrepreneur. While still in high school, Rahim co-founded a web-hosting company and negotiated its sale for $1.5 million while taking his Senior Year final exams. He then started a web services platform business and eventually took it public, becoming one of the youngest directors ever of a publicly traded company in the United States.

Rahim completed his MBA at the Richard Ivey School of Business, the top ranked business school in Canada. In recognition of his prior achievements, he was the youngest student in the school’s 80-year history to be accepted without a prerequisite undergraduate degree.

In September 2008, Rahim was named one of America’s “Top 30 Entrepreneurs Under 30″ by Inc. Magazine.

Faheem Moosa: Rahim, thanks for taking the time to join me for the ‘Fireside Chats…’ series. In your opinion, what’s the best way an entrepreneur can research and understand his or her market?

Rahim Fazal: There are a number of different things you can do, but I’ll focus on a couple of them. I think it’s important, before you do anything, to really try and understand what the existing conversation is like in the particular market you’re looking at. So, for example, if I take something like advertising in video games, before I do anything, I would try to understand what people are talking about. What are the problems in that market? What are some of the proposed solutions? Which companies are trying to solve those problems? What types of customers are buying? I think that what we’re finding now is that in each industry there are at least a couple of thought leaders. Thinking about this tactically, identifying who those people are is as simple as going on Google or a blog search engine like Technorati and looking for certain specific keywords to see who is actively leading and participating in the conversation.

The other thing that’s really become obviously more and more popular is Twitter, where you can search for specific keywords and see which people have the most followers. That’s a good measure of popularity and influence. Oftentimes you may see that there’s an overlap between the influential bloggers and the influential people on Twitter.

Using those channels you should be able to put together a list of who the top 3 or 5 thought leaders are in this space – start there and try to read as much as you possibly can and try to tease out what the major themes or pieces of conversation are.

Once you accomplish all of this, at least you will be conversational about the market you’re interested in. You can then reach out to those 3-5 people you’ve identified and really try to dig a little deeper by meeting with these folks or interviewing them. Now you’re really getting into a conversation yourself, and I think the best way of doing that is by meeting people one-on-one and really trying to dig into some of the things you were able to pull out during your research phase. At least then you’ll be intelligent enough (after you’ve done research) to engage in a conversation.

The third one involves identifying the companies that are already in this space – which you would have done through your research and conversations with the thought leaders – and going to their websites, looking at the media they are publishing, videos on YouTube, interviews on blogs or podcasts, etc. Now you’re getting a bit deeper not only into the specific problems, but also into what companies are doing to respond specifically to those problems.

FM: When there are several growth opportunities ahead of you, what criteria do you use to analyze those opportunities and place your bets?

RF: The first way of looking at it is looking internally – what resources, interest and skill-sets do you bring to the table? And among some of these problems or opportunities that you’ve uncovered, do you think that what you bring to the table and your level of interest matches up with any of those opportunities? So, for example, looking broadly at the in-game advertising opportunity – if that’s the problem you’re looking at – there might be a number of solutions. But maybe one particular solution is too technical. Let’s say it’s hardware related. The Xbox is a good example. Xbox is now inserting ads directly into console games, but there’s a pretty sophisticated hardware component to that and developing for the Xbox platform. And that’s probably a little too specific for me personally – I don’t have the skill-set to develop a solution to that problem. If I try to develop the skill-set, it’s a 3-5 year commitment and I just don’t have that level of interest or enthusiasm for trying to solve that problem.

The second criteria would be looking at the opportunity outwardly and answering questions such as, what’s the state of the market, how early is it, how many players are there in the marketplace, how many dollars (are being spent in the market)? And then you try and put the problem and the solution together by saying, “is the problem large enough, or is there a large enough opportunity for some of the solutions I’m thinking of?” So you might be interested in some very specific solutions to an in-game advertising problem, like for example, delivering ads on games on mobile phones. When you then look outwardly at the market, you may find that that market is very early-stage, or you might find that there are three incumbent players there, or you might find that in order to get on to a mobile phone you may need to work with a carrier. And for all those reasons, the opportunity is just not large enough to be interesting to you.

I think once you go through that assessment, you’ll be able to prioritize your opportunities based on these two variables. First, on what you bring to the table and your ability to capture that problem and opportunity. And second, looking outwardly at the external conditions – whether it is a growing, viable and interesting marketplace to be in. I think you could rate across both those dimensions every broad opportunity that you’ve uncovered during your research phase. You’ll then be able to come up with, let’s say, a composite score that will at least help you identify which are the top 2 or 3 opportunities in the market (that you should choose to pursue).

FM: Do you think it important for young, entrepreneurial companies to have a well-defined competitive position, target market and value proposition? Why?

RF: I think the most important thing for any young, entrepreneurial company to really have figured out, is what the problem is in the marketplace. I think the solution will change, undoubtedly. But the problem will likely not change. So, in our (Involver) case, we’ve always been focused on trying to figure out how to get brand dollars into Facebook.  That’s been the problem we’ve focused on for 2 ½ years, but the responses have changed probably two or three different times. I think it’s really, really important to understand what the problem is well as you possibly can. And the best way of doing that – kind of going back to the ‘research’ question – is when you’re talking to people, don’t just talk to people who are experts and service providers but try to talk to customers as well. Who are the people who are buying, who are the people you are solving this problem for? And I think once you really understand the problem, you can then propose what your solutions are to that problem, rank them and start executing them.

