Who Starts a Company During Economic Collapse?

Yesterday, I attended Demo Day for AlphaLab, a local tech startup incubator here in Pittsburgh (and a sponsor of PodCamp Pittsburgh 3). The six companies they're currently working with will be nudged out the door at the end of the year, so yesterday was their chance to spread their wings (and make their pitch) in front of a roomful of potential investors, advisers and other interested parties.

But will any of their ideas fly?

Web-Wide Ripples of Discontent

Earlier this week, Steve Woolf of Epic FU (formerly JetSetShow) announced that they'll be ending their relationship with (formerly-considered-to-be) rising web video production company Revision 3. Due to international economic calamity, among other factors, Revision 3 is dropping numerous shows from their lineup, including Epic FU and Gary Vee's Wine Library TV -- which is odd, considering they're some of the web's most successful niche shows.

Perhaps their production costs outweigh their current revenue potential, but the long-term implications of this decision seem to be: Revision 3 can't afford to keep incubating emerging web video hits long enough for them to take flight on their own.

So if a company that's supposedly trafficking in The Next Big Thing (aka the web video revolution) can't keep their flagship shows afloat, what does that mean for companies like AlphaLab, who are incubating similarly-positioned, service-driven companies whose business plans hinge upon Web 2.0 metrics?

Building Houses During a Forest Fire

Every new company is fighting an uphill battle during this economic downturn, not to launch or to grow, but merely to validate their own right to exist. New ideas and properties that might have had a few years to experiment and develop an audience won't have that same luxury from investors who will increasingly be looking exclusively for "sure things" -- and if there's one field that's anything but "sure," it's the entire social media spectrum.

Admittedly, the AlphaLab-supported companies I consider to have the most potential -- Chogger and GameHuddle -- seem sexy to me because they're social media-based, and that's the arena I work in. But just because I can see their potential, that doesn't mean investors -- or customers -- will. In fact, I'd go so far as to say that these companies may be the exact right idea at the exact wrong time: concepts that COULD be sticky and even useful, if only their business plans didn't rely on large numbers of niche users having the time to find them, use them and spread the word.

In this economy, time is even less abundant than capital.

So: how can emerging companies -- social media-based or otherwise -- insulate themselves from an uncertain economy? Or, do new companies need to stretch beyond existing patterns of business thought and seize upon new opportunities before those uncharted waters seem too hazardous for anyone to fund?

The Importance of Getting Paid

When you're a freelancer, NOTHING is more important than getting paid. Not finding new leads, not meeting your deadlines, not exceeding client expectations -- NONE of that compares to making sure there's money in your pocket and your bills are paid on time.

Over the past 3 years, I've learned that the act of physically getting paid by clients is much harder than it should be. Some of this is due to clients moving slowly -- after all, no one wants you to get paid more than YOU do -- but most of the trouble I've had getting paid stems from complications that I can improve on my own... and now, so can you.

5 Ways to Make Sure You, the Freelancer, Get Paid

1) Request half your fee up front.

Depending on the specifics of your freelance gig, a job you begin in February may not pay you until June. After all, it can take weeks to assemble all of the related materials, weeks more to complete the work itself, and then weeks (or months) of reviews until the client decides the work is complete.

And all that time, you're working but not getting paid.

Brand new clients should expect to pay you half up front for new contracts. Longtime clients may be more flexible, and agree to pay in increments as milestones of a project (initial plan, mock-ups, each review round, etc.) are reached. But if a client is reluctant to pay even a portion of your fee up front, you need to decide if you can complete the job while not seeing a penny for 3 or 4 months. (Odds are, unless you have a massive nest egg built up, you can't; rent doesn't give you a 4 month reprieve.)

2) Never presume an invoice has been processed.

Most clients are quick to respond when they receive an invoice. Their confirmation that the invoice will be entering the accounting system helps us sleep at night, knowing we can expect to be paid within the agreed-upon turnaround time.

Recently, one of my clients claimed to have not received an invoice. When I called their accounting department to clarify, the resulting wild goose chase included, among other proposed solutions, faxing a copy of the overdue invoice to a specific accounting employee -- who, it turned out, didn't actually exist(!)...

