Venture Atlanta Conference 2013
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Sep 6 /

Small Business is Big Business

It has been more than two years since The Great Recession officially ended but the road to economic recovery is still fraught with danger.  Stocks are volatile, oil and other commodity prices are up, global debt problems persist, and job creation at large businesses are anemic at best.  Yet, certain sectors of the economy show weak, but promising signs of life, with small businesses offering an avenue of hope.

Data drawn from financial statemetnts from 346,000 companies with up to $10 M annual sales that operate in 19 primary industries defined by the NAICS. Source: Sageworks

Although small businesses took a hit from the recession — the overall number of companies with up to 250 employees fell three percent between 2005 and 2010 — the outlook is brighter now, according to Forbes. Sales, payrolls and access to capital have started to bounce back. Small businesses also remain a strong source of job creation.  According to the U.S Census Bureau, the nation’s 27 million small businesses employ about half of the workers in the United States. They also accounted for 65 percent (or 9.8 million) of the 15 million net new jobs created between 1993 and 2009, according to the Bureau of Labor Statistics.

While the recent economic news has been mixed with some cautiously positive overtones, optimism among small businesses has remained at “recession levels,” according to the National Federation of Independent Business (NFIB). The recent NFIB small business survey lists “poor sales” as the most important problem among small businesses, an issue that has consistently scored highest since the recession struck.

With so much effort focused on remedying poor sales, employees and owners at small businesses are wearing many hats.  Many are turning to technology in an effort to free up time and capital. This in turn has spurred a cadre of start-ups offering technology tools that serve the needs of small business owners and their businesses rather than solutions that address the challenges faced by large enterprises.

Small business technology providers span the gamut. Online backup services for websites, outsourced telephony systems and social media management tools are just some of the tools available to small businesses. Venture Atlanta interviewed four of these providers located here in Atlanta.

Credit Card Headaches

Any small business that accepts credit cards as a form of payment is a prime target for hackers. The PCI Security Standards Council estimates that more than 80 percent of data theft attacks target small merchants because many either have lax security standards or they lack the resources to implement the necessary safeguards to protect consumer data. And since legally, merchants are responsible for protecting this information, a security breach can result in everything from fines and penalties to the termination of that merchant’s ability to accept payment cards.

Atlanta-based ControlScan works with small (Level 4) merchants to ensure that they are PCI DSS (Payment Card Industry Data Security Standard) compliant. With approximately six million Level 4 merchants in the U.S. and an additional 30 million worldwide, the company’s prospect base is significant. “ControlScan provides an easy-to-use system for these merchants to complete the self-assessment questionnaire as well as the scanning process,” said Joan Herbig, CEO of ControlScan. “We marry that with people and process that help the merchants along the way,” she added.

ControlScan services are offered through several dozen merchant acquirers including Solupay, CardWare International, Payment Plus, American Credit Card Processing Corporation and Ensight Merchant Services. These companies in turn enable Level 4 merchants to accept credit cards as payment. It also offers its services through ecommerce solutions providers including local hosted ecommerce platform ShopVisible. The most mature of the four companies interviewed, technology veteran Herbig has been at its helm since 2007.

Defending Against Website Outages

In just 10 years, company websites have become commonplace among small businesses. For some, websites serve as electronic brochures and for others they serve as electronic storefronts in which vital transactions take place daily. Regardless, many of these sites are not adequately protected from external (and internal) security threats.  Any small business owner knows just how inconvenient and even expensive it can be to regain control of a hacked site.

CodeGuard was founded to resolve just this issue.

The company’s online service monitors a website for any suspicious activities in the background while allowing routine operations like content updates and transaction processing to take place. Should a CodeGuard monitored site be hacked, the service alerts the website administrator via email. The website administrator can then activate a feature in CodeGuard to “roll back” the site to a previous working version so that there is no disruption of service to site visitors.  “We are a time machine for your website,” said David Moeller, CEO of CodeGuard. “If anything happens to your site, whether it was wanted or unwanted, that you want to undo, you can do it with just one button,” he added.

