How This Startup Got GoDaddy to Open Its Wallet
The internet has been around for decades, but many mom-and-pop shops continue to drag their feet when it comes to creating an online presence.
To help, there's Locu, a service that allows companies to create a digital footprint through self-service tools. Four Massachusetts Institute of Technology students -- working out of a lab put on by Tim Berners-Lee, the inventor of the World Wide Web -- founded the site in 2011.
Locu has managed to get 30,000 businesses to sign up for it service, by providing an easy-to-use dashboard for small business marketing materials. So it allows companies to update online content like menus and pricing lists. The company works on a freemium model, offering some of its basic services for free, with additional benefits costing $25 a month.
Locu's ability to scale and generate revenue helped the startup catch the attention of Scottsdale, Ariz.-based GoDaddy. In October the domain and web-hosting giant snatched up Locu for a reported $70 million.
We think this is pretty impressive. So for the month of November, Locu is officially Entrepreneur's Startup of the Month. With that comes bragging rights for life, naturally. The company's founders also get a copy of Entrepreneur Press’ latest book: No B.S. Time Management and a digital subscription to Entrepreneur magazine.
We chatted with co-founder Rene Reinsberg about motivation, getting acquired, challenges and advice:
Q: What were your biggest challenges?
A: Finding product-market fit. When we started out, we had a big vision: "structure the world's information." We wanted to help every local business out there connect with consumers in a better fashion. Our starting point was restaurant menus, and we were successful in this area. People started to just view us as the restaurant guys, not realizing we were actually doing a lot more. It was hard to shift people's perceptions of Locu and what it stood for.
Q: What role did Tim Berners-Lee play in Locu?
A: His vision for the semantic web, the role of structured data and concepts around linked data, really resonated with us. Think about your personal life. You have your address online and in various places. When you move, it really is cumbersome for you to change the address everywhere. If you are a business and your phone number is out-of-date, this is a much bigger problem. Tim is driving the vision that there should be a better way to deal with this problem and offer solutions for it.
Q: Why did you agree to the GoDaddy purchase?
A: We had a product in the market that was self-service but still required some support. When we were thinking of scaling this and taking it from 30,000 local businesses to millions, we had to decide if we wanted to build those capabilities ourselves or leverage a bigger platform. With GoDaddy's massive platform of more than eight million SMBs buying various products, it was a customer base we wanted to tap into.
Related: 5 Tips for Getting Acquired
Also, GoDaddy is going through a massive transformation in how it tackles the small business space. The more we talked to them, the more we realized we shared the same vision for helping local businesses get found and promote themselves.
With the acquisition, we can just focus on product and technology and don't have to think about other aspects, like building a sales force or customer support team.
Q: They say an acquisition is more exhausting than raising money. Do you agree?
A: It takes more time than fundraising, because you are creating deeper relationships, and there needs to be more alignment.
We really needed to know the people we were going to be working with, reporting to and internally partnering with. We spent a lot of time with the people, so we could understand the social fabric and whether there was a fit. We had to make sure we were aligned in how we did business, how we thought about the product going forward, the opportunities and the challenges.
It was definitely more than a full-time job. It was crazy.
Q: Advice for startups on getting acquired interested in getting acquired?
A: For anyone thinking about an acquisition, it is important to focus on building a business that has a strategic value.
Once in the process, it is crucial to know what is important to your team and you. Figure out what the ideal scenario is and what makes sense for your company. Have this discussion with your co-founders, as knowing you are aligned will give you peace of mind.
Q: Advice for aspiring entrepreneurs?
A: I meet a lot of early teams that got together to work on an idea and then the idea falls apart. If you have a great team, it is important not to get too anchored on ideas, as they evolve. Instead, focus on the broader market you are looking to disrupt.
-This interview was edited for clarity and brevity.