Financing a Second Startup on Cash Flow of Your First
When daily deal sites like Groupon and LivingSocial started to heat up, Kiha Lee took notice. Capitalizing on the success of his online community for bargain shoppers, dealspl.us, the Silicon Valley entrepreneur created DealPulp.com, a startup that offers online shoppers daily deals from national merchants, many of them lesser known and seeking exposure to a wide new audience.
Since DealPulp.com's launch in January, close to 160,000 consumers have joined, snatching up bargains that have saved them nearly $700,000.
We talked with Lee about how he tapped into the success of his parent company to finance a new effort.
How did dealspl.us lead to DealPulp.com?
Dealspl.us is a web community where shoppers can find and share the best deals and coupons. We make money through affiliate relationships with retailers. A lot of merchants included on dealspl.us were telling us, "We'd love to be featured more prominently." But dealspl.us is a user-generated site, so it limited our ability to specifically promote certain merchants.
At the same time, there was all this buzz about daily deal sites. But so many of them were offering only local deals. Launching DealPulp.com seemed like a logical next step in helping online merchants who were getting left out of the local daily deal space. And it was an opportunity for us to better feature the merchants who'd been asking for more visibility on dealspl.us.
How did you finance your startup five years ago?
I raised the money from friends and family. We've actually turned down outside funding offers. For the time being, we like the control that comes with funding the site ourselves. We come up with a lot of ideas for site features, and we appreciate the freedom to move forward with them the way we want.
How did you finance your latest venture?
Dealspl.us was cash-flow positive after its first year. Every year, we've doubled visitors and revenue. All the money we've put into DealPulp.com comes from dealspl.us revenue.
Are your sites run separately, by different staffs?
We are one team. We have 21 people, and most of us work on both sites. Our parent company is Sazze. DealPulp.com and dealspl.us are DBAs.
How does DealPulp.com make money?
We have a sales team that works directly with the merchants featured on the site to negotiate a revenue split. We don't charge them a fee to just be featured on the site.
When do you expect the new site to be cash-flow positive?
In the fourth quarter of the year, close to the holiday season.
What's the downside of launching a new startup on top of an existing one?
Time management and the availability of resources are definitely the biggest challenges, especially with a smaller team. It's such a fast-moving industry. It's easy to have tons of ideas. It's hard to find the time to execute them all.
What's the upside?
New technologies and startup trends emerge every year, if not every month. Sometimes the best way to make the most of them is to launch a second project. We could have tried to force daily deals and group-buying onto dealspl.us. But we realized we'd have more success using these features on a new project.
Should a second startup be related to the first?
It definitely helps. By the time we launched we already had merchants interested in participating. Plus, we were able to boost traffic by marketing DealPulp.com on dealspl.us.