Once you start executing your solutions, you’ll begin to really understand what the value proposition and competitive positioning should be, just by virtue of working with customers and trying to sell them a product or service that makes money. I think once you get down to actually generating real dollars, that’s when you really start to understand things like what your value proposition is and what your competitive positioning is. Because if you go to a customer with a product or a service, they’re going to say, “Why should I care? Why do you matter? What makes you different from what I can get elsewhere?”

(On the target market) In order to understand the problem, you really need to understand the market. And in order to understand the market, you need to really understand the customer. If you try to be all things to all people, it will be tough because the scope of the problem you’re trying to solve is too big. So for example, when we started this company, we started with the problem of getting brand dollars into Facebook. The solution we focused on was this: how to get a very small slice of those brand dollars into Facebook for a very specific customer segment. That segment included advertising agencies that wanted to market on Facebook using video. So, that was a very specific segment of the market. Now as we’ve grown and solved that problem, we’ve expanded the target market. We’ve gone from not just advertising agencies, but any type of agency (PR or media agency). We’ve also expanded to the brands directly themselves and to other customer segments that are interested not just in video, but also in any type of media – photos, news, quizzes, etc. But that evolution has happened very systematically over a period of 2 ½ years.

FM: What is your philosophy with regard to raising awareness about your company? How do you recommend entrepreneurs approach and plan this task?

RF: My philosophy with raising awareness about my company is to build a product or service that really delights the customer. Because when you do that, then your customers will tell their friends. So, word-of-mouth is my philosophy, and the way I execute around that is to focus on delighting our customers. Nowadays when Twitter, Facebook, blogs and YouTube are just massive communication channels that anyone can really tap into, if you focus on really making your customers happy, people will find out about you.

FM: What are the key factors for success for running and growing a B2B, web-application company?

RF: I think one fundamental key factor (in the B2B space) is this: really understanding the flow of money. It took us some time to really, really understand how money flowed from the buyer to the seller in the value chain. We had identified that we were interested in selling to advertising agencies, specifically those that were interested in video. But what we didn’t know exactly was, who – what individual – in the agency is doing the ‘buying’, i.e. when we’re thinking about our customer, it’s not the advertising agency, but which group and individual within the agency is responsible for buying? And within that group, what types of people (roles) are actually the decision-makers and what types of people are the implementers? And how are those people getting paid? Where does their budget come from? Their budget comes from their customers – the brands themselves. The advertising agency, which is the customer of Involver, is being paid by the brand on 60 or 90-day terms. And the person who’s ultimately being paid – the decision maker – is the Account Manager, but the implementer is actually somebody else on the account.  So all of these specific details around the flow of cash – where it originates from, through to the various intermediaries, all the way down to us, and then down to the various partners that we have – is critical to understand better than anything else. And it’s important not just because you need to then design your systems to align with this flow of money, but also to ensure the survival of your small company. I think it was an MIT professor who once said that cash was more important than your mother!

The second factor (from a web applications business’ point of view) would be scale. Our customers require that if they have 10,000 people watching a video at one time, there will be absolutely no loss in quality of service. That makes it really key for our company, as an applications platform, to be able to scale. In fact, we just spent the whole weekend transferring our entire infrastructure over from one data centre to Amazon Web Services, which gives you the idea of the importance of being able to scale very well. And this means, for example, if we get 10, 000 new customers tomorrow, we’ll be able to handle it without any problems.

I think the third key factor would be talent. It’s really important to recruit the right type of people you can take and work together as a team from the beginning, i.e. from the early stages of a company all the way to profitability. And this is especially so for a web applications business, where the ramp from the day you start till the day you reach profitability is usually done with the same core team. And it’s usually done in a short period of time, in a year or two, not usually more than that. The types of people you’re going to recruit from the beginning are going to define your culture. So, the first 10 hires are always the most important hires that you make. It doesn’t matter if you’re a small company like ours, or you’re Google. I’ve talked to very early employees at Google who have said that the first 10 hires were absolutely critical in the evolution of culture at a company.

FM: What do you feel is an entrepreneur’s biggest challenge when it comes to implementing a strategic plan / business plan? How can entrepreneurs be successful at implementation?

RF: Err on the side of execution, not planning. When it comes to running a business, particularly when you’re just starting out a business – I think that you really need to look at the amount of time you’re putting into planning and the amount of time you’re putting into execution.  Look at it more like this: spend 1/4 of your time planning and 3/4 of your time executing. When you’re starting a business, your planning cycle is not something that just happens at the early part of your business and then you never come back to it. Getting a business off the ground is a very iterative planning process. So what will happen is, you will really try to do the things that we talked about today, i.e. defining your target market and what the problems are and what the present solutions are, who the players are in this space and what your value proposition is going to be – all those types of things. And then you go out and execute. And then you come back, after 2-3 months of executing and analyze what’s working and what’s not. And then you do another cycle of planning, and follow that with a cycle of execution. So, you do multiple cycles of planning and execution. If you think about it over a 12-month period, you could do 1 month of planning and 3 months of execution, and so on. And I think that is the best way to overcome this challenge of implementing a plan unsuccessfully.

The key thing to remember is this: launching and running a business is a very iterative process and you need to really believe in that and execute around that. So, plan for going through these cycles many, many, many times a year, particularly in the first year of your business.

For an analysis of this interview, click here.