Despite their creative energy, startup companies usually have a tough time breaking into any market, let alone a brand new one. In response, some clever companies have adopted a strategy that involves riding in the slipstream of a much bigger company, which lends the startup clout by anointing it as a credible provider of services or products. It may not make you as big as the big friend, but it will certainly make the growth process much easier.
Early last year, Vancouver startup ConnectionPoint Systems Inc. developed a Facebook application called FundRazr that would help people support various charities and groups through social networks, a movement dubbed “social commerce.” Collecting donations through FundRazr saves organizations the time and the hassle of dealing with cheques and other traditional forms of fund transfer.
Creating a software app is always exciting, but ConnectionPoint founders Daryl Hatton and Natalie Sisson’s excitement soon faded when they went to various credit card companies for a payment system that would make their application more useful.
Traditional credit card systems rooted in the more orderly world of banking can be cumbersome and expensive for merchants and often require information exchange that is difficult in a social networking setting like Facebook, with its peer-to-peer interchange.
Early last summer, ConnectionPoint CEO Hatton heard rumblings that PayPal, the decade-old giant online payment company (US$2.4 billion in sales in 2008), was developing an open application of “adaptive payments” that might suit the more flexible world of online social networking.
Taking a chance, Hatton hopped on a plane for a Las Vegas software developers conference that PayPal was rumoured to be attending. Hatton’s agenda? To find “the guy in charge” of the PayPal initiative and convince him to let FundRazr be a beta developer.
In a stroke of luck, Hatton struck up a conversation with a stranger in the line outside the convention venue and roughly explained his problem. Inside, he discovered that the “guy in the line” was the PayPal general manager he was looking for. Hatton pitched, and the manager instantly recognized that the FundRazr application had the three top hot buttons for PayPal’s new PayPal X application: social media commerce, advocacy and functionality. Also, the FundRazr application provided PayPal with a road map to develop a faster, less cumbersome money-transfer system on Facebook, which has more than 300 million users.
ConnectionPoint was signed on immediately and over the next couple of months scrambled to integrate the application in time for a fall trade show. In September it showcased its system at the influential TechCrunch50 show in San Francisco. The demo was a hit and Hatton was invited to be the featured speaker at the PayPal X Innovate 2009 show in November.
While FundRazr is still in its post-launch stage, the easy payment system is helping it to rapidly gain new users. Today Hatton believes being in PayPal’s slipstream easily put it at least a year ahead of where it would be if it hadn’t hooked up with the giant.
Check out Tony's blog at The Insider.