DFW is full of some of the most innovative and creative individuals and the most amazing ideas.  Come celebrate those people and ideas as we hear from those who are making DFW more vibrant and creative for all of us.

The idea is simple, 5-6 leaders and leading entrepreneurs from one of the most vibrant communities in the nation will come together and share from their hearts- not about their individual accomplishments- but about topics that speak to all of us.  They’ll each have 5 minutes to talk and you’ll have a lifetime of connections to make. Connect with your friends- new and old- and enjoy a great atmosphere with DJ Jason Esquire and great drinks at one of the coolest venues in DFW.

Still not enough?  Ok, how about this- join us and be entered in a drawing to win a brand new iPad.  Yeah, we thought that would get your attention.  To top it off, all of the proceeds from Un-Plugged will go to benefit charities right here in DFW!

Featuring:

Gabriella Draney- Tech Wildcatters (@techwildcatters)

Mike Merrill- Social Media Club of Dallas (@smcdallas)

John Pozadzides- OpenCamp DFW (@ocdfw)

Brian Sullivan- DFW UPA (@dfwupa)

Chris Walters- Ignite Dallas (@IgniteDallas)

Tickets are $10 in advance and $15 at the door.

Who is harmed by Paul’s legal actions? First, you and me (assuming you have a 401K). Second, any startup (like ours) who uses web technologies. We need more innovation in the United States, not less. Software patents, like Paul’s, are bad for business, America and the planet. They simply don’t make any sense for software. When the government grants a monopoly for 20 years it should be for something unique or novel – i.e. a machine, a manufacturing process or pharmaceuticals – not an essential programming technique. Brad Feld has been a long time critic of software patents and he does a pretty good job of explaining why they are a bad idea:

• The financial cost of defending yourself against a software patent claim are impossible to overcome. Just to analyze whether the claims being made against you are justified will incur legal fees in excess of $50,000.00, and more than $1 million in legal fees before trial. Yet it costs the price of a postage stamp for a software patent holder to make a legal claim against you. (http://www.wsgr.com/PDFSearch/09202004_patentpirates.pdf)
• Economic research demonstrates that software patents are acting as a drag on the US economy. (http://en.swpat.org/wiki/Studies_on_economics_and_innovation)
• Programmers – those skilled in the art of writing software, would be expected to benefit from, and support the patenting of software. They do not. They uniformly despise them as a limitation on their art.(http://ec.europa.eu/internal_market/indprop/comp/analyses_en.htm)
• Venture capitalist like me, who work with new innovative start-ups can testify that software patents have a chilling effect on the market. (http://en.swpat.org/wiki/Statements_from_venture_capitalists)
• With well over 200,000 software patents having been issued, non practicing entities and hedge funds are buying up tens of thousands of these trash patents and using them to extract hundreds of millions of dollars from US companies. This activity takes the form of a protection racket. (http://www.techdirt.com/articles/20100217/1853298215.shtml)

The WSJ explained how broad Paul’s patent claims are:

Patent Claim: Browser for Use in Navigating a Body of Information, With Particular Application to Browsing Information Represented by Audiovisual Data

Implication: “The specific example in the patent might be for a news aggregator, but the patent could have applications far beyond news. The suit says the defendants are infringing the patent “by making and using websites, hardware and software to categorize, compare and display segments of a body of information.” That quote describes a lot of websites.“

Patent Claim: Attention Manager for Occupying the Peripheral Attention of a Person in the Vicinity of a Display Device

Implication: “AOL, Apple, Google and Yahoo are the only companies alleged in the suit to have violated these patents. But again, the patent is for a tool that is ubiquitous online, particularly on websites that give users real-time news updates.

Alerting Users to Items of Current Interest

Implication: “Theoretically it could apply to anything that uses technology to alert you to something you’re interested in. It’s important not only for news but for e-commerce — think about notices when an item you like is on sale or when a bid has been placed on something you’re watching. This patent is the only one in the suit that all the companies are alleged to have violated.”

Brad should add Paul to the list of folks who should see Patent Absurdity.

This week, after I wrote the post, D&B has ‘updated’ our “Supplier Evaluation Risk” from an 8 to a to a 4. Here is what our potential customers see today:

D&B still suggests we pose a “Moderate risk of severe financial stress over the next 12 months”, but at least we are almost in the ‘green’ section of the chart.

