News at Smith

App-etite for Innovation

Apr 21, 2014
Entrepreneurial Spirit

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It was a sultry summer evening in New York City. Mike Cerrone ’06  was out for dinner with fellow Terps John Williams ’02, John Brennan (Computer Science ‘06) and friend Warner Siebert in the Village. The restaurant’s wait list was long, the bar was full, and when Brennan asked the host to text him when their table was ready so the group could go get a beer elsewhere, he received a flat ‘no.’ As the group whiled away their time on the hot sidewalk, conversation turned to the annoyance of waiting for a seat at a restaurant.

Wouldn’t it be nice, the friends wondered aloud, if they could see how many people were before them in line? Wouldn’t it be nice if they could also browse the menu while they waited, so they could decide what they wanted to order before sitting down? Maybe this system could live on some kind of mobile app?

Social media had turned wait times into a big PR problem for restaurants. Michelin-rated Ippudo in New York City, for example, received an average of 20 customer complaints each week about the waiting experience. Some of them expressed their displeasure publicly on Yelp and other social sites. Restaurant staff spent about four hours a week responding to those customer comments. And about 12 percent of potential customers who were added to wait lists simply left to find another place to have dinner.

Most restaurants dealt with the problem by handing out mobile pagers to customers waiting in line. But they weren’t a perfect solution. Pagers were expensive, and they tended to get lost or stolen. They were hard to keep clean. And while buzzers give some limited information to diners – “Hey, your table is ready!” – they don’t transmit any information back to the restaurateur.

Other people had created wait list apps – Noshlist, NoWait, Wait List Manager.  “Those apps were created by restaurant people, but we were media marketing people,” said Cerrone. “We had a different set of skills and a different take on the problem.”

Their take? While customers and restaurant owners alike would appreciate the chance to improve the waiting experience, the true value to restaurateurs was in the data about diners that such an app could collect. Restaurant managers could use the data to improve a customer’s dining experience. Managers could track wait times, see when their busy times were and which hosts did better at seating people efficiently. They could also see how many times a customer had visited a restaurant and how much they spent during each visit. When a loyal customer was waiting in line the manager could send her a coupon redeemable for a free drink or appetizer, or provide her with a free dessert for her birthday.  The power of big data could transform a simple wait list app into an effective mobile loyalty platform.

BuzzTable, the group realized, had the potential to be a complete mobile customer relationship management (CRM) system for the hospitality industry, enabling a two-way communication between the diner and the restaurant.

This, they thought, could be an idea worth pursuing.

The Startup Bug

Williams, Cerrone, and Seibert already owned a startup, a digital agency called Branded Evolution.  Cerrone had worked in finance in California for a few years after college. Then the startup bug hit him. He moved to New York and started Branded Evolution, quickly enlisting college friend Williams, who left his sales job in Baltimore to join the team. Branded Evolution was doing well, counting big brands like Mercedes, GM, and Fast Company among its clients. Was it worth taking time away from their thriving agency to work on this BuzzTable project, they wondered?

Brennan wondered the same. As a computer science major at Maryland, he had taken part in the Hinman CEOs Living-Learning Program and worked with the Smith School’s Dingman Center to start Open Action, a for-profit company that worked with foundations and nonprofits to map their philanthropic activities. Brennan knew Cerrone from college, and while he liked the BuzzTable idea, he wanted to make sure it had legs before he committed to another startup. So the group interviewed some restaurant owners and general managers at chain restaurants, describing the idea for BuzzTable. “I wanted to do research to see if I could talk myself out of it,” says Brennan. The response surprised them: “Oh wow. If you had something like that, we’d use it tomorrow.”

So Seibert, Williams and Cerrone began taking a day or two a week from Branded Evolution to work on BuzzTable. Brennan coded and built BuzzTable’s initial products, the customer-facing BuzzTable web app, and its companion app for restaurateurs, WaitList+.  Cerrone handled market research and worked with restaurants to understand operational processes and discover what managers needed. Williams and Seibert worked on sales.

Their first sale was to Dinosaur BBQ, a fast-growing chain in New York City.  The BuzzTable team rolled out a test version of their products at the chain’s Harlem location. “We got a lot of data and information from them that helped in developing the app,” says Cerrone.

Rather than giving a diner a buzzer, when a diner checked in at the restaurant, the host asked the diner for his mobile phone number. The host then used WaitList+ to send a text message to the diner’s phone that prompted him to download the BuzzTable app. Using the app, the diner could check his progress in line, redeem rewards or points from the restaurant, and give feedback in real time. 

The founders staked out the restaurant, observing how customers interacted with the device and how the restaurant operated. Brennan, the code writer, saw that when the restaurant’s Wi-Fi signal went out, as happened several times a day, the host lost the ability to connect with customers through BuzzTable. In a few weeks he developed an updated version that could work offline. “We built alongside the customer,” says Brennan. “Because we were seeing it as it happened, we were able to quickly make the changes the restaurant needed.”

The busy restaurant environment also demonstrated to the BuzzTable team the need for a streamlined, simplified user interface for the restaurant staff. “It’s an incredibly fast-paced environment, with dozens of staff and hundreds of customers. It’s all about how quickly you can turn a table,” says Williams. “We needed to make it so there were as few keystrokes as possible to operate the system. If you slow the process, you’re not of value to the restaurant.”

