5 min read
We’ve all heard the grim statistics about the failure rate of new businesses. Something like 80% of them fail after 18 months. Of those who survive and actually hire employees, half shut their doors after 5 years. Only 30% survive beyond 10 years.
The causes of business failure are varied, but most can be boiled down to: failures of leadership, lack of demand for the product, and cash flow problems.
If these statistics are not bad enough, Bain & Co estimates that “The rapid spread of automation may eliminate as many as 20% to 25% of current jobs—equivalent to 40 million displaced workers—and depress wage growth for many more.” Before we know it, new business formation will no longer be an expression of passion or desire, but a necessity.
Could there be one solution that addresses all of these problems? StartItUp, a new advisory marketplace built on a foundation of AI tools, says yes.
StartItUp sees on-demand business advisors as the next phase of the gig economy.
“Small business owners need to make something like three hundred decisions when they are just starting up and most likely many more later on,” explains Goli Ameri, CEO of StartItUp. This could be anything from registering the business, to securing or renegotiating a lease, to figuring out their compliance requirements. “This can mean hundreds or thousands of Google searches,” she continues.
But for SMBs, some things are simply not Googleable. Someone who is great at developing products may have no idea how to manage people. A visionary CEO may be at a loss when it comes to setting product pricing. A genius marketer may have trouble understanding legal paperwork. All of these things can make or break a small business.
Studies have shown that a capable and qualified advisor can increase business success rates by up to 70%. A question that might take an advisor 10 minutes to answer could potentially steer new business owners away from the ‘trial and error strategy’ and help them course-correct in real time. This could mean fewer failed businesses.
“We partnered with StartItUp to identify those entrepreneurs ready for advising, get a clear picture of their strengths/weaknesses and scale the number of businesses we could serve,” says Pat Nye, the Regional Director of the Los Angeles Small Business Development Network, a resource of qualified advisors, and a partner of StartItUp.
One small business owner, Ossie Cohen, started his grocery store brand visibility company PICKL through StartItUp. “As someone starting a company from scratch, StartItUp really makes you think about what you’re doing. Am I doing things the way I should be?” Cohen describes his advisor as a “windfall of critical and focused guidance.”
Business owners who use the StartItUp app are connected to an advisor via an algorithm that takes industry, personality, skills, location, project need, and other specifics into account. They are led through an intuitive series of questions that helps them create a business plan and addresses potential problems or gaps in knowledge. A paper trail is created. An AI-driven chat bot will be available to immediately answer questions.
“I started a telecom consulting business a couple of decades ago, after I left the corporate world. But I just couldn’t figure out how to scale and not sell my time one hour at a time. I didn’t have an advisor and was so busy being the CEO and the janitor at the same time” says Ameri, who went on to hold global leadership positions at the State Department and then the International Red Cross.
Access to the platform with some of the tools is free. For a $40 monthly subscription fee, users can connect with an advisor and access other tools like the chat-bot or personalized content. Users can schedule one meeting a month with their advisor and send an unlimited number of messages. Much like TalkSpace did for mental health therapy, the idea here is to put a qualified expert in a small business owner’s corner.
Co-founders Goli Ameri, Daniel Bouganim, and Brad King see their technology as a way to share the American dream they’ve all experienced. StartItUp has the potential to help the mass of small and mid-size businesses break through the cost barrier and improve their success rate.
“We are a diverse team in more ways than one. Our team is made up of two immigrants, an Iranian-American and and Israeli-American, and a native who grew up in the heart of Silicon Valley. We all have varying backgrounds and experiences, yet we’re all painfully aware of SMB obstacles and we’re obsessed with solving them” says Ameri.
StartItUp CTO Daniel Bouganim says “We believe just connecting an advisor to an entrepreneur is only part of the solution. Online Marketplaces have moved beyond just matching professionals with users. To ensure success, we have an obligation to provide the best set of tools for entrepreneurs AND advisors.”
Through their platform, new business owners get access to affordable, qualified business help. And advisors who use the app get access to a pipeline of clients without having to pay for marketing services or do the piles of admin work that most consultants are saddled with. This allows qualified advisors to charge less and make more.
Of course, business advisors are nothing new. Management consulting is a $250 billion industry. And CEO Goli Ameri says it’s an industry that’s ripe for disruption.
According to Inc Magazine, the management consulting industry has five fatal flaws. It’s labor intensive, it relies on trading hours for dollars, the “cost of goods” is inflated, advice quickly becomes out-of-date, and it relies on keeping information “secret.”
This all works together to make traditional business consulting expensive and inefficient. At its core, the consulting industry is set up to go against the interests of small and mid-size businesses who might consider getting help, but can’t afford it.
Ameri sees StartItUp as an affordable and scalable solution to the problem of failing or stagnant businesses. Keeping conversations and paperwork in the app and using a range of AI tools ensures that the advisory content goes further than a one-time one-on-one meeting.
By collaborating with ecosystems that cater to SMBs, StartItUp has found early success with their programs in Bakersfield and Long Beach CA, where 30% of business license applicants are currently downloading the app. Bank of America is piloting the app in Bakersfield with SMBs, and with positive results, will likely roll out in other parts of California.
John Keisler, Long Beach’s Director of Economic Development says “StartitUp is an incredible story of how we’re leveraging technology to help entrepreneurs get the support they need in an efficient way.”
Bakersfield College piloted StartItUp and now plans to incorporate the app into a Certificate Program on entrepreneurship. "Community colleges play a critical role in preparing students for entrepreneurship. Our partnership with StarItUp is an innovative way for us to help students build the skills and experience they need to be competitive.” says Sonya Christian the President of Bakersfield College.
Next stop? Rolling out in the top 35 large metro areas starting in early 2020, and along the way still focusing on smaller cities such as Santa Ana who are eager to do right by their entrepreneurs.
“Having helped launch e-Harmony, matching individuals in search of compatible partners and witnessing over one million marriages, I believe we can provide the same type of service to SMBs which are the backbone of the global economy,” says Brad King.
As more and more small businesses join the platform, learn from their advisors, and connect with their peers, will the failure rate of small businesses go down?
“I believe it will,” Ameri says. “Large companies can go on hiring expensive consultants. Small businesses who don’t have access to advisors will get the help they need from our platform, and we believe we can dramatically improve an entrepreneur's chances of success.”
Take our readiness assessment to find out more about the road ahead.