Originally published by Hunter Walk on LinkedIn: "Why give up that much equity for an amount we could raise other ways?:" SMB Tech Talk from ArtJamz
This week I'll be running a series of Five Question interviews with small businesses which were facilitated by BondStreet, a SMB lending platform (we're investors). LocalBiz stories are really fun for me since my first high school job was working in an independent bookstore. These people are true founders and entrepreneurs just like any venture backed company.
Hunter Walk: Can you share the founding story of ArtJamz? How did it all begin?
Michael Clements: The ah-ah moment came when I was up late one night painting, drinking and hanging out with a group of friends at my house instead of going out and thought, "Wouldn't this be great if there was a place we could go to do this?" During this same time, I had decided to audit an MBA Entrepreneurship class at my alma mater American University in order to learn more about business plans and starting a business. As media / communications professional my business chops were lacking.
During this time, I was working as executive editor of a well-known city magazine where I was interviewing and getting inspired by local business leaders and I had great grasp on the zeitgeist of the city. I also wanted to find an idea that was within the creative economy as I have a passion for and experience within arts and entertainment. Most importantly, since day one, I've told myself no matter what I do it has to "make the world a more creative place." That's my overriding principle. All these factors, plus timing, blended together to birth ArtJamz.
HW: All of the social platforms claim to help small businesses and brands amplify their voice, find their customers. Are you active on Twitter, Facebook, Tumblr, Instagram, etc? How do you decide which products to dedicate time and attention? Do "likes" and "shares" turn into sales?
MC: We are activate on all of these. We have a marketing coordinator who helps get our voice heard as well as listens to and communicates with voices talking about and to us. We further leverage mailchimp (eblasts), wordpress (website), hootesuite (social media messaging), review sites such as Yelp! and Trip Advisor and we have a presence on YouTube. SEO is crucial as well. We use a service called Scene Squid to get our classes and events listed on local media event calendars.
Out of all of them, our team likes Instagram the best since ArtJamz is such a visual experience. We coach our team on capturing great moments in the studio and hash-tagging for maximum effect. We boost posts occasionally on Facebook. We're convinced all amazing images coming from the studio generate customers and impact to bottom line. We also believe in old school marketing -- fliers, posters, street teaming and outreach to editors and media gatekeepers. My team keeps bugging me to up our SnapChat game.
HW: At Homebrew we see lots of startups wanting to serve the small/growing business segment with software tools ranging from ecommerce, to point of sale to employees backoffice and so on. What software tools help power your business - besides Microsoft Excel - since everyone secretly just uses Excel
MC: Oh wow. So many tools. I think the exciting thing about being a small business in today's world is that so many of the brilliant minds in technology are building tools to help businesses like ours. It's amazing but can be overwhelming too. I always joke that were a digital wolf in an analog sheep's clothing. You can't get any more analog than putting paint and glitter to canvas and getting your hands dirty. But that's the tip of the iceberg. Everything else is tech.
Aside from the before-mentioned digital marketing tools, we use FareHarbor (online booking and reservations), Square (POS & Gift Cards), When I Work (HR, Staff scheduling), Quick Books Online (accounting), Wells Fargo (Banking and Payroll), DropCam (security), Succuri (website security), Slack (team communication), Google Drive (email hosting and file sharing), HubSpot + SideKick (CRM and Email Analytics), and Drop Box. Everything in our studio runs off iPads. We've tried several loyalty programs, but haven't found anything that really works well. As virtual reality becomes more pervasive we'd love to use it to help people paint more!
HW: What's a problem you wish a technology startup could solve for you?
MC: How about helping my 2 year-old son sleep more, so I can too! Our holy grail is one solution that allows us to follow our customers seamlessly from booking to in-studio experience to post event follow-up. We blazed our own trial in building ArtJamz. The result is that ArtJamz is a hybrid experience -- somewhere between restaurant, paint and sip and gym / yoga studio. So, the right reservation + POS software solutions have been hard to find. To complicate that, we're building multiple locations, so the system needs to be able to scale across numerous locations, whether franchises or corporate-owned locations.
We need one system that allows customers to choose their favorite ArtJamz studio, book and pay online for an experience, quickly check in and make additional transactions in the studio, and then enables us to follow up with a loyalty program, offers, surveys, etc. It would be great if it handled staff scheduling and offered monthly memberships and tracking of blocks of studio time like a yoga studio. I've recently spent more time researching gym / yoga studio solutions.
HW: You partnered with Bond Street for growth capital. How did you originally connect with Bond Street? What's the biggest difference for you between a platform like Bond Street and traditional borrowing from a bank or other offline source?
MC: I had been researching funding options for about 2 years in order to build-out our 4th location and make it our prototype retail location. We've bootstrapped since we launching. This enabled us to open a number of studios and remain profitable, but, we never had enough liquidity to go all in and create our "model location." In tech terms, our first 3 locations were phase 1, 2 & 3 MVPs. First, we tried investors. But, based on our sales and the amount we we're looking to raise, $60-$120K, it could have meant giving up over 40% equity. Why give up that much equity for an amount we could raise other ways?
Then we tried traditional lending. We were approved for an SBA loan but after 4 to 5 months of going through the SBA closing process, I had a change of heart, mainly since this meant using my mine and my wife's house as collateral. As a new dad and husband, the more I thought about that, the more it bothered me. You can't really beat a 10 year pay-off at 4% but what's value of going to be knowing that you haven't mortgaged your house? It meant eating most of our $5,000 deposit but I'm convinced we made the right choice. Sometimes it's not all about APR. We looked at credit cards and smaller bank loans, but interest rates of 11 to 15% were too high.
Crowdfunding was an option but brought with it a lot of administrative follow-up and complications. So, we looked at newer forms of lending of which there are many now. Bond street stuck out for several reasons. First, they took the time to understand our business; it wasn't about crunching us into a pre-set formula like banks do. I was also impressed with the ease of applying. They have a solid tech game. The rates were competitive and the payoff period gave us an extra year over most other lenders. Importantly, they weren't hard sellers. I probably got quotes and information from 4 or 5 other lenders and in most cases that came with a very aggressive boiler room type hard sell. I also have a lot respect for the fellow DC-based entrepreneurs and the founders of Sweetgreen who were part of Bond Street's Series A.
About Bond Street:
Bond Street is transforming small business lending through technology, data and design.