During the 90-day case study, over 2,000 customers downloaded BuzzTable and enrolled in Dinosaur BBQ’s mobile loyalty program.  Fifty-two percent redeemed a reward and 9 percent provided feedback to the restaurant. The success of the trial, and the enthusiasm of Dinosaur BBQ’s management and staff, cemented their belief in the product.

Show Me the Money

So the idea was sound. The product could work, and there was demand for it in the marketplace. Now came the truly serious challenge – how to get funding. Williams, Cerrone and Seibert continued to work at Branded Evolution, but now they were each giving a day or two a week to BuzzTable. That meant revenue from Branded Evolution was going down, while BuzzTable was still so new it had very limited funding.

“The financial forecast was as bleak as it could get,” says Williams. “At one point we were living month to month. We had that uneasy, unsettling feeling that comes from having your back against the wall. But that feeling fueled unbelievable productivity in us.”

“Most tech companies have two co-founders, a tech guy and a business guy,” says Cerrone. “We had four founders. We had good success raising small amounts of seed money, but split between four people that didn’t go far. Living in New York City is expensive. At first it was hard to scrape by.”

That had an impact on their ability to develop the company’s longer term strategy, says Brennan: “It’s hard to think of where you’re going to be a year from now when you don’t have the cash to last a year.”

Things began to look up when BuzzTable was accepted to the Entrepreneur’s Roundtable Accelerator (ERA) program. The four-month program included mentorship from a network of 200 successful entrepreneurs, a workspace, legal advice and $40,000 of seed capital. At the end of the program, all the ERA startups got to pitch to hundreds of funders from all over the country.

“Demo Day” was BuzzTable’s big opportunity. Companies that have graduated from the ERA’s first two classes now have a collective valuation of over $100 million. If the BuzzTable founders were to get their company to a sound financial footing, they would need to achieve similar success.

“It was a culmination of countless hours, long nights and very little sleep,” says Williams. “We were half excited, half nervous. After Warner gave our presentation, we had a breakout session. Dozens of people came and talked to us. You really have to be on your feet because people ask all kinds of questions.”

BuzzTable raised over $1 million from that rolling round. Cerrone, Williams, Brennan and Siebert could breathe a sigh of relief. They were able to celebrate again when Microsoft Ventures decided to invest; BuzzTable is now one of the funder’s portfolio companies. 

BuzzTable makes money by charging restaurants a $49 monthly platform fee. Restaurants use WaitList+  to manage their wait lists and automatically build guest profiles. ControlCenter, a web dashboard, then delivers information about the restaurants customers gathered by BuzzTable and WaitList+.  Control Center lets restaurant owners and managers view their wait-time analytics, customer demographics, loyalty reward redemptions, guest feedback, and customer data like email addresses. BuzzTable doesn’t want to release its revenue numbers, but their performance metrics are “excellent,” says Cerrone.

Challenges

Scaling a great idea can be a problem, one many adolescent startups struggle to overcome. At the moment, BuzzTable’s founders have a great, terrible problem – they’ve got too many customers. On the one hand, the team is thrilled, overjoyed. Restaurateurs like their product! On the other hand, all of those customers need support, and when you’ve got a tiny 9-person staff, everyone gets spread pretty thin.

Take customer service calls. BuzzTable set up a customer support hotline as soon as it began distributing the apps, because it wanted to be sure that restaurants and diners could successfully use their products. The hotline rang straight to the phone of all four founders. That was fine when their customer base was small. But now that they have more than 1,000 clients, the hotline has gotten unwieldy. It’s not unusual, says Cerrone, for the founders to receive 20 or 25 calls on a Friday night from sheepish restaurant managers who have forgotten their passwords. The team is working on adding staff, but “formalizing the hiring process takes time,” says Cerrone.

There are many operational challenges to scaling up. “Understanding how the business needs to be run to be profitable has been a challenge,” says Cerrone. “Now we’re building up different channels to acquire customers, we’re learning to take on more strategic roles.”

Joy in the Journey

Brennan wants to grow “a billion dollar company.” But he’s also trying to appreciate the journey. “We started out with the four of us working in an apartment, then the accelerator space, then a space in SoHo. Now we’ve got 9 people in a much larger working space, and most days I take a moment to just turn around in my chair and appreciate how far we’ve come,” says Brennan. “I can see how hard everyone is working and how passionate they are. That’s the greatest, getting other people to share in our vision of what the company can be.”

“Right now it’s all about increasing the value we provide to the restaurants and guests,” says Cerrone. “It hasn’t been about the money, obviously. It was a passion, something we really, really wanted to do. You can’t just start a company to make a lot of money. You really need to care about something or be bothered by a problem. We all loved the dining out experience and we’re just trying to improve it for everybody. We’re passionate about that. It’s why we’re doing what we’re doing.

“If there’s a bundle of money at the end of the road, that would be great. I think we’re certainly worth it, and we’ve worked hard for it. But it’s not about the money.”

Williams agrees. “I started the entrepreneurial journey when I felt like something was missing from my normal, day-to-day life. It’s tested my limits and boundaries. And the friendships I’ve made [with Brennan, Cerrone and Siebert] will last forever. We’re really fortunate to be a group of friends that founded a company.”

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