First, some perspective…
In the restaurant world, getting feedback on dining experiences can be very valuable to management and ownership. The trouble is actually getting the feedback. When the first post-dining surveys were rolled out, restaurateurs were so excited to get feedback, they didn’t care what they got. Then, once data started coming in, management wanted more data. All of sudden, surveys got really long and, as a result, customers stopped filling them out.
As a result, the most common form of survey today has just one question and there are many ISVs delivering such solutions to restaurants in their own ways. AfterWords is striving to be different.
AfterWords is a customer engagement platform for restaurants that delivers dynamic multi-question surveys based on what a customer just ate, or bought. The patent pending technology uses sales and customer loyalty data from cloud-based POS or via the receipt printer, only relevant questions are asked to the customer. The resulting data can be very powerful for a restaurant.
As Drew Peloubet, CEO of AfterWords explains it, the idea for the solution was born out of a bad dining experience. “The executive team was out to lunch and was presented with a post-dining survey, which was very poorly executed,” he says. “We thought we could do something better, so we set out to do just that.”
It just so happened that Peloubet and his team were no strangers to the world of restaurant IT. They happen to be the creators of Restaurant Magic, a food and labor management and business intelligence solution for large restaurant chains.
“AfterWords was initially planned to be an extension to Restaurant Magic, however, the more we looked at the market, the more we realized is could be a stand-alone product,” he says. “We established a dedicated development team and ultimately felt it would be best to separate AfterWords from Restaurant Magic and position it independently.”
While AfterWords is able to leverage the expertise and, in some cases, the personnel of Restaurant Magic, Peloubet says it’s essentially a startup, with many of the same issues startups face and difficult decisions they have to make. Here’s some of his advice for other ISVs on the startup path…
Lesson 1: Stick to core competencies
Know what you do well and resist the temptation to spend time and money on things you don’t know much about. “We’ve seen it happen with other ISVs who decided to branch into some other area without really understanding it,” he says. “While they are spending time trying to learn something new, their competition is passing them and putting them out of business. We try to follow that same philosophy with Restaurant Magic. This thinking is one reason why we spun off AfterWords as its own company — we knew there would be too many aspects of the business that were outside of what Restaurant Magic was all about.”
Take, for instance, the sales model. While it doesn’t make sense for Restaurant Magic to use a VAR channel due to the complexity, it makes perfect sense for AfterWords. The application is light weight, easy to understand, easy to install, and easy to sell. The price point is such that a VAR can make some money and AfterWords makes money as well.
Lesson 2: Only create partnerships that matter
Peloubet says it’s enticing to forge all sorts of partnerships early on, but to do so without knowing if there would be value to a customer or other partners is a mistake. For example, early in the AfterWords planning, Peloubet and team were introduced to Epson and its OmniLink receipt printers. In OmniLink, Epson has created a way to intercept receipt printer data and send it to the cloud. ISV partners can access the data in real time and create really unique solutions.
Peloubet and team saw the immediate value for AfterWords, accessing real-time data through Epson from any POS, but they questioned whether customers and partners would find value. “Everyone we talked to said the value was there so we proceeded,” he says.
Lesson 3: Don’t lie to yourself about sales models
Restaurant Magic is sold direct, but Peloubet and team decided that the bulk of AfterWord’s revenue will come through distributors and VARs. This wasn’t an easy decision to make. The ownership and management team had to accept that they would make a smaller margin by having it go through a channel.
Most smaller startups are always chasing the dollar to keep the lights on. As such, many times they’ll take on a bad partner deal or not take a partner deal because they don’t want to give up the margin. “Startup ISVs have to understand that it’s sometimes better to spend a few dollars to train VARs and distributors and let them do the marketing and selling,” he says. “Many ISVs resist selling through a channel because they want all the money for themselves.”
Lesson 4: Find someone who knows your industry and has connections
A strategic hire for Restaurant Magic was bringing on Lenore O’Meara, who had 20 years of experience dealing with restaurants, and hardware and software manufacturers as a media publisher. It was O’Meara who introduced the company to Epson. As that partnership was being established, it became clear to Peloubet that O’Meara could help in creating additional partnerships for AfterWords. “Go find someone who knows everyone, and who knows how to build and maintain relationships,” he says to other ISVs. “Lenore can leverage her 20 years of experience and contacts and get things done in a couple years that it would take us decades to accomplish without her.”
Lesson 5: Slow down and get strategic
Peloubet says that when the Epson partnership began, both companies were probably a little too excited about the potential solution, which resulted into rushing in and things taking a little longer than they should have. “Looking back, I think we should have aimed a little more before we fired,” he says. “Rather than getting overly excited to get the data and do something with a customer, we should have spent more time lining up teams from both companies to address the integration holistically. Instead of being strategic, we were tactical.”
Peloubet continues by saying this is the worst mistake you can make as a software company. “If more strategic, we would have slowed down enough to align our teams with the right resources to make the integration proceed better. We would have asked them to provide a team that includes a product manager, product marketing managers, and more developers.” He believes the result would have been faster throughput and smoother communication throughout the process. “You get so excited that you just jump in head first,” he cautions. “Fortunately, we and Epson have re-calibrated. We’re now moving forward with a well-conceived plan.”
Lesson 6: Be willing to give up control if you have to
One of the most difficult decisions startups have to make is whether to take money from outside sources. “Do you need money so you can launch fast enough to not miss the opportunity window,” he asks. “I’ve learned that no tech advantage lasts very long. You may have the most exciting idea in the world, but if you can’t execute quickly, you’re going to get left in the dust because someone is going to think of the same thing.”
Peloubet says startup ISVs must be willing to have a difficult conversation about what they might have to give up. In the case of AfterWords, the startup is lucky enough to have the resources from Restaurant Magic to help fund the company as it gets going.
Lesson 7: Don’t rush a reseller/distributor model
Now that AfterWords has a product ready for the market, the immediate challenge is being able to support a reseller and distributor network. All too often, startup ISVs don’t ramp up resources until the need is immediate. This can cause some undue stress. Peloubet says AfterWords needs marketing collateral, a clear value proposition, training, and support that’s specific to the reseller channel it plans to build. The company is willing to invest in creating these assets, but it’s a lot to get done. “With a small staff, we look around internally and try to determine who’s going to tackle some of these issues. In some cases, the people to do some of these tasks aren’t hired yet. We’re fortunate to have bench strength through consultant relationships. Of course, consultants aren’t cheap.”
His lesson is clear: Don’t be too excited to sign up a bunch of VARs and distributors and then be unable to support them. Once the word gets out that you can’t support them, your opportunity window will close. AfterWords is taking a slow targeted approach to bringing on partners. The company has a few key partners and will make sure it has the infrastructure in place and can support them before it opens the floodgates. The current plan is to solidify everything this year so the company can launch a broad reseller and distributor model in 2018.
Being a startup, but coming from an established company isn’t anything new. There are many companies with leadership that are on their umpteenth company launch. Still, Peloubet and AfterWords provide great examples that no matter how much experience you have, every new company will face startup issues that must be dealt with.