Launched earlier this summer, the start-up has already signed several thousand customers across all industries – from web designers/developers to law firms and retail stores. In addition, they have begun partnerships with hosting providers and other web services such as CloudFlare.

Managing Social Media Chaos

Small businesses are beginning to engage potential and existing customers through social media channels and networks such as Twitter, Yelp and Facebook. With the proliferation of social media accounts that have to be maintained, small businesses are turning to social media management tools for help. According to Postling, small business owners use social media management tools mostly because they are a “one-stop shop for all their social networks” (42 percent) and for “comment aggregation” (27 percent).

Soket wants to be a small business owner’s social media command center. The company provides a single place for small businesses to orchestrate their web presence – from social networks to their own website. From the application, businesses can manage online content like events, images and status updates, publish information to a variety of social media channels, monitor relevant online chatter, engage with followers and fans, and analyze these interactions. “The results for small business owners are cost and time savings while improving marketing effectiveness,” said Marcel Crudele, president and founder of Soket. “We bring organization to all the chaos. According to our estimates, users are experiencing close to a 50 percent savings on time with Soket,” he added.

Still a young company, Soket was a finalist in the GRA/TAG Business Launch competition earlier this spring. The MiT Enterprise Forum, Venture Atlanta and the Georgia Department of Economic Development Life Sciences Group are subscribers to the Soket service.

A Remedy to Lead Generation Woes

Finally, this last company seeks to solve the age old challenge of lead generation. According to a survey of more than 900 marketing executives by MarketingSherpa on the state of B2B marketing published earlier this year, “generating higher quality leads” (78 percent) and “generating a higher volume of leads” (44 percent) were the two most cited challenges facing marketing departments. Also of concern was the lengthening sales cycle. Among respondents, 60 percent experienced a sales cycle of longer than three months. Implementing marketing automation and online lead generation technologies have become popular solutions to easing these pressures among mid-sized and large enterprises. But these technologies are often either beyond the budgets of small businesses or they require specialized personnel to operate and are therefore not practical for these types of companies.

BrightWhistle offers a solution that combines features from marketing automation and online lead generation tools, to provide the best of both worlds. Coming out of the gates, the company is focused on providing a remedy to healthcare providers’ lead generation woes. “Doctors have no efficient way to generate leads,” said Greg Foster, CEO of BrightWhistle. “The BrightWhistle platform magnifies their online presence and generates, qualifies and converts leads online in an efficient and cost-effective manner,” he added.

BrightWhistle Content Network

According to Foster, the company platform was designed with the medical industry’s myriad of regulations in mind and this single attribute sets the company apart from its competitors.

The company recently closed a round of funding and has customers ranging from physician practices that span multiple states to healthcare specialists such as neurosurgeons and orthopedic surgeons.

Start-Ups, Small Businesses and Economic Recovery

While experts agree on the small business sector’s contributions to job creation, matters are not so clear cut with start-ups. Overall, there are fewer start-ups than years past and many are operating leaner. Employment at new companies has decreased steadily since 2000, according to data from the U.S. Department of Labor. In 2010, 2.5 million jobs were created by start-ups, compared with 4.7 million jobs annually between 1997 and 2000.

Despite this decrease, job creation among start-ups remains strong compared to existing companies. In a new research paper, Tim Kane, a senior fellow at the Kauffman Foundation, found that start-ups are responsible for all net job growth in the U.S. economy. During years of recession, net job losses increase at existing firms— defined as those a year and older—while job creation at start-ups stays stable. “Start-ups create an average of three million new jobs annually,” Kane writes. “All other ages of firms, including companies in their first full years of existence up to firms established two centuries ago, are net job destroyers, losing one million jobs net combined per year.”

Start-ups like those mentioned here are making it easier and more cost effective for small businesses to thrive which in turn spurs more innovation in small business technologies.  Regardless of one’s position regarding the role of start-ups or the small business sector in this country’s road to economic recovery, it is hard to ignore the burgeoning innovations among technology companies serving the small business sector. These companies are bringing to market new tools that increase small business efficiency and productivity. And that, can only lead to good things.

September 2011 Newsletter

 

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