If a client doesn't confirm receipt of an invoice, call to verify it's been received. Be pleasant but, if you're not getting an affirmative answer, be persistent -- at that stage, nothing is more important than ensuring that your invoice is processed as swiftly as possible. Remember, it's not the client's job to make sure you get paid; it's yours.

3) Make friends within the company, to help when Accounting falls behind.

If you're good at what you do, it's hard not to make friends within your client company. Keep in touch with these people, even when they're not directly involved in your current projects, because you never know when you may need to ask them for help after the impersonal folks in accounting can't find last month's invoice...

4) Be consistent in your invoicing procedures.

Most clients have one specific procedure that they request you follow when submitting invoices. This helps them avoid overlooking an invoice, which could trigger late fees if they don't pay on time. It also protects you in case you need to prove that an invoice was submitted properly, so any dispute can't be blamed on your inability to follow directions.

I recently attached a client's invoice in an email in which I also answered a client's question. Upon receipt, the client replied to follow up on my answer, resulting in a longer email conversation. Unfortunately, the client didn't notice the invoice was also attached, which resulted in that invoice not getting paid until I noticed it was overdue. In this case, simply sending two different emails (one delivering the invoice, one answering the client's question) could have saved me an additional 30 days of waiting to get paid -- since, in this case, the client wasn't wrong for not noticing the invoice because I'd diverged from standard procedure.

5) Deposit your cash immediately.

This might seem obvious, but it's amazing how often checks can languish, awaiting deposit in your account. Maybe you think it's more important to meet today's deadline, or maybe it's more convenient to deposit that check tomorrow when you're running other errands.

Wrong.

NOTHING is more important than getting paid -- and that includes the physcial act of depositing that money in your bank account.

This step is doubly important if your bank (like mine) places additional holds on out-of-state checks. In my case, when a non-Pennsylvania client pays me, it takes an extra week to actually receive that money because my bank holds that check for 5 business days. Add in the time it takes for the check to physically travel from my client's desk to mine -- up to 5 days, depending on when and where it's mailed -- and that's over 10 days between the time a client thinks they're paying me and the time I can actually apply that money to bills. (So when that check comes in, the last thing I can afford to do is "get to it tomorrow"...)

REMEMBER: When it comes to freelance work, NOTHING is more important than getting paid. If you keep your bank account full (or at least "not empty"), you'll survive long enough to acquire more clients, get higher-paying work, and (if you're really good at what you do) build a nest egg that will make each of these "get paid now" steps a little less harrowing.

Do you have any tips for getting paid? Add them to the comments below!

ShowClix: A Pittsburgh Social Media Startup That Gets It Right?

Yesterday, I met with Lynsie Camuso, one half of the dynamic duo behind recent Pittsburgh-based social media startup ShowClix. But, as I quickly realized (and as Lynsie herself was quick to point out), ShowClix isn't a social media company -- it's a service-based business that uses social media tools. (Or, in other words, they actually have a business plan.)

ShowClix, in a nutshell, is the friendly independent alternative to Ticketmaster. Considering Ticketmaster is one of the most-reviled companies on the planet, ShowClix has an easy story to tell. But just being the "good guy" isn't enough to win an uphill race, so Lynsie and her team are looking for ways to include the community-driven power of social media to help her startup gain an advantage against Ye Olde Behemoth.

For example, ShowClix has created strategic alliances with influential bloggers like Perez Hilton, which help them gain brand name traction among a key demographic: pop culture obsessives who actually *go* to live events.

They also host their own ShowClix blog, "The Shlog", which is part concert announcement board, part entertainment gossip and part personal opinion. (Do I sense a Perez influence in recent posts needling Angelina Jolie and Harrison Ford? Perhaps -- but it's nice to know a blog is written by a human, rather than a press kit, no?)

ShowClix has a relationship with Innovation Works, an investment firm dedicated to revitalizing the "tech economy" in Southwest Pennsylvania by supporting "independent business ideas" (aka concepts not hatched in a CMU think tank). This is an arrangement that's good for both IW and ShowClix, which seems to be wisely plotting their path to credibility AND profitability.

Let's hope this is just the beginning of profitable Pittsburgh web startups. Lord knows we have room for a few more along that ever-expanding "Technology Corridor"...