Again, I stand by my previous post when I explained, “I think there is a potential for a massive class action against D&B on several counts – but most importantly their propensity to offer credit advice without sufficient data. D&B should have to disclose that on accounts, like ours, they simply don’t have enough data one way or another. They can’t possibly know whether or not our company is likely to fail based on the data they have collected. Their data is used by our potential clients to hire us. How many clients have looked at this data and decided that since we are ‘likely to fail in the next 12 months’ they will choose another vendor? How many other clients have low PAYDEX scores and ‘High Risk of Failure’ warnings where there is little or no data available? I would be happy to sign our company up as a lead plaintiff. I can show a loss of at least $1,000,000 in billings as a result of their 66 Paydex report on our company. Let me know if you want to join by filling out this form: D&B Class Action Sign Up“

The company pays out around $250,000 in payables each month to more than 100 vendors. Additionally we have credit lines ranging from $1,000 to $500,000. Out of these vendors D&B only had four. Our controller added more than 100 vendors and we were surprised how many would not agree to report payments to D&B. Companies like AMEX, Chase and Ingram Micro were unwilling to share credit history with D&B – later I learned they didn’t want to pay D&B a fee for the pleasure. Evidently, D&B is collecting fees from the companies that report and from the companies that are reported on. Wow.

One week later we were able to raise our ‘PAYDEX’ score from 66 to 77 by just adding a few additional vendors to the system. This morning I got an alert from D&B explaining that they had INCREASED our companies financial risk number from 7 to 8 – meaning they estimated that there was a HIGH risk of our company’s failure in the next 12 months. Our ‘PayDex’ score was improving, but D&B is now reporting that we are likely to fail. This company is ten years old and has been profitable since 2002 – why would D&B suggest we were likely to fail? What data are they using to come to this conclusion. Here is the chart the D&B account rep showed me:

Just a week after we opened out account with D&B and began helping them build our credit someone in the computer manufacturing business suggests that we have a payment 61-90+ old that is less than $1,000. I talked to our controller and she has no record of any late invoice – much less one for less than $1,000. I asked the D&B rep who was reporting the 61-90+ day late payment, but they would not release the name of the vendor. I assume the vendor who reported the late payment wants to get paid – why wouldn’t they want me to be able to contact them to get paid? The D&B rep couldn’t explain why the policy was this way. I then asked the D&B rep why they would issue a public report that we were likely to fail despite the fact that 99% of our vendors are reporting we pay within terms? I reiterated that we spend about $250,000 a month in payables – it seems crazy that a company would publicly report that we were likely to fail because an anonymous company reported that we were late on an invoice less than $1,000. She could not explain why.

I think there is a potential for a massive class action against D&B on several counts – but most importantly their propensity to offer credit advice without sufficient data. D&B should have to disclose that on accounts, like ours, they simply don’t have enough data one way or another. They can’t possibly know whether or not our company is likely to fail based on the data they have collected. Their data is used by our potential clients to hire us. How many clients have looked at this data and decided that since we are ‘likely to fail in the next 12 months’ they will choose another vendor? How many other clients have low PAYDEX scores and ‘High Risk of Failure’ warnings where there is little or no data available? I would be happy to sign our company up as a lead plaintiff. I can show a loss of at least $1,000,000 in billings as a result of their 66 Paydex report on our company. Let me know if you want to join by filling out this form: D&B Class Action Sign Up

• $3 for a bagel that would normally cost you $8
• $15 for cupcakes that would normally cost you $33
• $24 for a manicure that would normally cost you $55
• $49 for a spa treatment that would normally cost you $154

The reason Groupon is so successful is the social nature of the deals. To get them YOU must get your friends to buy the deal so you can get it. It is just a matter of time before EVERYONE has been exposed to Groupon. It is such a simple concept LOTS of entrepreneurs have or plan to launch competitive businesses. Lots of people have approached me about starting a Groupon-killer so I started looking into the business (one such entrepreneur suggested I read Chris Dixon’s post on competition if I didn’t want to fund his deal). Groupon is backed by a Russian investment firm (helpful if anyone gets out of line). The demographics are REALLY interesting:

So Groupons are perfect for young, educated women who have money. Groupon has effectively figured out how to get their attention and before long almost all ‘young, educated women who have money’ will know about the concept. But what happens next?

One of our friends owns a spa that uses Groupon to market their services. Once a quarter or so Groupon allows his spa to run a ‘Groupon’ for spa services in a major city. Over the past few days he sold more than 1,500 Groupons generating $70,000+ in revenue for Groupon and $50,000+ in revenue for the spa (Groupon gets to keep between 15-30% of the revenue and send the rest to the spa a few days after they collect it). These services are provided at a 68% discount – and I suspect they are delivered on a break-even basis. The spa will convert a certain percentage of these new customers into active members making the deal worthwhile. My question is how many more times can he use Groupon before reaching the total universe of potential customers?

Throughout the rest of the quarter the same ‘young, educated women who have money’ who were attracted to his spa by the GREAT deal will be seeing other GREAT deals from other spas. Will they learn to ‘wait’ to use these ‘loss leader’ deals or will the abandon the Groupon and commit to our friend’s spa? If deals become commonplace and consumers expect them my friend (and his competitors) won’t be able to continue their practice of offering margin-free services. On the other hand Groupon users settle down and start using their favorite spa and stop taking new deals from new spas the system won’t work anymore. Either way it is just a matter of time before Groupon breaks. Groupon seems to focus on food and personal services – each susceptible to this same problem.

The Groupon model is PERFECT for generating more business for local service businesses (spas, massage parlors, restaurants), but the volume of business is troublesome for many retailers. Take the example of my friend’s spa. Assume that he has 17 treatment rooms and that each room can offer 6 one hour treatments each day per room (leaving room for cleaning and such). This means that his spa (and it is a big one) can handle 100 treatments each day or 700 per week. The last Groupon he ran generated more than 1,500 treatments. Assuming his business has been operating at 50% capacity prior to the sale of the Groupon it would take five solid weeks to fulfill the Groupon. Of course this sort of ‘perfect fill’ would be impossible because most ‘young, educated women who have money’ want to get their treatments in the evenings and weekends. I suspect that more than a few of the ‘young, educated women who have money’ who bought this deal will be surprised that they won’t get a treatment for several weeks. More and more businesses who use Groupon are recognizing this issue. This week Aaron Crowe wrote an article titled, “Groupon discounts working too well, overwhelming small businesses” covering the issue following a Business Week article on the same topic.

There are a LOT of ways Groupon can build on its success and even more ways for it to shoot itself in the head. I wish I had come up with the idea AND had the time to actually execute, but I would be surprised if Groupon is a long term success…

The latest member of Architel Labs is a startup called TapMap. Headed by Philip McNamara, the company is helping to organize retail inventory and pricing in Europe. Working hand-in-hand with our ShopSavvy team, Philip is quickly becoming the largest aggregator of product pricing and inventory data in the European Union. Look for more information about the company in the near future.

Or at least that is what the folks atSevenLayer think. SevenLayer is latest company to be incubated inArchitel Labs. Headed by Jeff Rothell, the company delivers cloud based voice applications to small and medium sized companies. Prior to co-founding Sevenlayer, Jeff built two multi-million dollar telecommunication companies. From 1999 to 2002 he served as President and CEO of Netvoice Technologies, a publicly traded (NTVT) telecommunications business operating hosted VoIP services in 52 major U.S. markets. Then in 2003 he co-founded CentricVoice, a venture-backed telecommunications company offering trunk replacement to small and medium sized businesses. Most recently Jeff served as COO of Unified360, one of the largest Cisco-powered voice vendors in the Southwest.

In the United States there are thousands of phone vendors selling hardware-based phone systems to small and medium-sized companies. Despite the advent of hosted voice options, the number of phone systems sold in the U.S. continues to increase. Business owners throughout the U.S. seem to want to own the hardware powering their phones. On the other hand they want ALL of the features that hosted solutions can offer at affordable prices. SevenLayer’s offering is designed to create a recurring revenue model for phone vendors, while offering business owners the features they demand without competing with their primary offering – selling phone systems.

Last month, SevenLayer launched what they call their Intelligent Voice Cloud, powered by their AVAS platform, and began offering live features including:

• Recording – a key application for call centers, financial services, healthcare and real estate. Formerly an expensive feature to acquire much less manage, can be offered as an add on service delivered from the cloud with no heavy upfront costs to implement, while making tracking, management and storage of recordings easy and secure.
• Conferencing – moving conferencing to the cloud may seem excessive, but in doing so an enterprise can leverage the power of our IVC conference scheduler allowing easy access to your address book. Imagine being able to schedule a meeting at a specific time and instead of having to remember to dial in, the IVC will dial each party at the appropriate time.
• Business Continuity – the greatest weakness of premises based features is the premises itself. In the event of a service disruption the cloud-based IVC can guarantee 100% uptime on inbound calls by automatically re-routing calls to alternative landlines or mobile numbers.

In the coming months SevenLayer will release a full suite of features and applications accessible to any small business through the click of a mouse.